Estonian, Latvian foreign ministers discuss alcohol excise policies ({{contentCtrl.commentsTotal}})

Alcohol store in Ainaži, on the Latvian-Estonian border.
Alcohol store in Ainaži, on the Latvian-Estonian border. Source: ERR

Minister of Foreign Affairs Urmas Reinsalu (Isamaa) discussed excise policy with his Latvian opposite number Edgars Rinkēvičs (Unity) on Monday. The two met after a Council of Baltic Sea States meeting, in Jūrmala, Latvia.

The issue is timely, since a bill to slash excise duties on alcoholic drinks by 25 percent passed its first Riigikogu reading Monday.

The main argument supporting the bill is a curbing of cross-border trade in alcohol, which has led to a boom in Latvian border towns such as Valka and Ainaži, to Estonia's detriment.

Alcohol excise duties have been successively raised in Estonia in recent years.

Latvia recently announced it would respond with its own excise reductions, following the tabling of the Estonian bill.

The meeting

Rinkēvičs congratulated Reinsalu on becoming foreign minister, after the current Centre/EKRE/Isamaa coalition came into being in late April. Reinsalu was justice minister under the last administration.

The two ministers discussed excise policy questions, agreeing that both countries' finance ministries should hold consultations on the issue, ERR's online Estonian news reports.

"Latvia and Estonia have active and comprehensive cooperation at several levels and in different fields," said Rinkēvičs on Monday.

"This year also sees a common celebration - the 100th anniversary of the Battle of Võnnu. We are happy that our countries are united by stable economic relations. We want to move forward with close economic cooperation, and we need to strengthen cross-sectoral collaboration through innovation and new technologies, " he added.

The Battle of Võnnu, also known as the Battle of Cēsis, took place during the Estonian War of Independence and saw joint Estonian and Latvian forces successfully repel Baltic German attacks, near the northern Latvian town of that name. Latvia was also engaged in an independence war at the time.

Further concrete details of how the common policy might pan out were not reported, though the two ministers also talked about other  bilateral relations, regional cooperation, and Russian actions in Ukraine. The Rail Baltica project was also discussed.

Arguments for and against excise cuts

However, Prime Minister Jüri Ratas (Centre) told daily Eesti Päevaleht (EPL) Tuesday that he had not discussed combating a price war on alcohol with Latvian colleagues yet.

Arguments in favor of reducing excise duties on alcohol in Estonia principally concern lost revenues, including government revenue, which happen when Estonian, and even Finnish, customers head south to stock up on alcohol.

Counter-arguments claim the excise cuts will lead to further losses in excise revenues, since the volume of alcohol purchases needed to even maintain current levels would need to rise significantly. This would come at a time when alcohol consumption in the region is generally falling, it is argued, with a trend reversal being detrimental to public health.

Some skepticism has also been voiced on whether the excise cuts would be passed on as price cuts to consumers, or would instead lead to increased profits for alcohol producers, should prices remain constant.

Finland also noted last week it would need to evaluate responses to any excise cuts in Estonia.

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Editor: Andrew Whyte

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