How Airbus Ending Subsidies Could Reduce Prices on Scotch

Airbus has agreed with the governments of France and Spain to make amendments to the A350 Repayable Launch Investment (RLI) contracts. After 16 years of litigation at the World Trade Organisation (WTO), this is the final step to stop the long-standing dispute and removes any justification for U.S. tariffs.

The Trump administration imposed a 25 percent tariff on all single malt Scotch imports late last fall, part of a larger package of European goods hit with tariffs, which includes Parmesan cheese, Irish whiskey, olives, wool clothing and aircraft. Those tariffs arrived with the official approval of the World Trade Organization (WTO) and they were part of a penalty against an EU subsidies program Airbus. The EU, in turn, imposed a 25 percent retaliatory tariff on American whiskey imports, which was a response to steel and aluminum tariffs.

Again, this all made it more expensive to drink for everyone. Exports of Scotch to the U.S. declined by more than 30% since the tariffs were introduced, according to the Scotch Whisky Association (SWA).

But the fight might not be over. The U.S. has suggested spirits, beer and wine from the European Union and the United Kingdom could see tariffs raised or introduced at up to whopping 100%, a figure that’s been met with fierce resistance from an assortment of global trade groups, as shown by a statement on July 27 by the Distilled Spirits Council of the United States (DISCUS):

Our 17 U.S., EU and UK associations are united in strong opposition to tariffs on beverage alcohol products.  We are speaking with one voice in calling for the U.S. Administration and the European Commission to remove the current tariffs on spirits and wine from the EU and UK, and American Whiskeys, and to forgo imposing any additional tariffs on beverage alcohol products. We hope Friday’s announcement by Airbus and the legislation passed in Washington State in March regarding civil aviation subsidies are significant steps toward the elimination of tariffs,” said the group of U.S., EU, and UK beverage alcohol associations.

Beverage alcohol sectors on both sides of the Atlantic have suffered enough.  These tariffs are exacerbating the incredible burden hospitality businesses are experiencing with the widespread closures of bars and restaurants due to COVID-19.  The U.S. and EU need to seek measures to bolster hospitality jobs, not saddle businesses with unnecessary tariffs.

DISCUS suggests U.S. tariffs on UK and EU wine, distilled spirits and beer may lead to a loss of up to 95,900 U.S. jobs, depending on the increase of tariffs.

Hopefully, the recent actions of Airbus will be a tariff win for all spirits brands around the globe.

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