The EU and the US have agreed to suspend mutual tariffs over the Airbus-Boeing dispute for a four-month period, which gives an immediate lifting of the 25% tariff being paid by Irish butter exporters to the US such as Ornua and to a lesser extent on Irish whiskey and related beverage exporters.
The breakthrough was announced by European Commission president Ursula von der Leyen following a phone call with US president Joe Biden on Friday, paving the way for a final settlement of the 16-year-old trade dispute over illegal subsidies by both Washington and Brussels to their aircraft manufacturers.
The battle for global market share between Boeing and Airbus, with both claiming the other had availed of illegal government subsidies, boiled over in 2019 when the Trump administration slapped a 25% import duty on a range of European goods including butter and whiskey, as well as a 10% import duty on Airbus aircraft entering the US.
Despite the hefty Trump tariff duty, sales of dairy products to the market held up well at €396m, slightly up on 2019, but exporters did suffer a loss of profit margin.
The big surprise was the fall in drink exports to North America, which was the most negatively affected of Ireland’s key markets last year, showing a reduction of 26%.
The dairy exports were mainly driven by Irish butter which sells well in the US, mainly due to the popularity of Kerrygold, a favourite selling three million packets of butter in the US each week.
However, the hit to profit margin would have been significant and not something they would have been able to absorb for much longer, as commodity prices and Covid driven transport costs had also risen.
The largest market for Irish whiskey is the US, hence the dramatic fall in sales to the market last year was felt right across the sector from large producers such as Jameson to small niche brands such as Knappogue Castle, a single malt producer.
The Trump tariffs imposed in October 2019, were mainly aimed at the single malt Scotch whiskies, which took the brunt of the 25% import tariff. Whereas Irish whiskey being mostly the blended variety, was not impacted by the US tariff.
However, Irish producers were not able to take advantage of their good fortune and the opportunity to gain market share over their traditional market adversary.
In fact, there was a significant decline in exports to the US market last year. Industry sources state that the US tariff did have some impact but also pointed to pre-October 2019 stockpiling, and the closure of the on-trade globally due to the pandemic.
According to Bord Bia, Irish whiskey exports to the US was down 26% to €356m last year and cream liqueur exports valued at €141m was down 14%.
Regardless of the nuances in the Irish trade figures, the news of the breakthrough in EU-US relations is excellent news for Irish business, as well as business on both sides of the Atlantic.
It is also a very positive signal that the Joe Biden-Ursula van der Leyen relationship has not been hurt by the EU announcement of the investment deal with China in January, despite the incoming Biden request to hold off.
- John Whelan is a leading consultant on trade and business. He is also managing partner at the Linkage-Partnership, an international trade consultancy.