Walpole Comment | Tariff free trade is essential to luxury’s post-COVID recovery

Today Monday 28th July 2020 – ECCIA (the European Cultural and Creative Industries Alliance, of which Walpole is a founder member) will make further submission to the Office of the US Trade Representative to try to avert the escalation of the long-running Airbus/Boeing dispute’s impact on the luxury sector’s trade with the US.

Many Walpole members were affected by the imposition of tariffs of up to 25% on luxury goods that came into play in October last year. Whilst the tariffs imposed on goods imported from the EU into the US are over a wide range of categories, there’s a disproportionate impact on luxury goods, not least on cashmere from Johnstons of Elgin, bed linen from Peter Reed, Savile Row tailoring, suiting fabrics, knitwear, English wines and our single malt whisky members, putting up significant barriers to trade with a market that remains the largest luxury market in the world, worth in the region of $85b. It’s estimated that the current tariffs and those listed in annexes 2 and 3 could affect $48b of soft luxury goods imports into the US and could equate to $12bn in additional duties.

Last month, the Office of the USTR announced that it was considering modifying the list of EU products subject to additional import tariffs on goods to the US – including gin, vodka, sparkling wines, china and glassware and handbags – and potentially scaling up the tariff rate up to 100%.

At a time when the COVID crisis puts international trade on a fragile footing, luxury goods are caught in the crossfire of an unconnected dispute over aircraft subsidies, and we have been urging our contacts in Westminster and, with ECCIA, in Brussels to do all they can to resolve the issue rapidly.”

Airbus announced last Friday that it was changing some of its financial support agreements to bring it into compliance with World Trade Organisation guidelines and remove the justification for US tariffs, but it remains to be seen if this will end the dispute.

You can read the documents Walpole and ECCIA have submitted for the public consultation period here: Walpole response: EU – US tariff submission and here: ECCIA: EU – US tariff submission. The Office of the US Trade Representative will announce the decision on European goods and the applicable tariff rate no later than August 12th, but if nothing is resolved the tariffs will be implemented on goods imported into the US in early September.

The long-standing American and European luxury goods trading relationship has been caught in the cross-fire of mounting trade tensions: there are no winners in a trade war, and Walpole and its sister associations across Europe are doing all we can to help UK, EU and US authorities to de-escalate a situation which will not only harm consumers but impact on employment.

In the UK, of course, we have the additional implications of Brexit to contend with, and it seems that a UK-EU trade deal is still some way off. Compromises will have to emerge in September before a deal is agreed in October, leaving both sides just enough time to ratify an agreement before the end of the year.

It’s a huge advantage for Walpole to be so closely aligned with its counterparts in continental Europe – 80% of the world’s luxury comes from continental Europe and the UK, and supply chains, talent and customer networks are highly integrated, supported by strong trading relationships that go back many years: centuries in some cases. The support of Altagamma, Comite Colbert, Meisterkreis and Circulo Fortuny and ours for them, always invaluable, has come into its own during the crisis, reinforcing the collegiate heart of the luxury sector.

When troubles come not as single spies but in battalions, only by focusing on all we have in common and by working closely together for the good of the sector will we be able to win.

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