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Whisky sector calls for new free trade deal with EU

David Frost
David Frost: need to act quickly (photo by Terry Murden)

The Scotch Whisky Association is warning the UK and Scottish governments of a threat to tariffs unless there is a new free and open trade agreement with the EU.

Britain’s decision to quit the EU means it will eventually lose access to the bloc’s Free Trade Agreements (FTAs).

The SWA says: “Unless there are transitional arrangements, Scotch will lose significant tariff reductions in certain markets, notably Korea, South Africa, and Colombia and Peru.

“The UK will eventually need to negotiate its own FTAs or rely, as the EU largely does with most countries, on World Trade Organisation rules. This will take a major upgrade of capacity within the UK Government and can’t be done quickly.”

Of the £3.8 billion worth of Scotch exported last year, almost a third – £1.2bn – was shipped to the EU.

It is the biggest single net contributor to the UK’s balance of trade in goods, and without it the UK’s trade deficit would be 10% larger. 

The SWA wants some clarity on what sort of relationship Britain is seeking with the with the EU, “so we know how much new legislation to expect”.

There has been talk of Britain having European Economic Area (EEA) status, like Norway, or a more distant relationship based on a Free Trade Agreement with the EU, like Canada or Switzerland.

“The key difference is that EEA status keeps most EU single market laws in force in the UK, at the price of accepting free movement and a budget contribution. An FTA relationship means Britain would need its own rules in these areas,” says the SWA.

“The difference is crucial because many laws setting out the rules for Scotch and the food and drink sector generally are made at European level – for example rules on the definition of whisky, food labelling, bottle sizes, and so on.

“If these laws are to be rewritten it will make Brexit more complicated and the industry will need to start planning now.”

The industry is calling for practical arrangements enabling it to export Scotch Whisky to and across Europe “as simply as possible”.

It says: “We will also need new UK legislation for customs enforcement and interception of counterfeit goods.”

The UK will need to develop its own network of trade agreements with non-EU countries.

The SWA would like to see a new excise duty regime that is “fairer to Scotch Whisky and taxes alcohol more rationally across categories” and wants assurances that there will be no further burdens imposed on business “at such a sensitive time”.

It says: “We urge government in Edinburgh and London to work closely with us and to put in place mechanisms that allow vital industries such as Scotch Whisky a seat at the table”. 

SWA chief executive David Frost says: “Scotch Whisky is one of the UK’s most successful exports. We are calling on the UK Government to bring clarity to the transition to Brexit as soon as possible, and to negotiate to ensure that the current open trading environment is not affected. 

“Finding practical ways forward on export practicalities and on free trade agreements should be high on the agenda as negotiations begin in the coming months. We plan to play an active role in influencing this whole process to ensure that Scotch remains a product enjoyed across the globe.”

The SWA says it is confident certain things will not change. It does not expect a tariff on exports to the EU. The current EU tariff is 0% and World Trade Organisation (WTO) rules mean this won’t change.

In many markets Scotch will also continue to benefit from existing zero tariffs, for example in the US, Canada, and Mexico, as these are offered to all countries already. In many other markets that already demand high tariffs, for example India, Brexit will not make the situation any worse.

The industry believes it will be able to protect Scotch Whisky across the EU and globally as it does now.

It will no longer be subject to EU rules on excise duty or VAT.

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