Archive for the 'wine politics' Category

Wine tariff comment period ends today

Tariffs of 100% may soon hit European wines in America. The price of some wines will double. But mostly it will mean that many of the most coveted wines will no longer be available. The comment period ends today at midnight over at the site of the United States Trade Representative. Fully 24,071 people have submitted comments. Add yours! My take on the situation is that it’s a code red: after “big, beautiful” negotiation with China and a new agreement in North America, the administration is more likely to turn to Europe. Hopefully, cooler heads will prevail…Anyway, I made a pie chart! It shows that more American businesses profit from a bottle of European wine than the producer. Overly simple, but trying to make the point that these tariffs are an own goal.

Here are three pieces I wrote on tariffs for Wine & Spirits magazine last month. And here’s my letter to the USTR:

January 13, 2020

Ambassador Robert Lighthizer,

I am writing to express my concern regarding the escalation of tariffs on wine. Read more…

How did champagne dodge the tariff bullet?


For those looking to explain the oddities of the recent tariffs on French wine, a clue may have come last week in Texas.

But first, those oddities. It is not really going out on a limb to say that this administration has a haphazard, govern-by-tweet style of policymaking. So it should not be a surprise that there were some head-scratchers in the wines affected by tariffs. since not all of the $2.1 billion of wines that the US imported from France last year were included. Notably omitted from the list was the high-value category of champagne (sparkling wines were all exempted). Cognac and French spirits were not affected, another large, high-value. (And neither were French handbags or fashion–by contrast, cashmere sweaters from Scotland were hit). And wines over 14% alcohol were not affected. And those in “containers” of over two liters. And Italian wines were exempted since Italy is not a part of Airbus–yet parmigiano reggiano was hit with a 25% tariff? Hmmm…

For a possible clue for explaining some of those loopholes, we take you to Johnson County, Texas Read more…

Questions on French wine tariffs!

wine tariff
Our post about the 25% tariff that will be imposed on the $.2.5 billion of wines imported from France, Spain and Germany as of October 18 raised some questions. We respond:

Rick: How do you suppose this will affect futures orders that are in place?

Dr. Vino: They will be hit by the 25% levy if they arrive in the US after October 18. This could lead to the smart collector’s money either (A) diverting toward wines already in the US that are available at auction (they have the added bonus of being perhaps more ready to drink) or (B) perhaps the merchant that sold you the future is prepared to hold off on taking delivery until the tariffs are called off. This trade dispute can’t go on forever, right?!

Carol: Since Italian wines are not hit by tariffs, will this be a Prosecco New Year’s Eve?
Dr. Vino: Champagne somehow dodged the tariff bullet so your choice of bubbly will be tariff-free.

Carol, with a follow-up: So will wine prices be rising this holiday season?
Dr. Vino: It is unclear if there will be price hikes on store shelves (and restaurant wine lists as soon as December). Many shops or restaurants could conceivably buy now to insulate themselves and distributor warehouses are probably pretty full in anticipation of both year-end madness and perhaps this tariff move. One rep I spoke with said their distributor is not expecting price hikes for six months. But who knows–others may not be as well positioned and have to pass these tariffs on to consumers sooner.

Jade: Should I pre-buy my wine now for the rest of the year?
Dr. Vino: Sure! I never would tell you not to! There are so many great wines in the market right now plus a lot of stores offer discounts on 12+ bottles. And you know the holidays are coming…oh, and have you seen the news recently? Oh, man…might make you want to crack into your stash.

Juliette: so will French rosé next year be 25% more expensive?
Dr. Vino: If the issue remains unresolved and the tariffs are still in place, then yes. Any 2019 wine from these three countries would be impacted–even Beaujolais Nouveau!

Leslie: How exactly do the tariffs affect the auction market? If a past vintage passes from an affected EU country will that be subject to tariff? Do auction wines now become more valuable if they are unaffected by the tariffs?
Dr. Vino: Wines in the US before Oct 18 are not hit by tariffs. So, yes, there’s a chance that if futures buyers like Rick divert their funds to collectible wines that are slumbering in cellars across America now, then, yes, there could be a bump in the auction market for French (and German and Spanish) wines.

