Speaking at the recent launch of spiritsEUROPE’s report ‘Spirits: A European Power House for Trade’ at the Brussels press club, DG Paul Skehan (pictured, far left below) outlined what the industry wants from the incoming EU Commission following recent elections in the bloc.
Addressing policing and enforcement, Skehan said it was vital that the incoming Commission received sufficient resources for its vital Directorate Generals (DGs) to drive growth and jobs in the EU spirits industry, which exports €10bn ($13.6bn) worth of spirits each year and employs a million people.
“We sympathize with the Commission, they don’t have the resources to develop their policing and enforcement responsibilities,” he said.
In its annual report released on March 31 2014, Europe’s DG for Trade said it spent a “relatively small budget” of €11,064bn on payments in areas including ‘administration’, ‘contributions to international bodies; and ‘procurement and other activities’.
New trade agreements are no use if partners don't stick to rules...
“But if they’re devoting significant resources now to negotiating new agreements, they still have to police them – there’s no point in setting new agreements in place if those third parties don’t respect the rules that are laid down,” Skehan said.
He added that Europe should continue pursuing bilateral free trade agreements with third parties including Canada, India, Vietnam, Thailand, the US and Japan, and reaffirm the role of the World Trade Organization (WTO), since its trade facilitation agreement agreed at Bali in December offered “great scope” despite the wider Doha Development Agenda stalling.
“It has to be implemented, and there will be serious and difficult discussions in doing that – but that’s the potential that’s there,” Skehan said.
spiritsEUROPE’s DG also urged the Commission to base its trade policy on “facts not fiction…the Commission has to be careful not to buy into some of the myths or protectionism dressed up as religious, health or other difficulties”.
Religious or cultural ruses to exclude alcohol from free trade talks
Skehan cited Malaysia as an example of a country that tried to cut wine and spirits out of free trade agreements (FTAs) claiming religious or cultural sensitivities, despite significant domestic production and consumption of alcohol.
Taking the pulse of EU-27 spirits exports in 2013, Skehan said the US continued as by far the biggest market (accounting for about a third of exports in value terms at €3,341bn) followed by Singapore (as a logistics hub in Asia) then China, Russia, Canada, Mexico, Australia and South Africa.
Beyond a ‘renaissance of sorts’ in the States, Skehan acknowledged the harm that a Chinese edit curtailing receptions and gift giving had done that market, with exports down 22% in 2013 to €456m.
In Russia, worth €725m as spirits export market, Skehan said growth was at a standstill due to global economic factors linked with its heavily oil-based economy, while Thailand and The Philippines suffered in 2013 due to “discriminatory tax systems” that penalize foreign products, although the WTO Panel told the latter in 2011 its regime was illegal leading to significant growth for EU spirits in the country.
“We still have very high import taxes in a lot of countries. India was mentioned at 150% but you also have others in Thailand (60% circa.) and Vietnam 45%,” Skehan said.
Huge import tax barrier of 150% in India
“These are huge barriers to entry. If you have this kind of tariff, and if on top of this you’re paying tax, it becomes very difficult to break into those markets,” he warned.
Summing up, Skehan called on the Commission to better protect intellectual property as a “fundamental part of the value” of EU spirits across 46 categories and incorporate protections into every free trade deal discussed.
Another area it should focus on was counterfeit products, he said, with criminal gangs defrauding national exchequers out of “a tonne of tax” and endangering people’s lives – giving the example of killer vodkas and rums that killed 19 people in the Czech Republic last September.
Skehan also urged the Commission to fight bizarre customs procedures changing at a moment’s notice, giving as an example the cost of shipping spirits to Asia only to find that in one month’s time a key trading partner demands labelling changes. “For us it’s impossible to react,”he said.