‘Mini deal’ on whisky would be a boon to independent distillers

Scotch whisky, one of the UK’s most valuable exports, is facing a potential breakthrough on tariffs that have cost the industry hundreds of millions of pounds.

In an interview with the BBC, US trade representative Robert Lighthizer said there was hope for a ‘mini-deal’ between the US and UK that could see punitive tariffs on Scottish whisky cut.

Scotch whisky is a protected food name that will be covered by a new UK Geographical Indications scheme after Brexit takes effect. Exports have struggled in recent months thanks to a cocktail of challenges, including Covid-19, Brexit and US tariffs.

Since October 2019, a 25% tariff has been in place on single malt whisky that is shipped to the US – its most valuable export market. It came after distillers found themselves caught in the middle of a trade war between the US and EU over a dispute relating to aircraft manufacturers Boeing and Airbus.

Whisky makers have lost more than £400m due to the tariffs, according to the Scotch Whisky Association (SWA).

Karen Betts, chief executive of the SWA, said suspending the tariffs would “create a positive environment for intensified settlement talks to take place. A settlement would enable everyone – aircraft manufacturers, Scotch Whisky and other industries caught up in this – to focus on economic recovery rather than losing revenue to punitive tariffs.”

The SWA had previously hit out at the UK government for taking “inexplicably slow” action against the tariffs. Currently, there are 133 whisky distilleries in operation across Scotland, and small producers in particular are at risk if the tariff is not removed.

John Davidson, external affairs and strategy director at Scotland Food & Drink, said trade disputes are exacerbating an already challenging situation caused by the Covid-19 pandemic.

Recent figures from the Scottish government revealed that in the first nine months of 2020 Scottish food and drink export sales were down £1.1 billion on the same period in 2019.

“The removal of tariffs on shortbread earlier this year was a welcome relief for one of our key export categories,” John said. “The prospect of removing punitive 25% tariffs on whisky would be similarly welcomed by an industry whose exports are down significantly for the first nine months of the year, compared to the same period in 2019.

“For smaller producers, distillers and independent bottlers, for whom the US is a key export market, such a deal to remove tariffs could have a significant impact on their abilities to trade through these extremely difficult conditions.”

But the UK has an opportunity to negotiate new terms as part of ongoing trade talks with the US. For instance, the government recently took measures to “de-escalate” its role in the conflict by saying it would no longer apply tariffs to imports of Boeing aircraft.

“Secretary of State Liz Truss’s decision to suspend tariffs on US products in the Airbus/Boeing dispute is an important step forward, and a strong signal of the UK’s willingness to agree a resolution,” said Karen. “We would now like to see the US reciprocate by suspending tariffs.”

Karen continued, “Time is of the essence – Ambassador Lighthizer was very clear about that in his interview.  The US and UK governments must now work hard to find a final settlement to Airbus/Boeing and steel and aluminium disputes, and bring about the rapid return of tariff free trans-Atlantic trade in whiskies.”