Okay, that’s all the questions for now. But I did want to reproduce the text of the directive on French wine tariffs (and Spanish and German and UK wine): “Wine other than Tokay (not carbonated), not over 14% alcohol, in containers not over two liters.”

So weird that wine over 14% alc gets a pass! so all Chateauneuf du Pape comes in unaffected? To Juliette’s point above, maybe we will see some 14% alc roses? 😛 Also, game on for double mags of French wine! And champagne!

Also, final fun fact: $16 million of wine was imported from the UK last year! I knew it was, uh, small beer, but that is actually more than I thought!

UPDATE: this post was edited to reflect the fact that champagne will not be affected by the tariffs. Neither will cognac or handbags so a big wine for LV to the MH.

Trump to slap tariff on French wine


The trade war gets real! As if tariffs on hundreds of billions of consumer goods made in China weren’t real enough, the latest escalation from the Trump administration has found a new target: French wine.

Late yesterday, word came down that the Trump administration will impose $7.5 billion in tariffs on goods from our European allies. The impetus is subsidies to the plane consortium, Airbus, which is backed by France, Spain, Germany and the UK. Thus the tariffs affect symbolic goods from those countries, including all wine, olive oil, whisky and some camera parts. The long-simmering dispute entered a new phase yesterday as the WTO ruled in favor of the US. Hopefully there will be a negotiated settlement but as announced yesterday, the levy will be imposed on all goods on the list that enter the country as of October 18.

The fourth quarter of the year is by far the biggest quarter for wine sales. Many of the wines that will be sold during that time are already in (climate controlled) warehouses on our shores. But not all. If these tariffs become reality, it remains to be seen how importers of French and Spanish (and German and British) wine will adjust prices in the near term. But, if these tariffs linger, prices for these wines will inevitably rise sharply in the new year. It is worth noting that tariffs are paid by importers, not the producers (although in some instances, importers may request producers share the pain to mitigate price increases but with a tariff this large, there’s not a lot they can do other than see prices on store shelves rise and placements on wine lists decline.)

Wine is highly symbolic of France. Thus, it has been the subject of protests and over time, such as in New Zealand over the Rainbow Warrior or in 2003 over the Iraq war. (See the wines served at Macron’s state dinner.)

France was the biggest supplier of imported wine to the US market, sending $2.1 billion of wine to the US in 2018. Spain was fifth with $383 million, Germany ninth with $103 million, and the UK 14th with $16 million in wine (!). [source]

Clearly, the biggest winners here are domestic wineries, which provide two of over three bottles of wine consumed in America. Italy, the second largest provider of imported wine to the US, is not hit by the tariffs since they do are not a part of the Airbus consortium. As such, they stand to benefit greatly and the Italians, New Zealanders, Chileans and Australians are probably slack-jawed at this opportunity that has been handed to them.

If the tariffs indeed get imposed, how long they remain in place is an open question. So far, Trump has not rolled back any tariffs against China, so it is entirely possible that the only way for the tariffs to be removed is when there is a new occupant of the Oval Office.

Exciting times for Spanish wine – a story over on SevenFifty

ricardo perez
Spain makes a lot of wine. Overall, it’s the third biggest producer in the world. One problem the country has is that many of the country’s wines sell at low prices–don’t get me wrong, there are certainly some pricey ones too. Another problem is that as wine enthusiasts and producers around the world rejoice in delving into fiendish detail about vineyards, some of Spain’s region’s can keep an administrative lid on the terroir.

I examine how some producers such as Ricardo Pérez Palacios (above) and Raúl Pérez in Bierzo and Telmo Rodriguez in Rioja are doing to unlock the terroir in their regions. This process not only ties into what’s happening in the larger wine world, it can also serve as a way to raise the price of grapes, land and wine.

These are exciting developments. I sought to capture them in an article at SevenFifty daily, published today. Check it out and let me know your thoughts.

“Why Spanish Producers Are Seeking Burgundy-Style Classifications” [SevenFifty Daily]

Wine spills onto the docket at the Supreme Court


On Wednesday, the eyes of wine geeks and those in the wine industry will turn to the the Supreme Court. Wine will be on the docket, and, as you might expect, reds and whites do not map on to a political right and left. A love of wine is non-partisan even though no justice has ever proclaimed “I love wine” during confirmation hearings (only beer gets this kind of admiration!). At stake on Wednesday is whether wine shops can ship across state lines.

