At Vinexpo Paris and Wine Paris, US wine taxes worry

Text by: Agnieszka Kumor

A new trade fair for wines and spirits is set up from February 10 to 12 at the Parc des expositions in Paris. With this joint edition, Vinexpo Paris and Wine Paris want to outrun their German competitor, ProWein. But this year, the French wine surcharge is on everyone's mind.

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Joining forces is undoubtedly the thing to do when you aspire to become the 1st world fair dedicated to wines and spirits. But beating the German machine that attracts 60,000 visitors to Düsseldorf each year is no small task. Hence the considerable effort made by the two organizers, Vinexpo Paris and Wine Paris , to meet the expectations of some 30,000 professionals expected at the Parc des Expositions at Porte de Versailles. Importers, wine merchants, sommeliers and journalists from around the world in the French capital take part in the tastings, which are accompanied by professional meetings. In addition, thematic conferences on wine regions, indigenous grape varieties and soils (to name a few) are well attended. Despite the enthusiasm aroused by the Parisian salon, subjects of concern are troubling the wine world.

Brexit, China, and now Trump…

The slowdown in the Chinese market, Brexit and its consequences , and the increase in American taxes on many European products are starting to weigh heavily on world wine trade. In 2018, 108 million hectoliters were exported in volume for a total amount of € 31 billion in value (source: OIV ). In this market, France retains a place of choice as the world's leading exporter by value (9.3 billion euros in 2018).

But today French wine exports to the United States are weighed down by the Airbus tax . Introduced on October 18, 2020 by Washington, in retaliation for subsidies paid to the European aircraft manufacturer, this 25% tax targets certain European products such as Spanish olive oil, Scottish and Irish spirits, Italian cheeses and even German construction machinery. The list is long, but extremely selective with immediate effect on trade. Jean-Baptiste Lemoyne, Secretary of State to the Minister for Europe and Foreign Affairs confirms: " The exports of our wines to the United States fell by 44% at the end of 2019 ". The government has decided to put in place a series of measures to deal with this situation . “ We are doing more promotions to find other international markets. For this, Sopexa's budget [ note: international food & drink communication agency ] has been doubled. Business France is setting up additional international actions to support French companies. In addition, we have asked at European level for the establishment of a compensation fund. It would be a very precious tool to support the wine industry in these complicated moments. "

Meanwhile, the losses are piling up. The Federation of French Wine & Spirits Exporters (FEVS) is sounding the alarm: " This market is irreplaceable for our sector, it has a major impact on turnover and, even more, on the margin achieved by exporting companies , ”recalls Fabrice Latour, vice-president of FEVS. This situation is causing concern on both sides of the Atlantic.

► Also to listen: American wine taxes: “A conflict that goes beyond us”

The wine industry in France does its accounts

Starting with the producers, especially those of the great vintages. These noble wines whose average producer price is more than 22.50 euros per bottle represent more than half of Bordeaux shipments in value (1.15 billion euros). The domains are making their first assessments, and everywhere it is the same observation: the American market is slowing down.

Ronan Laborde, president of the Union of great wines of Bordeaux ( UGCB ), specifies: “ The American taxes were put for an indefinite period. At the end of the first period, which ends in mid-February, we will know which new products will be targeted. But also what will be the level of taxes. For the moment, they are 25% ”. This owner of Pomerol points out that today this surcharge is shared by the commercial chain. It is made up of the “ producer who sells his wine to a merchant in the Place de Bordeaux, who then sells it to an importer in the United States. The latter will resell the wine to the distributor or, if he distributes his products himself, directly to the reseller. Today, the effort is collectively distributed among all these actors. But if the taxes were to increase, the consumer will unfortunately pay the costs . ” Admittedly, the appetite of informed consumers for French wines is great. But how far can they go if the taxes go up to 100%?

The tax battle continues in the shadows

This time, we are talking about the digital tax, known as the Gafa tax. Certainly, the American administration has temporarily decided to abandon the plan to overtax up to 100% the equivalent of 2.1 billion euros of French products. A decision taken after that of the French government which postponed to December 2020 the collection of its Gafa tax, the time to set up an international taxation within the Organization for Economic Cooperation and Development ( OECD ).

On January 7, 2020 , US government trade representatives interviewed American companies concerned with French products. They were only asked one question: what effect would the possible increase in customs tariffs for them go beyond the existing 25%? The response was unanimous: it would be a disaster.

In the United States, a scenario worthy of a disaster film

Robert Tobiassen, president of the National Association of Beverage Importers ( NABI ) in Washington, DC participated in this hearing. In an exclusive interview with RFI, he believes: “ These taxes have a devastating effect on the entire wine and spirits industry in the United States. They destroy the long-standing relationships of trust with our European partners. The obligation to pay this Airbus tax, which nobody expected elsewhere, poses a serious problem for certain importers, who must find an arrangement with their banks. The situation is particularly difficult for small businesses, said the president of the American federation. Supply chains have been disrupted, as has the positioning of products on the market. “ Some of these products are very sensitive to price variations. When the price goes up, demand goes down. And once the consumer is lost, it is then very difficult to regain its market share ”.

Ben Aneff, co-director of a Tribeca Wine Merchants wine and spirits store north of Manhattan, contacted by phone is adamant: " If customs tariffs go from 25% to 50% and beyond, we will no longer be able to sell the wines European, including French wines. Starting with the importing companies who will simply no longer be able to pay them when they arrive on American soil. The same goes for the others : distributors, restaurateurs, wine merchants and the end customer who will not agree to pay a double price. We risk losing these wines that we love so much. "

Lover of Europe, Ben Aneff underlines that 60% of his offer comes from France. " It would be a huge waste if we lost access to these products, " he sighs. What the Tribeca wine merchant fears is the domino effect on American businesses. “ The commercial wine chain in the United States has 400,000 jobs. If the rates double, tens of thousands of positions may simply disappear. His only hope: that the Europeans return to the negotiating table.

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