Do U.S. Craft Brewers Need a Tax Break to Compete with E.U. Craft Brewers?

February 24, 2015

The U.S. is a craft beer nation, and the 2,768 craft breweries in the U.S. are proof of it. Although we would like to believe that Americans love craft beer more than any other nation, our friends across the pond would disagree with us. European breweries are more than just old world brewers, steeped in tradition and bound by outdated purity laws.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.

As such, it shouldn’t surprise you to learn 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., who has locations in California and Virginia, has even decided to open a brewery in Berlin to bring their beer directly to the German beer drinker.

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., 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.

Being a beer enthusiasts myself, I believe that U.S. brewers don’t need the protection; they can compete on a world stage. I would put the brewing talent in Ashville, NC against any city in Europe. In fact, it seems that U.S. craft breweries, such as Stone and Green Flash, are rapidly gaining market share in Europe.

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

So, let’s extend a welcome hand to our fellow beer lovers across the Atlantic.

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 agreement.


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