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Trade Agreements Alcohol Industry

Although coronavirus is a temporary decline in Asian sales of these (and other) products, even with more moderate revenue growth, Asia will gain importance as a global beverage consumer (Anderson 2020b). Asia`s growing importance in world markets, combined with the predominance of spirits and, to a lesser extent, beer consumption (Figure 2), has contributed to the decline in the share of wine in global alcohol consumption (Chart 3). In 2013, Russia banned Moldovan wine on the false grounds that it contained a health risk. According to The Economist, about 10% of the wine consumed in Russia comes from Moldova and wine exports to Russia are an important source of income for this small country. Russia has used a technical barrier to trade for purely political purposes: to prevent the signing of trade agreements with the EU by the Republic of Moldova. This shows that trade barriers and free trade rules are not isolated from diplomacy and even geopolitics. Tax policy in some markets discriminates against European spirits by significantly increasing their retail prices compared to domestic spirits. If taxes are too high, consumers tend not to shift their demand to low excise or tax categories on alcoholic beverages or illegal alcohol, which equates to additional performance costs and health risks. In the past, when commercial costs were high, consumers concentrated their alcohol consumption on beverages that could be produced locally at the lowest cost.

These models have been reinforced by taxes on beverage consumption and imports, which vary considerably by beverage types (Anderson 2020a). There are often taxes to protect local producers, thus reinforcing the climatic differences between countries in mixing the drinks consumed. Russia and Moldova are members of the WTO, which has not deterred Russia`s power play. This raises the worrying prospect that populist leaders in other countries, including the United States, risk undermining the post-war rules-based trade regime. Table 1 Average excise duties on wines, beers and spirits, in U.S. dollars per litre of alcohol and value (%) The equivalent of average prices, 2008 and 2018 Excessive labelling systems are often a barrier to trade, especially for SMEs. Labelling concerns include questionable lists of information to be provided and prescriptive requirements for placement and label size. Whether this will stimulate exports from other countries and alternative products from destination countries will depend on the moderating effect of these additional taxes on global alcohol consumption to offset the positive effects of trade diversion on the consumption of non-targeted products and countries. This impact depends on the domestic share of wine imports to the United States and the share of the United States in domestic wine exports. Meanwhile, excise duties on all types of alcohol have increased in high-income emerging economies and major emerging economies. In a sample of 42 of these countries, wine is the least taxed and spirits are the most taxed; However, between 2008 and 2018, the unweighted average tax rate in these countries increased by one-ninth for beer and about a quarter for wines and spirits (Table 1).

Brexit has already had an undecided impact on markets, as sterling has depreciated by more than 10% since the June 2016 referendum and growth in incomes, household consumption and business investment has slowed. Other impacts on beverage markets in the UK and elsewhere will depend on the UK`s post-Brexit policy decisions, including its trade deals with many trading partners in third countries, alongside the EU. Under the auspices of the WTO, there has been some movement towards harmonization and mutual recognition. Bilateral agreements, such as the US-EU agreement on wine trade, have also taken the same direction. However, these