Scotch whisky: US tariffs

Daniel Zeichner Excerpts

Thursday 30th January 2020 Westminster Hall

[Daniel Zeichner (Cambridge) (Lab)]

It is a pleasure to serve with you in the Chair, Ms Buck.

I congratulate all Members on such sensible and thoughtful contributions. In particular, I thank the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) for securing the debate and for his broad-ranging and sensible introduction to it. I also congratulate the hon. Member for North East Fife (Wendy Chamberlain) on what might have been her first contribution in Westminster Hall, which is a less aggressive place than our other Chamber. I was struck by her comments about Diageo and the European Union. I also thank some of my colleagues in the shadow International Trade team for helping me to prepare for this debate, which is just as much about trade as it is about food and drink.

The Scotch whisky industry is thriving and, as we have heard, incredibly important to the United Kingdom as our ninth most valuable export, contributing £5.5 billion to the UK economy last year and supporting 42,000 jobs across the nation. It is particularly important for Scotland’s economy, accounting for the vast majority of Scotland’s exports of food and drink, and providing 10,500 jobs, in particular in rural communities involved in the distillation, production and maturation processes.

Having the Scottish whisky industry embroiled in the increasingly tit-for-tat trade disputes that have been festering between the US and the EU over the past 15 years is a cause for profound regret. We can all agree that something is wrong when a trade dispute that originated in alleged subsidies for aircraft has escalated primarily to affect a whisky industry that has been doing nothing but mind its own business and thrive, without tariffs, for decades. With the 25% tariffs that have been slapped on American imports of single malt Scotch whiskies and Scotch whisky liqueurs from the UK, Scotch whisky now pays for more than 60% of the UK’s tariff bill arising from the Airbus case. That absolutely cannot be right. As hon. Members have outlined, we are now seeing real impacts of the row on people.

The EU as a bloc remains our largest export market for Scotch whisky, but as an individual country the US is our largest market, and clearly our largest export market for single malt Scotch whisky. The tariffs imposed on those products in October have therefore had considerable impact already, as we have heard, with the value of Scotch whisky exports to the US down 33% in November 2019 compared with November 2018.

Those hit hardest by the tariffs, as we have heard, are disproportionately the small and medium-sized distilleries across Scotland, which only produce single malt and have the US as a key market. The Scotch Whisky Association estimates that the industry could lose as much as 20% of its sales to the US over the next year if the tariffs remain. That would be worth £1 billion. As we are all aware, a decline in the value of our exports to the US of such magnitude will inevitably have knock-on effects on investment, productivity and jobs.

Scotch whisky has not been alone in being hit by the American tariffs, and it is worth repeating that the 25% tariffs also hit a range of our agricultural exports, including pork and cheese. The British Meat Processors Association tells us that they face some real difficulties, and we have already seen the value of UK pork exports to the US fall by 42% between November 2018 and November 2019.

The main subject today, however, is the impact on Scotch whisky. Following the US Trade Representative’s announcement of a further review of its tariffs in December, we now face the real possibility of the tariffs on single malt whisky being increased, or their coverage expanded to include the blended Scotch that is currently excluded. That would make an already challenging situation much more difficult.

Such bullying tactics by President Trump are sadly reflective of an approach to international trade that I fear we will only see more of as we leave the European Union. President Trump has made his desire to put America first explicit, and is playing fast and loose with the global rules-based system governing international trade. So far, he has unfairly attacked foreign industries with tariffs, blocked the appointment of judges to the World Trade Organisation’s appellate body and, recently, threatened to pull the US out of the World Trade Organisation altogether. We urgently need an end to that tit for tat, and the removal of tariffs on both sides, on both Scotch and American whiskies. The Scotch whisky and American whiskey industries are in clear agreement on that.

The Prime Minister’s promise to remove EU tariffs on American whiskey as soon as we leave the EU is welcome, and it is clear that he believes this will go some way to encouraging President Trump to remove tariffs on our Scotch whisky. What is less welcome, and remarkably counter-intuitive, are recent reports that the Prime Minister is threatening both the US and the EU with high tariffs in some bid to speed up post-Brexit trade deals. We are familiar with the Prime Minister preparing completely different positions to cover all eventualities, but will the Minister make it crystal clear that tariffs on American whiskey will be excluded from this threat? If he will not, how can the Government possibly guarantee that pursuing such an aggressive trade stance will not embroil the Scotch whisky industry yet further in a burgeoning trade war?

In the meantime, the Scotch Whisky Association has been waiting nearly three months for a response from the Government on their plans for short-term support for the industry while it is subject to the tariffs. I hope that the Government will confirm today what their intentions are in that regard.

The sad reality is that this entire episode demonstrates just how difficult our upcoming trade negotiations will be once we leave the EU. One of the main economic advantages of being in the EU was the fact that in trade negotiations the UK was part of a trading bloc of 28 countries. Now we are on our own. In a future trade deal with the US, therefore, we will have to face up to the full force of its demands to export to us hormone- treated beef and chlorine-washed chicken. We will also have to ensure that the geographical indicators for our produce—such as Scotch whisky and Cornish pasties—are not lost once we leave the EU’s protective framework. The signs to date of the Government’s commitment to protecting the good name and value of our regional goods are, frankly, not promising.

Our highly prized Scotch whisky industry is a high-profile casualty in this grim world of retaliatory trade wars between men with big egos, little sense of the damage they cause and even less regard for the wider consequences. We urgently need a return to a rules-based order to give stability and security. The jobs and livelihoods of people not just in the UK but in nations across the world depend upon it.