Australian Craft Brewers Appeal to WTO Over Beer Subsidies

Craft brewers in Australia have turned to the World Trade Organisation (WTO) in an effort to stop other governments subsidising their foreign counterparts.

ABC reports that the Australian Real Craft Brewers Association (ARCBA) accuses US microbrewers in particular of gaining an unfair advantage in the Australian market.

Many governments offer tax breaks to producers that brew under a pre-determined amount of beer each year. In the UK, it's called the Small Brewers' Relief scheme and was introduced by former Chancellor Gordon Brown in 2002. Under the initiative, those brewing less than 60,000 hectolitres qualify for reduced beer duty.

The smaller you are, the better the saving: those producing less than 5,000 hectolitres qualify for a 50% tax break, but the rebate falls as the amount brewed goes up.

These sorts of tax breaks, argue the ARCBA, distort the market. The organisation's chairman David Hollyoak said: "Australia is in a very unfair position because in 22 out of the 33 Organisation for Economic Cooperation and Development [OECD] countries are providing substantial reduced tax rates for their small brewers, and under the general agreement of trade and tariffs that is deemed a government subsidy."

Craft brewing has taken off around the western world and in Australia, is growing at 13% per year, with local media estimating that the number of craft breweries in the country rose from 86 to 175 in the decade to 2013.

It's US microbreweries who seem to be the main target for the accusations, with the ARCBA singling out the Californian company Sierra Nevada for particular criticism.

Hollyoak told ABC: "We've had quite a few members say they've lost taps at hotels or fridge space to Sierra Nevada products."

Sierra Nevada is far from what would be defined as a craft or microbrewery in the UK. The company employs more than 400 people and has brewing facilities around the US. It brews almost a million hectolitres of beer each year and is the seventh-largest brewer in America.

One UK industry insider says that any WTO challenge would not impede on UK brewers, because very few who qualify for "microbrewery" status export much (if any) of their produce. But in the US, the source says the government "shifts the goalposts" in order to allow companies such as Sierra Nevada to benefit from subsidies.

It's also understood that the company has received significant capital from the state government in exchange for setting up a premises in North Carolina.

In Australia, the standard beer duty is 10% on the unit. In the US, it is determined on state-by-state basis and in California, where Sierra Nevada is brewed, it stands at 7.25%. In the UK, the standard beer duty is 20%, but as explained, smaller brewers can earn a significant tax break by brewing small amounts.

There are precedents for such a case at the WTO – which sets the rules of international trade for its 160 member states. In 2006, the European Union brought a case against Canada for giving tax exemptions to its beer and wine industry, which it claimed were "inconsistent with Canada's obligations" as a member of the international trade architecture.

The pair reached a mutually agreed solution in 2008, which allowed EU exporters to benefit from reduced customs duties in Canada.

The US brought India to the WTO in 2007 because India imposed "additional duty" on beer, wine and distilled spirits from the US. A judgement reached in 2008 found that India did not have to remove the extra tariffs.