Politics & Policy

A Little Less Tariff, a Lot More Booze

Bottled beer move down a bottling line at the Brooklyn Brewery in Brooklyn, New York (Sara Hylton/Reuters)
If Trump wants more manufacturing jobs, he should look to the alcohol industry

From the earliest moments of his campaign, President Donald Trump has emphasized the importance of domestic manufacturing jobs. He’s negotiated carve-outs to keep factories in America, railed against companies that move jobs overseas, and increased tariffs in an attempt to protect blue-collar workers. Nearly all of the president’s rhetoric, however, has fixated on a handful of sectors traditionally associated with manufacturing, such as the steel industry, automobiles, and construction. This myopic focus has blinded the president to one of the most promising sources of manufacturing jobs in modern America: the alcohol industry.

President Trump is far from the only government official who obsesses over manufacturing jobs, with stories cropping up daily about politicians visiting production plants in Rust Belt states and donning hard hats for well-publicized photo ops. Unfortunately, many of the policies used to promote these jobs are targeted at propping up struggling industries at a time when more and more American jobs are migrating to other sectors. In many cases the very policies that are designed to protect jobs in one industry directly hurt job growth in more promising industries.

President Trump’s tariff policies are the most prominent example of this disconnect. The administration’s aluminum tariffs, meant to protect the domestic aluminum industry, have had a disproportionate negative impact on beer manufacturers. Because aluminum is used in beer cans, the tariffs are driving up production costs for brewers. According to analysis by the Beer Institute, aluminum tariffs are costing breweries nearly $350 million a year and putting around 20,000 beer-related jobs at risk.

The damage to the alcohol industry from tariffs extends to other drinks as well. In response to U.S. tariffs, Canada, Mexico, China, and the European Union have all slapped retaliatory tariffs on American whiskey. Several distilleries have already forecast higher prices as a result, which could dampen consumer demand and stymie the job-producing potential of the spirits industry. Meanwhile, small craft distillers looking to expand into Europe have seen their market access dry up.

Lost in all this is the fact that the American drinks industry has some of the best job-growth potential in the country. According to data from the Bureau of Labor Statistics, breweries, wineries, and distilleries created the second-most manufacturing jobs of any industry in 2017. These numbers don’t even include support industries that are tied to drinks, such as barrel manufacturers or bottle producers. With new breweries and distilleries opening every day, the growth seems primed to continue — if policymakers will let it.

Despite the tremendous growth, drinks producers still labor under some of the most onerous and complex rules — many stemming from the Prohibition era — of any industry. If President Trump and other lawmakers are truly serious about rebooting American manufacturing, they should begin by deregulating the alcohol industry rather than implementing more tariffs.

Federal lawmakers brought about some relief last year when, as part of the tax-reform package, they cut federal excise taxes on alcohol for the first time in decades. Unfortunately, not only have the recent tariff wars largely wiped out these cuts, they are in place for only a two-year period that is set to expire this year.

Federal officials and lawmakers should prioritize making these cuts permanent as well as revisiting the current tariffs. They also should revamp the complex and often time-consuming labeling requirements that the Alcohol and Tobacco Tax and Trade Bureau imposes on alcohol, including its excessive rules concerning arcane topics such as whether a beer can call itself “strong” or a spirit can be marketed as “pure.”

In addition to these federal strictures, state and local governments currently enforce many anticompetitive and harmful alcohol laws. More than a dozen states still allow only government-operated stores to sell liquor, while nearly every state has strict rules limiting alcohol producers’ ability to sell and ship their products directly to consumers. Many of these laws crowd out private investment, raise alcohol prices, and cap the number of jobs that the alcohol industry creates.

In the end, 95 percent of the world’s population and 80 percent of the world’s purchasing power reside outside the United States. Expanding the reach of the American alcohol industry will create and sustain domestic manufacturing jobs, but it requires the relatively free flow of goods in and out of the country — as well as a better regulatory environment for booze here at home.

Instead of pursuing misbegotten trade wars that ultimately hurt American job seekers, government officials should be concentrating on where the jobs really are: booze.

Jarrett Dieterle is the director of commercial freedom at the R Street Institute and the editor of DrinksReform.org. Clark Packard is the trade-policy counsel for R Street.

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