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French, German Winemakers Take the Long View on Eve of New Tariffs

by Mike Dunne
October 18, 2019
Maximin Von Schubert                                                                                           Photos by Mike Dunne
Lea Rodrigues

While apprehensive about the imposition of 25 percent tariffs on European wine by the United States, several members of the French and German wine trade are almost uniformly calm about the potential impact on their business.

Their perspective has been honed by the American recession of a decade ago, which reminded them of an old lesson: Don’t put all your eggs – or wine - in one basket.

Since then, they assiduously have been courting other potential markets to assure that they no longer are so heavily dependent on the United States.

Maximin Von Schubert, sixth-generation manager of his family’s estate at Mertesdorf in the Moselle Valley – Maximin Grunhaus – said that in the wake of the American recession he suspected that he should start to cultivate other outlets for his wines, though California remains his chief market in the United States.

“Unfortunately, I was right,” he says of his foresight, given the looming tariffs. In the meantime, he has developed more markets in England, China and elsewhere.

Similarly, Reinhard Lowenstein of the Moselle Valley estate Weingut Heymann Lowenstein said, “I’m happy not to be in the hands of one big importer in one country. We are in 40 countries.”

Despite forecasts that the tariffs will lead to equivalent price increases for French, German and Spanish wines in the U.S. – Portuguese, Austrian and Italian wines are exempt from the levy –producers generally shied from speculating on how the cost of their releases will be affected.

An exception was Francois Despagne, owner of Chateau Grand Corbin-Despagne of Saint-Emilion. He expects to see the price of his wines in the U.S. jump 20 percent. “The United States is a big market for me, so I am uncertain and nervous,” said Despagne. With each $5 increase in the price of a wine, its sales drop by half, experience has shown, he added.

Others took a wait-and-see stance. “We don’t know what will happen,” said Lea Rodrigues, winegrower at her family’s Chateau de Castres in the Graves region of Bordeaux.

“It could be complicated for French wine,” said Frank Bijon, general manager of Chateau Arnauld in Bordeaux’s Medoc region.

Marina Cazes, director of digital communications for her family’s Chateau Lynch-Bages in the Medoc, recalled that when the American market last collapsed during the recession the Chinese market was gaining traction. “That was a great compensation. But China is now much weaker,” she said. “We are very worried about the outcome of recent decisions by Donald Trump. And once you create a tax it’s quite rare that the tax disappears.”

Others rued the unequal application and the abruptness of the new tariffs. Why aren’t the tariffs, mused Maximin Von Schubert, applying to Austrian wines, a major competitor for Germany in the realm of aromatic white wines.

What’s more, the suddenness of the decision to impose the tariffs didn’t give producers a chance to ship wines and replenish stocks before they took effect. “Trump didn’t wait to give us an opportunity to ship,” said Von Schubert.

The tariffs are an outgrowth of a World Trade Organization finding that $18 billion in European Union subsidies for the airplane manufacturer Airbus violated the organization’s rules, costing American aerospace companies “hundreds of billions of dollars in lost revenue” during nearly 15 years of litigation, according to the Office of the United States Trade Representative. The subsidies, argued the United States, allowed Airbus to sell its products at unfair low prices, hurting this country’s largest airplane builder, Boeing, reported The New York Times.

The tariffs are to be applied mostly to imports from France, Germany, Spain and the United Kingdom, the four countries responsible for the subsidies. They are meant to raise $7.5 billion annually, or until the European Union ends the subsidies.

Cheese from throughout Europe also is targeted in the tariffs, including imports from Ireland, Greece, Poland, Sweden, Finland and Italy.

According to the Office of the United States Trade Representative, the European Union isn’t allowed to retaliate against World Trade Organization countermeasures, which lessens the odds that the EU will impose tariffs on American products, including wine.

However, reports The New York Times, the World Trade Organization is pondering a case that the European Union has brought against the United States for subsidizing Boeing. Whether that could result in retaliatory tariffs on U.S. products remains to be seen, though European officials reportedly already have drawn up a list of $20 billion in American goods that could be taxed if the EU prevails in its arguments. That case is expected to be resolved early next year.

See Today's Joint Statement by International Beverage Alcohol Associations in Response to U.S. Tariffs Imposed Today 

Reinhard Lowenstein
Francois Despagne
Frank Bijon

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