E-Malt.com News article: USA & EU: EU brewers negotiating US tax breaks

The U.S. is a craft beer nation, and the 2,768 craft breweries in the U.S. are proof of it. Although Americans would like to believe that they love craft beer more than any other nation, people across the pond would disagree with them. European breweries are more than just old world brewers, steeped in tradition and bound by outdated purity laws. Craft breweries are on the rise in Europe, producing innovative and novel beers as much as any American brewery. In fact, the E.U. has over 5,000 breweries, the majority of which would be considered “craft” breweries, Forbes reported on February 24.

As such, it shouldn’t be surprising that American brewers and European brewers collaborate with each other. Evil Twin, a gypsy brewery from Denmark, and Westbrook Brewing Co., a South Caroline brewery, have produced some of the most praised brews in the craft beer world.

American and European brewers are also sharing facilities to bring their beers to market without compromising quality. Green Flash Brewing Co., a California brewery, has a deal with St. Feuillien, a Belgian brewery, to produce their West Coast IPA in Europe.

Stone Brewing Co. from California has plans to open a brewery in Berlin (and in Virginia) later this year or early next year, bringing their beer directly to the German beer drinker and closer to craft beer fans throughout Europe.

With all the similarities and relationships between the U.S. and E.U. beer markets, why does the U.S. demand unequal tax treatment?

Both the E.U. and U.S. grant a tax break to small brewers. In the U.S., small breweries pay a lower excise tax, $7 per barrel, on the first 60,000 barrels of beer and $18 per barrel thereafter. The U.S. does not extend this lower tax rate to small foreign breweries even though the E.U. extends American small breweries that sell in the E.U. a preferential rate.

While the wisdom of carving out an exemption for small breweries is circumspect in general, the tax asymmetry has caused some tension between the U.S. and E.U. during the Transatlantic Trade and Investment Partnership (TTIP) negotiations. European brewers see the tax preference for only small American brewers as anti-competitive. They want the TTIP agreement to include a provision that extends the small brewery tax rate to European breweries.

The European brewers have a point. Brewers should compete on the quality of their beer at a particular price point. Where the brewery is located should only matter as far as it relates to production and transportation costs.

The unwillingness of the U.S. to extend the same benefits to European small breweries suggests they don’t believe U.S. brewers can compete without the protection.

The reality is that not extending the reduced rate to European small breweries is only hurting the U.S. beer consumer, observers say. It keeps the U.S. consumer from enjoying the talents of European brewers.

Representatives of the European brewing industry have reported a positive receptions to the proposal and are optimistic the equal treatment of small breweries will be included in the final TTIP agreement.


25 February, 2015