E-Malt.com News article: USA: Diageo suggests alternative to tariffs

Smirnoff owner Diageo has suggested the US government should consider tougher rules of origin requirements in trade agreements as an alternative to tariffs, The Spirits Business reported on March 17.

In a letter sent to the US trade representative (USTR) on 11 March, the drinks giant argues that new rules of origin would ‘disincentivise the use of non-originating content and support the Trump Administration’s policy objectives’.

The letter was written by Diageo North America’s vice-president of government relations, Alden Schacher, and sent in response to a request for comments to assist in reviewing and identifying unfair trade practices and initiating all necessary actions to investigate harm from non-reciprocal trade arrangements. It was ‘one of hundreds’ published by the USTR from firms and trade associations about tariffs.

The letter begins by highlighting that “by definition, many of [Diageo’s] products must be produced in certain parts of the world, such as Bourbon (US), Tequila (Mexico), Canadian whisky, Scotch whisky, and Irish liqueur. Because of this regional production, consumers have come to know and recognise their preferences for alcoholic beverages based on where those beverages are produced.”

Schacher goes onto mention in the US, the firm supports more than 178,000 jobs, and operates 11 manufacturing sites, with an investment of approximately US$415 million to open a new manufacturing and warehousing facility in Montgomery, Alabama recently announced.

He adds that in a typical year, Diageo products generate more US$12.1 billion in sales revenue for US restaurants and bars, and US$1.5bn in alcohol excise tax revenue for the US federal government and US state and local governments.

“Furthermore, we spend nearly US$650m annually sourcing US inputs including: US$101m on American white oak wooden barrels, US$75m on agricultural commodities, US$150m in glass, US$35m in cans, US$40 million in PET (polyethylene terephthalate), US$60m in paper products, US$40m in flavours, and US$150m in bulk liquids.

“The ability of our US-produced products that utilise substantial US inputs to compete fairly in export markets is critical to Diageo,” Schacher’s letter explains.

After providing background information in alcoholic beverage trade, the letter moves on to propose an alternative to the tariffs that are currently hanging over the heads of Mexico and Canada.

It reads: “President Trump’s reciprocal trade initiative presents a useful opportunity to support President Trump’s pro-growth economic agenda and to expand tariff-free trade in alcoholic beverages and spirits with other trade partners that demonstrate fair and reciprocal trade. This would help to unlock significant untapped global growth opportunities for US exporters like Diageo.

“An opportunity to enhance trade in alcoholic beverages, protect integrated supply chains, and incentivise substantial US content in imported goods would be through enhanced rules of origin in trade agreements that provide preference to goods like alcoholic beverages in which all ingredients and subcomponents are substantially sourced within the territories of the United States and the other trade agreement country.”

These proposed rules of origin would mean that plants or grains used in the production of imported alcohol would be required to come from the US, or the territory of a ‘strategic trade partner’ – meaning any country that has a trade agreement with the US, such as Mexico and Canada.

Diageo also suggests that the rules ensure the distillation also occurs in the US or the territory of the same partner, with any barrels used in ageing also sourced from one of those places.

The move, Schacher says in the letter, “would deepen US supply chains, disincentivise the use of non-originating content, and support the Trump Administration’s policy objectives of growing US jobs, the US economy and resilient supply chains.”


17 March, 2025