Wine Taxation Without Representation from Tourism or Tourists
A tariff on wine was imposed on imports from several European countries by former President Trump which is affecting the bottom line for tourism and travel-related industries.
- COVID-19 has challenged everyone and every industry; however, restaurants are being repeatedly whip-lashed by government actions.
- The Distilled Spirits Council, an industry group, was seriously disturbed by the Trump administration’s interest in putting a tariff on wine.
- The US Wine Trade Alliance has coordinated a coalition of chefs and restauranteurs to pressure the Biden administration to abandon the notion of additional tariffs on wine imports.
Taxes on products we love and want are never popular. When it comes to increasing wine prices because of wine taxation, we are likely to become livid. Perhaps the imported wine industry became a tariff target during the last administration because the fellow who resided in the White House preferred Coke over sparkling wine or Riesling; had his beverage choice been different, the taxes may have fallen on the water or soft drink industry instead.
The Office of the US Trade Representative (USTR) imposed a 25 percent tariff on most wines imported from France, Germany, Spain, and the UK starting in October 2019 in retaliation for a long-running aircraft subsidy dispute between the US and the European Union involving Boeing (Chicago) and Airbus (Leiden, Netherlands). Raising tariffs by 25 percent is estimated to increase US prices of wine grapes by an average of 2.6 percent, and producer prices of bottled still wines by 1.1. percent in the targeted countries. The tariff is currently operational.
The United States is the largest importer of French wines and the Trump-led US government had proposed an additional tariff of 100 percent on French Champagne and other sparkling wines. President Trump was a big fan of tariffs although economists view this form of taxation as a burden on importers that is passed down to consumers in the form of higher prices at the cash register. Fortunately for French wine fans, this tariff was not implemented; however, the 25 percent tariff already on European wines may be increased and is currently being discussed in Washington.
Airplanes vs. Grapes
The Distilled Spirits Council, an industry group, was seriously disturbed by the Trump administration’s interest in putting a tariff on wine, questioning the appropriateness of dragging the hospitality industry into an unrelated trade dispute.
It is interesting to note that Italian and sparkling wines were excluded from the hit list as it was imposed onto still wines packaged in containers smaller than two liters and with an alcohol content below 14 percent. If the wines were shipped in large containers or bulk and had a higher ABV… they were marked EXEMPT.
In 2020, the United States Trade Representative (USTR) decided to circle back to the wine industry and hit it with additional tariffs. Why? The Airbus dispute had stalled. The Trump administration was not happy just maiming certain countries and certain wines, now they wanted to whipsaw all members of the European Union and bring all wine categories under the tariff umbrella (forget about package size or alcohol content).
Wine industry advocates were not happy and standing on their wine barrels, opposed the proposal forcing the Trumpsters to step back from the proposal. Although the Trump tariff advocates are now out of the White House, they left the threat of tariff expansion on the table and the pending legislation seeks to expand the tariff to all European wines with the possibility of moving back to the 100 percent demand.
Tariffs Result in Higher Consumer Prices
What do tariffs do to wine consumption? Charging an additional 25 percent fee on European wines in current price sensitive markets reduces demand and the nations on the Trump hitlist experienced a 32 percent decline in revenue. In some cases, foreign producers slashed their prices and shared some of the price pain with their US importers who are, at the end of the day, responsible for paying the tax. The outcome of all this political wine climate? Wines from France, Germany, Spain, and the United Kingdom are lower in quality than the previous year suggesting there has been a shift in the product mix toward lower-value wines keeping the better, more expensive wines, out of the US market.
COVID-19 has challenged everyone and every industry; however, a major and devastating blow has been leveled specifically against the tourism industry, with restaurants being repeatedly whip-lashed by the start/stop/go/no go actions of governments.
As a result of the pandemic that started at the beginning of 2020, the tourism industry ground to a halt. Due to measures of social distancing and general caution in public places, consumers have been dining out less and the year-over-year decline of seated diners in restaurants in the US was 64.68 percent as of January 13, 2021 (statista.com). Overall, total restaurant and food service sales were down $240 billion from expected levels in 2020 and this includes the sales shortfall at eating and drinking places, plus a sharp reduction in spending at food service operations in sectors such as lodging, arts/entertainment/recreation, education, healthcare and retail (restaurant.org).
The US alcohol industry lost almost 93,000 jobs and $3.8 billion in wages. When bureaucrats and politicians could not find a reason for an increase in COVID infections and deaths, they blamed the spread on restaurants and bars. Without research and science to determine the efficacy and validity of their observations, restaurants and bars were moved to the number one spot on the DO NOT GO list, bringing the industry to its knees, according to Ben Aneff, President of the US Wine Trade Alliance and Managing Director, Tribeca Wine Merchants in New York.
The embargo against restaurants and bars has impacted US wine distributors resulting in a loss of 50-60 percent of their sales. By piling on the additional burden of taxation, there will be limited opportunities for many wineries to survive in a very competitive marketplace. Aneff finds that threatened tariff to be the “greatest threat to the wine industry since Prohibition.”
Aneff is optimistic that the Biden administration will review the current tariff program and come out in support of the wine industry as the businesses hurt by the tax are not large companies like Boeing with a market cap of $120 billion but does hurt wine producers in France and Germany.
US Wine Trade Alliance
Addressing the tariffs on imported wine at the upcoming WorldTourismNetwork.travel ZOOM conversation with Dr. Elinor Garely, eTN Investigating Reporter, is Ben Aneff, the President of the US Wine Trade Alliance (USWTA) and Managing Partner of Tribeca Wine Merchants in New York City. Prior to forming the association, Aneff was involved in supporting the National Association of Wine Retailers, leading discussions on tariffs and testifying on the effects of tariffs before the International Trade Commission.
Aneff attended Texas Tech University where he was a music major (1999-2004) and received his Master’s degree in Music from Ithaca College (2004-2006). His connection to wine started in Berlin, Germany, where he was a Fine Wine Advisor. In 2009, he became the Director of Sales at the Tribeca Wine Merchants, becoming the Managing Partner in 2014.
The Alliance has coordinated a coalition of chefs and restauranteurs to pressure the Biden administration to abandon the notion of additional tariffs on wine imports. Food and beverage and restaurant professionals responded to the effort by sending over 2000 letters from 50 states asking for tariff removal.
For additional information on wine tariffs, contact: USwinetradealliance.org