New President Won't End Wine Tariffs

People might have celebrated Biden's election, but will the wine trade?
© AP | People might have celebrated Biden's election, but will the wine trade?
When it comes to tariffs, it's meet the new boss, same as the old boss.
By W. Blake Gray | Posted Sunday, 15-Nov-2020

Many wine lovers hope that regime change in the US will bring an end to the punishing 25 percent tariffs currently being slapped on most French, German and Spanish wines.

That might happen, eventually. But don't look for action soon. If anything, it's possible that the US will put tariffs on even more European wines while the Trump administration is still in charge. And those tariffs won't magically disappear from the US government on January 20, 2021, even if Trump himself does.

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It takes two sides to fight a war, and the European Union fired its own salvo last week, after being authorized by the World Trade Organization to impose tariffs on $4 billion in US goods. The EU did not impose tariffs on most US wine, but it did slap 25 percent tariffs on rum, vodka, brandy and vermouth from the US. The EU already has a 25 percent tariff on American whiskey.

"I was really disappointed," said Ben Aneff, president of the US Wine Trade Alliance. "I was certainly hoping that [the EU] would wait for the Biden transition to put their team in place and to begin negotiations around this issue. I think it's very possible that the USTR [US Trade Representative] will respond with retaliatory tariffs shortly. We're hopeful that they will leave wine out of this. At this point they should have a full understanding that tariffs do absolutely nothing whatsoever to influence the EU. The current tariffs on European wine have been an absolute failure in terms of influencing European policy. I hope they'll focus on something more effective."

The trade war between the US and EU goes all the way back to 2005, when both sides complained to the WTO that the other was subsidizing commercial aircraft production – Boeing in the US, Airbus in Europe. It ticked along for more than a decade without significantly affecting US-EU relations until Donald Trump took the White House and decided that yesterday's international enemies were his friends, and vice versa.

EU leaders probably breathed a sigh of relief, and perhaps opened a bottle of bubbly or two, when Trump was defeated in the US presidential election. President-elect Joe Biden was known for his foreign policy expertise when he was still a US Senator; it's one reason Barack Obama asked him to be Vice President. It's a near certainty that US-EU relations will improve immensely as soon as Biden walks through the rings of security gates that now surround the White House and takes occupancy.

But good EU-US relations don't mean an easing of tariffs. Aneff says Biden simply will not have time to make changes to the USTR before February, the next time it is scheduled to review the existing trade-war tariff schedule.

"With respect to the current tariffs on wine, we have to be clearheaded here," Aneff told Wine-Searcher. "We're still going to be in the middle of the civil aircraft dispute. The Biden administration is not likely to have a new USTR representative by the time the next [deadline to examine tariffs] rolls around again. His cabinet will not have been approved. Our job will be to tell the Biden administration why these tariffs should be a priority in the first 60 to 90 days of his administration. There will likely not be new leadership at USTR to make these decisions. We're going to have to go to the Biden administration and make the pitch that eliminating these tariffs is good for America."

The common good

The pitch, Aneff says, is that US companies are more hurt by tariffs on European wine than European wineries are. In particular, the US restaurant industry is struggling during the pandemic, and increasing the prices of popular European wines does not help.

"We're a country in crisis right now," Aneff said. "[Biden] is going to come in with a series of fires to put out. He's also likely to have a divided government. All of the different restaurant tariffs, on food and wine and everything restaurants need, these affect millions of people around the United States. Eliminating these tariffs is something the Biden administration can do with the stroke of a pen. They can make the lives of millions of Americans better on day one. They have it within their power to eliminate these tariffs. They will not need [Senator] Mitch McConnell's approval to do so. And it would be helpful to thousands of small businesses across the United States. It's easier to do than some of the other things they want to accomplish. That said, I know this is a big ask."

Current US Trade Representative Robert Lighthizer is a longtime advocate of tariffs and protectionism. He is more known for his suspicion of China. His antipathy to Europe was somewhat unexpected. But as with any government employee, it is his job to reflect the president's agenda.

"In the Trump administration, Robert Lighthizer runs trade policy. It's his say," Aneff said. "He and Trump are in sync. Everyone we've spoken to in the administration has told us time and time again, this is Lighthizer's baby. He has total say in what the US tariff response is. He's been advocating for many of these tariffs for decades. Not the tariffs on wine, but he has been advocating for a much more robust tariff structure. I don't think anyone thinks we would be in the position we're in right now in a standard Republican or Democratic administration. The idea that we would be in a trade war with our allies would be anathema to most people on either side of the aisle. It's Trump's willingness to go against traditional norms. He doesn't value our relationship to Europe in the way that others have. You've seen that with NATO. And Lighthizer has been advocating for tariffs for most of his career. It's a dangerous combination."

Biden will get to name his own US Trade Representative to replace Lighthizer, but that person will have to be approved by what appears likely to be a Republican-controlled Senate, so it might not happen quickly.

Moreover, while restoring good political relations with Europe will likely be important to Biden, when it comes to trade relations, Europe will probably not be top of the agenda. Trade with China is a far more contentious political and economic issue, so it's possible the new US Trade Representative will be a China expert.

"We're hopeful that they're going to be anxious to resolve this and put our relationship with Europe back on a normal footing," Aneff said. "There's unfortunately been a real feeling that Lighthizer is willing to do more pain to American businesses as long as he can also stick his finger in the eye of the Europeans. I think that's unfortunate and moving on from that is going to be important. We need somebody who wants to resolve this issue. His job is supposed to include alleviating the pain to US businesses, particularly considering this is happening during a pandemic."

When he's not organizing a letter writing campaign to the USTR or talking with journalists about wine tariffs, Aneff is managing partner of Tribeca Wine Merchants in New York.

"Nobody wants to talk to me about Burgundy anymore," he said. "It makes me sad."

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