A trade analysis of the wine and spirit market from the perspective of the European Union. (Trade both within the EU and globally)
According to the European Spirits Organization made up of 38 member countries form the EU the industry is governed by bilateral and multilateral trade agreements with different world markets. The treaties influence the tarries and quotas as well as the imports and exports within the member states. The wines and spirits business is a crucial part of the EU markets. In 2011, EU spirits producers paid €13.8 billion towards the excise duty costs.
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This accounts for 47% of all excise revenue collected from the alcoholic drinks. Spirits feature about 21% of the whole alcohol consumed. The alcoholic and beer varieties in the EU comprise of the Wine, Beer and Spirits. Despite the immense contribution made to the EU economy, the industry contends with trade barriers like tariffs, and tariff quotas giving preferences to EU competitors like South Africa. Every country in the EU has its own tax rates in VAT and excise duties (CEPS, 2005)
Exports and imports
The EU is the leading wine producer in the world markets today with leading producers being Italy France, Spain and Germany. It is the EU which hosts 45% of wine producing regions of the world and it features 70% of global wine exports. Wine is produced from a variety of grapes to produce variants with tastes of dry and sweet wines.
The wine business in the EU is influenced by the Common Market Organization which streamlines the supply and demand (Agriculture and Rural Development, 2012).
According to the European Spirits Organization (CEPS) its annual exports in spirits amounts to 6 million Euros. Its partners in the Andean region feature Venezuela, Bolivia, Ecuador and Colombia. It also trades with South East Asian states, Central America, India, Argentina, Brazil, Uruguay, Korea and Ukraine. In EU exports to the South East Asian communities is worth about 400 million Euros. Brazil is one of its prime export markets due to the market restrictions, discriminatory laws and intellectual property laws.
Most of the EU countries have increased VAT. The UK alcohol excise duty is about £2.per 75cl of bottled wine and approximately £7.per bottle of 70cl in spirit. In total it spends about £15 billion in excise duty. Taxes vary from country to country. France currently has a 10% increase in exercise tax with a 20% reduction on the intermediate products. Denmark has a 25% increased exercise on beer with wine featuring a 55% incensement. Canada’s wine export to the UK stands at 2%.
Most of its wine is to the US and Chinese regions. Most of its imports are from the EU with France, Italy leading in its imports. However, Canada’s key trade barriers involve the increasing tariffs in bottled wine.
Competition from other countries includes Australia, Argentina, Canada, Chile, US, South Africa and New Zealand. Its most export markets are in China, Russia. The World Spirits Alliance handles factors of legal protection of spirit brands, enhanced market access, and removal of non-tariff barriers. The EU as a member counts on it for reduced procedural/regulatory obstacles in international trade for distilled spirits (Spenser and Foster, 2002)
Europe has some of the leading brands of liquor including Martini, Johnny Walker and Bacardi. The increased demand in the wines and spirits market has led to the restructuring of the wine producing farms to cope with the competitive global economy.
Regulations guiding the production of wine in the region are under the Common Agricultural Policy which influences the wine production, and marketing strategies.. As the market expands, it faces challenges which include the elimination of unfair tariffs and non tariff barriers like discriminatory taxes.
Agriculture and Rural Development. (2012). What is the Current situation of the European Union’s Wine Sector? European Commission. Retrieved from: https://ec.europa.eu/
CEPS. (2005). The European Sprits Organizations. Bruxelles. European Commission. CP.AS-053-2005. Web.
Spenser, D and Foster, M. (2002). World Wine Market, Barriers to Increasing Trade, ABARE Research Report, Grape and Wine Research and Development Corporation, 02.6. Web.