Follow-up: The foolishness of taxing European wine

taxing european wine

“Who needs this stuff? Let’s buy more expensive California wine, because that’s what the Americans say we should do.”

Taxing European wine, and the economic fallacy behind the Jackson Family Wines proposal

Know two things about the proposal by the man who runs Jackson Family Wines to put up a tariff wall to keep cheap European imports out of the U.S.:

First, Barbara Banke, the chairwoman of Jackson Family Wines, told Wine Business Monthly in February: The wine business “seems tougher this year and it probably will be tougher next year. It doesn’t seem like it’s as easy as it was.”

Second, the suggested retail price for the company’s flagship product, Kendall-Jackson chardonnay, is about $17. But you can find it for $10 or $12 without too much trouble, which no doubt causes much consternation at company headquarters.

Is a pattern emerging here?

The Jackson Family proposal for taxing European wine has nothing to do with free trade, the so-called “level playing field,” or any other political rhetoric. It has to do with profit – Jackson doesn’t want to sell $10 wine, so it doesn’t want anyone else to sell it, either.

Which I completely understand. I don’t agree with it, but I understand it. So why hide the company’s true intentions behind complaints about unfair trade? Because who would agree to tax $10 European wine to protect one company’s profits? Hardly anyone who doesn’t work for that company.

Which brings us to the Wine Curmudgeon’s wine supply and demand primer. California’s role in the world wine market is important certainly, accounting for about 280 million cases a year. But it’s not as important as Californians like to think.  The French, Spanish, and Italians combine for almost 1.8 billion cases a year, while the total production of Chile plus Argentina is some 11 percent higher than California’s.

So what makes anyone think that the so-called “level playing field” would change anything? The rest of the world already has plenty of wine of equal quality and that will probably still cost less, even without the offending tariffs and subsidies. Why would a European buy €15 or €20 California wine (assuming anyone in California could sell it for that little, given California’s pricing structure) when they could still buy €8 or €10 European wine in the supermarket?

And this assumes that California can somehow produce enough wine to export. Which, as I mentioned in the first post, it doesn’t. We drink almost all the wine made in the U.S. in the U.S., and that doesn’t look to change anytime soon. They’re pulling out vines in California, not planting new ones to sell cabernet sauvignon to France and sauvignon blanc to Chile.

So there may not be much demand in the rest of the world for California wine, even if there was enough supply to export it, tariffs or no. The Jackson Family proposal ignores those basics, because it doesn’t help their argument.

Fortunately for those of us who care about wine and not wine company profits, I’m here to make sure those basics aren’t ignored.

Photo of “IMAG0970”by thirstforwine is licensed under CC BY-NC 2.0

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3 thoughts on “Follow-up: The foolishness of taxing European wine

  • By Tony Caffrey - Reply

    The problem for California vis a vis other countries, is that it can compete with any on both price and quality, just not both at the same time. Witness the % of US wines recommended on this blog.

  • By Phillip Anderson - Reply

    The part of this whole thing that boggles my mind is particularly who is saying it. If it were a small domestic producer saying this, they would still be wrong, but it wouldn’t be so weird. Instead, this is the head of a multinational company. When he says “If we were to continue selling wine from other nations, we would be teaching the next generation to drink imported wine,” surely he must realize how dishonest that seems considering that they are selling wine from 2 Australian wineries, 1 Chilean winery, 1 French, 2 Italian, & 1 South African wine. Someone who actively produces wine in 5 countries & sells 7 different wineries worth of foreign wine in the U.S. saying this seems disingenuous. It didn’t sound like they were about to divest themselves of these 7 wineries, so I guess he plans to help teach the next generation to drink imported wine.

  • By Rodney Schatz - Reply

    While I can not speak for Jackson Family Wines I do agree that we have an imbalance!
    WC”Wine Supply and Demand primer” You say that California is not as important as We think, with only 280 million cases verse 1.8 billion by France, Italy ,and Spain. If you are a grower or producer you would feel that CA is extremely important. For the sake of argument, If you break that down by country that is 600 million cases/ country. Now compare populations those three countries are significantly less populated than the US (all three are twice as populated as California alone) Just because the rest of the world has plenty of wine doesn’t mean that the US should take it especially with and unfair or uneven tariff.
    WC “So what makes anyone think that the so-called “level playing field” would change anything?”
    I do not know the answer to your question but why should Not the tariff be equal? Balancing the tariff would make their wine more expensive here and ours less if they would even buy it? I have never found any CA wine in Spain Italy of France I am sure there are some I have just never experienced Ca in the Old World.

    WC”Why would a European buy €15 or €20 California wine (assuming anyone in California could sell it for that little, given California’s pricing structure) when they could still buy €8 or €10 European wine in the supermarket?”
    Clearly you know that California can sell wine in to Europe and be on the shelve for 8-10 euro we do it all the time just not in Spain Italy and France. Imagine if they could?

    California If ever there was a place on earth to produce and export more wine
    WC” They’re pulling out vines in California, not planting new ones to sell cabernet sauvignon to France and sauvignon blanc to Chile.”
    We are pulling out vines for market reasons, disease and age issues. That is how California Ag works. If we were subsidized to keep unwanted grapes in the ground and subsidized to sell it out of country The world would have California’s problem. Those subsidies allow the old worldcountries to continue as well as expand a decreasing consumption in their respective countries at the same time looking to US
    The consumer should be happy we produce great wines at all price points. California, even with odds against us, will continue stand strong in the world market
    For you to imply that gross volume and production of other countries is a non issue to California or any other producing State in the US is simply Simple WC “Fortunately for those of us who care about wine and not wine company profits, I’m here to make sure those basics aren’t ignored”. Without profit no one can exist! Well maybe someone subsidized?

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