The biggest wine case the Supreme Court ever decided was Granholm v Heald in 2005. In their decision, the majority ruled that states could not discriminate between out-of-state wineries and in-state wineries—either they had to open up to shipping from all wineries or close the whole thing down. Fortunately for wine enthusiasts, almost all state chose to open up so consumers across the country now at least have the right to order wine from wineries.

But it has remained an open legal question whether this freedom for wineries to ship also applies to wine shops. In fact, Read more…

Brexit will give UK wine a hangover

brexit_wine
Tumult (anarchy?) is the current state of the main political parties in Britain after the Brexit referendum. Will the vote to exit the EU leave the British wine trade in any better shape than the political parties?

By way of background, the UK was, pre-Brexit vote, one of the bright stars in the wine world. While consumption has been slowing in the main producing countries of France, Italy and Spain for some time now, the UK was heading in the opposite direction: the wine market is vibrant, diverse, growing and by some measures, the second still wine market to the US. Somewhat astonishingly, a recent survey by the wine trade group WSTA showed wine as “the most popular alcoholic drink in the country.”

Post-referendum, the pound Sterling has fallen to 35 year lows against the dollar and tumbled nine percent against the euro (and even more as jitters about Brexit gripped the currency market earlier in the year). Historically, wine was one of the things par excellence that the British traded for: Adam Smith observed this in his example of “wine for wool” highlighting the comparative advantage of nations. (More recently, England has seen a domestic wine industry emerge but it is still not enough quantity at low enough prices to slake the thirst of British.) So the quick take is that Riojas, Burgundies, Baroli, and all other euro-denominated wines just got nine percent more expensive. (The currency-related price increases may take several months to filter through until existing inventories need to be refreshed at the new currency levels but preliminary reports indicate it is already being felt in France.) With 80% of wine in the UK sold at retail and much of that at thin margins, the consumer will feel the brunt of the currency impacts.

Over half of the price of the average bottle of wine in the UK is tax, so the government could conceivably cut the wine tax to offset the currency effect. But since HM Treasury is as desperate for revenue as most treasuries, that is highly unlikely especially since wine brings in £8.6 billion to the public purse.

There is, of course, the human element too and many non-British EU citizens live in Britain and work in the wine trade. London is a hotbed for restaurants and there are many non-British EU citizens who work as sommeliers. Their futures are all up in the air now.

The uncertainty following the referendum has sent the pound plummeting and many economic forecasters now see a recession looming for Britain. In the end, since the referendum was only advisory, and there’s been a wave of resignations among the political class, there’s a fair chance that no politician will actually trigger Article 50, which starts the clock and makes inevitable Britain’s departure from the EU. And if, in the delay, the economy suffers, British unity itself is under risk, new leadership emerges that can better articulate the cause for “remain,” there could be calls to rethink and “Bremain.”

With all the uncertainty, the Brits could certainly use a glass or two of wine. But whether they will continue to reach for it with such enthusiasm remains to be seen.

Gov Cuomo deals wine shipping a setback

governor_mansion_ny
Late on Friday, Governor Andrew Cuomo vetoed a bill that would have made wine shipping easier for New York wine retailers. The bill protects wine retailers from being penalized by the NY State Liquor Authority for potentially violating the laws of other states. That’s right: other states.

In vetoing the bill, Cuomo said that he did not want to make New York a “haven for entities intent on breaking other states’ laws, avoiding other states’ legitimately imposed taxes and regulations and selling to minors with impunity.” (see full text of the statement)

Why would the Governor veto a bill that both houses passed by 90% last summer? Your guess is as good as mine. But that language about selling to minors is usually the hallmark of wholesalers’ argument against liberalizing wine shipping–technology exists to collect taxes and provide age verification. Now it remains to be seen if the legislature will override the veto with a two-thirds majority.

The Governor also called on the SLA to hold “a series of roundtables” on how to modernize the industry starting next March. We shall see if these roundtables include any consumer representatives but since a recent SLA ad hoc committee did not, I will not hold my breath.

The bill stems from a long-running case of Empire Wine, a retailer in the Albany area that is active in internet sales. The SLA had sanctioned Empire for violating other states’ laws and the legislature saw that as overreach, thus passing the bill.


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