By Mark Gillespie
Updated March 5, 2021 – In a surprise early-morning move Thursday, the Biden Administration announced a four-month suspension of tariffs on single malt whiskies from Scotland and Northern Ireland, along with other exports from Great Britain. Those goods have been subject to a 25% import tariff imposed by the Trump Administration in October of 2019 following a World Trade Organization ruling favoring the U.S. in its long-standing dispute with Europe over subsidies to Airbus and Boeing. Friday, the U.S. and the European Union announced a similar four-month suspension in their matching tariffs from the aerospace dispute.
In joint statements issued by the U.S. Office of the Trade Representative and the UK Government, both countries cited the need for a cooling of the trade disputes on both sides of the Atlantic. From the U.S. statement:
“The United Kingdom and the United States are undertaking a four-month tariff suspension to ease the burden on industry and take a bold, joint step towards resolving the longest running disputes at the World Trade Organization. The United Kingdom ceased applying retaliatory tariffs in the Boeing dispute from January 1, 2021 to de-escalate the issue and create space for a negotiated settlement to the Airbus and Boeing disputes. The United States will now suspend retaliatory tariffs in the Airbus dispute from March 4, 2021, for four months. This will allow time to focus on negotiating a balanced settlement to the disputes, and begin seriously addressing the challenges posed by new entrants to the civil aviation market from non-market economies, such as China.”
Great Britain was just one target of the tariffs imposed before its exit from the European Union, with Germany, Spain, and France as the other key targets because of the financial support their governments provided to Airbus. However, Europe’s ongoing opposition to a settlement while awaiting a WTO ruling on its own case against the U.S. for support to Boeing led the Trump Administration to expand the list of good subject to tariffs last year. That list included more spirits and wines from Europe, along with liqueurs such as Irish cream liqueur. Great Britain became a separate negotiating partner for the U.S. after its final exit from the European Union on January 1, 2021, forcing U.S. trade negotiators to work with their counterparts in London and Brussels on the aerospace dispute while also working to solve other trade disputes and negotiate a new free trade agreement with Great Britain.
“I think it really is a step in the right direction, and the Scotch Whisky industry is clearly delighted,” Scotch Whisky Association chief Karen Betts told WhiskyCast in a Zoom interview following the announcement. The tariffs decimated Scotch Whisky exports to the United States, with exports falling by 35% during the 16-month period — and played a significant role in the 23% global decline in Scotch Whisky exports during 2020. While the tariffs only affected single malts, that category has shown significant growth over the decade leading up to the tariffs with single malts peaking at around a third of all Scotch Whisky sales in the United States.
Scotch Whisky remains the UK’s largest food and drink export according to government data, and in the UK Government’s announcement, International Trade Secretary Liz Truss praised the new U.S. Administration for its desire to resolve the differences between historic trading partners.
“This is Global Britain in action: securing new opportunities as a newly nimble nation. The benefits will be felt across our nation, especially in Scotland, where Scotch whisky distillers will be able to sell at lower prices in the United States, their most valuable market. The easier it is for Americans to buy a bottle of Macallan, Talisker or Glenfiddich, the more money those producers will have to invest in their businesses, their staff and futures. Today’s agreement shows that both the UK and the US are determined to work together to build back better and take our trading relationship to new heights.”
However, the UK is retaining for now its 25% tariffs on American whiskies and other U.S. goods stemming from the dispute over steel and aluminum tariffs imposed by the Trump Administration in 2018. Those tariffs were also part of European Union-wide sanctions against the United States, though Prime Minister Boris Johnson had pledged during his most recent election campaign to scrap them as soon as Brexit could be implemented.
Spirits industry trade groups on both sides of the Atlantic have been arguing for those tariffs to be dropped as well. Distilled Spirits Council CEO Chris Swonger compared attempts to resolve the various differences between the U.S., Great Britain, and the European Union to “unwinding a rattlesnake.”
“Nothing’s black and white as it relates to trying to resolve these problems…the best news we have with today’s announcement is that there is a recognition by the U.S. government that the hospitality sector has been greatly pained, and we’ve got four months between Monday and June for the UK and the U.S. to get the Boeing and Airbus case resolved…that’s a great opportunity, but in the meantime, gotta work hard to make sure that the tariffs on American whiskey which are implicated in the steel and aluminum case, that needs to be suspended as well,” Swonger said in an interview.
The “Section 232” steel and aluminum case falls under a different section of U.S. law allowing import tariffs in order to protect American industries on “national security” grounds. The Trump Administration cited the need to protect domestic manufacturing of specialized metals for defense use in imposing the tariffs on steel and aluminum imported from Europe and other key trading partners.
Last week, the Kentucky Distillers Association blamed the tariffs for a 35% global decline in Kentucky Bourbon exports during 2020, with the declines reaching 50% in both Great Britain and the remaining European Union nations.
“We strongly believe this dispute deserves similar priority in finding a resolution before more long-term damage is done,” KDA President Eric Gregory said in a statement. “With a focused settlement to help the aerospace industry now underway, the KDA reiterates its call for an immediate suspension of disastrous tariffs in the steel and aluminum dispute that have ensnared unrelated American whiskey and key agricultural exports,” he said. The European tariffs on American whiskies are scheduled to automatically double to 50% on June 1 unless an agreement is reached between the U.S. and EU.
The success comes even as the Office of the U.S. Trade Representative remains hollowed-out by the transition between the Trump and Biden administrations. Permanent USTR staff members worked out the truce between Washington and London while Katherine Tai, President Biden’s choice to serve as U.S. Trade Representative, awaits Senate confirmation. Wednesday, the Senate Finance Committee voted unanimously to send her nomination to the floor for a final vote expected in the next several days.
Listen to the next episode of WhiskyCast for more details on this developing story.
Editor’s note: This story was updated on March 5 to reflect a similar truce between the United States and the European Union, along with additional information on the European Union tariffs on American whiskies.