US drops gin from list of trade targets

THE US administration has decided to drop gin from the hit list of European products it plans to target if trade talks founder, industry sources say.

Gin was the most important British product on the list, and its deletion reflects the growing American belief that their fight is with the French, rather than with the EC as a whole.

The dollars 2bn ( pounds 1.25bn) sanctions list was drawn up in July to put pressure on the Europeans to end the subsidies they pay on oilseed crops. Carla Hills, the US trade negotiator, said that prohibitive duties would be applied to dollars 1bn worth of products on the list.

The EC has refused to give way, and the oilseeds issue has become enmeshed in the general wrangling over agricultural subsidies that is threatening to destroy the Uruguay round of negotiations on the General Agreement on Tariffs and Trade.

The list, which is highly detailed, consists mainly of luxury food and drink. If no progress is made on the Gatt talks, the administration is expected to publish and activate its final dollars 1bn list this week.

There are fears that this could lead to retributive measures from the Europeans, and ultimately to a new era of protectionism.

British products accounted for pounds 168m, or less than 10 per cent of the original list by value (30 per cent of the goods were French). Gin made up about 25 per cent of the British total; other major UK exports affected were, in descending order of value, liqueurs, sugar confectionery, cheese, cakes and biscuits.

City observers said the removal of the import threat against gin was very good news for Guinness and Allied-Lyons.

One analyst said: 'The pressure is obviously being applied against the French if the threat to imports of cognac is not lifted.'

The biggest problem for Guinness would have been its Tanqueray brand of gin, which is exported to America. Gordons, its other main brand, would not have been affected because it is produced in the US.

London Dry Gin, produced by Allied-Lyons, has had previous experience of a trade war. The brand was severely hit by import restrictions in the Eighties, when it was owned by James Burrough.

The news of the removal of gin from the US hit list will also be welcome for Invergordon Distillers, which recently opened a pounds 10m white-spirit distillery in Greenwich, the first to be built in London since 1908.

The plant, jointly owned with Tunnel Refineries, will sell distillate to make gin to Allied.

Gin was originally brought into Britain by soldiers fighting in the Netherlands during the Thirty Years' War in the 17th century. London became the home of gin, and gin became known as 'mother's ruin' because of the vast quantities consumed by women.

If the US does impose punitive tariffs, Guinness will, however, suffer through its 24 per cent holding in the French drinks and luxury goods group, LVMH, which is a major producer of cognac.

It is not clear whether LVMH's Moet & Hennessy champagne will be affected, but the French group, in common with all European drink manufacturers, has accelerated its sales to the US in an effort to limit the effects of any sanctions.

Meanwhile, European food and drink companies are mounting a campaign to make sure the Gatt talks are not allowed to founder. 'We are extremely alarmed and are trying to put all the pressure we can on the EC,' said Jill Ardagh, director for EC and international policy at the Food and Drink Federation.

'We have built up some important markets in the US, and we are gravely concerned that sanctions would set back years of marketing.'

Ms Ardagh said that the FDF and several of its equivalents in Europe have been urging top food executives to write to Jacques Delors, president of the European Commission, urging him to keep talks alive.

European food companies generally support the American view, because they want the Common Agricultural Policy reformed to bring down the cost of basic ingredients. However, French and southern European companies are less willing to go against the wishes of their governments, and are toeing the EC line.