Don’t make U.S. wine consumers the victims in a dispute with aircraft industry | Opinion

For decades, the wine industry has played an instrumental role in supporting the United States’ efforts to facilitate international trade by opening overseas markets for American companies. According to the Wine Institute, U.S. wine exports to the European Union reached $469 million in winery revenues in 2018.

Ironically, the Trump administration has recently announced that it is considering imposing tariffs of up to 100 percent on all wines imported from the European Union. The E.U. could respond in kind with tariffs on American wine imports in a parallel dispute.

Why? It is a long story that is part of a mounting trade battle between the United States and the European Union, currently fighting over two separate but connected matters: subsidies that — according to the World Trade Organization — were granted to Airbus by certain E.U. countries, and the subsidies that — in the view of the E.U. — Washington State gave to Boeing. The taxes that France and other E.U. countries recently levied on American companies, such as Facebook and Google, also became part of the trans-Atlantic debate.

Presumably, the Office of the U.S. Trade Representative targeted tariffs on E.U. wines to put pressure on the E.U. to negotiate and resolve the trade controversy originating in these other industries. However, I believe that these tariffs would have virtually no impact on the underlying disputes, since most European wine suppliers are small farmers, or cooperatives of farmers, that do not have the resources to lobby their governments to negotiate a resolution of the civil aircraft dispute.

Regrettably, wine importers, wholesalers and retailers — most of which are small to medium sized businesses — will suffer immediate and catastrophic consequences if the addition tariffs are imposed.

There are more than 47,000 wine retailers, and more than 6,500 importers and distributors, with little financial ability to absorb the massive revenue losses that the targeted tariffs would cause. Current estimates suggest up to $10 billion in lost revenue and 78,000 job losses in the U.S. industry. Given the magnitude of the tariffs’ potential impact, it is hard to find any comparable risk faced by the wine industry since Prohibition.

Additionally, tariffs at the proposed levels will have a profound impact on American consumers, raising prices dramatically and making some European wines unaffordable. Margins on wine are extremely small, and the legally mandated three-tier system imposed in 1933, when Prohibition was lifted, compounds any tariff-induced price increase. A 25 percent tariff on wine imports will likely result in a 50 percent increase in prices for consumers; a 100 percent tariff on wine imports will likely result in an approximately 150 percent price increase.

Even domestic wineries are against imposing these tariffs on EU wines, because they fear retaliatory actions from the E.U. Last October, the Wine Institute issued a release expressing concern that the application of tariffs to E.U. wines would lead to retaliatory tariffs on U.S. wines and set back efforts to continue growing U.S. wine exports.

Risking U.S. jobs and small-business viability does not seem to be a fair way to settle a trade dispute that has nothing to do with the wine industry. Tariffs on wines would make small businesses across the United States collateral damage in a war involving large multinational corporations.

It would be best if the politics were eliminated from the wine business. The U.S. Trade Representative should negotiate the issues regarding large multinational-companies without attacking the very jobs and economic stability that it is bound to promote and protect.

Thomas Eagan is a senior partner with Squire Patton Boggs (US) LLP. Squire Patton Boggs (US) LLP is registered under the Lobbying Disclosure Act to represent clients in the wine and spirits industry.