SWA urges ‘swift’ removal of tariffs during UK-US trade talks

Trade body the Scotch Whisky Association (SWA) is calling on the UK government to “act swiftly” to remove tariffs during the US-UK trade negotiations as Scotch exports to the States dropped by 65% in May.

The US introduced a 25% tariff on single malt Scotch whisky last year

The US imposed a 25% import tariff on a number of EU goods, including single malt Scotch whisky, on 18 October last year. The move came in relation to an ongoing spat between the EU and US regarding aircraft subsidies for plane manufacturer Airbus, which the US argues caused the Boeing 777, 787 and 747 aircrafts to lose sales and market share, thus affecting revenue for US producers and jobs for US workers.

The SWA said that since the tariff was imposed, exports of Scotch whisky to the US have declined by more than 30%. Export figures for the second quarter of 2020 are not yet available.

The SWA’s chief executive, Karen Betts, said: “US tariffs continue to damage Scotch whisky’s exports to our most valuable market. Exports to the US have fallen over 30% since October last year when a 25% tariff was imposed on single malt Scotch whisky – amounting to over £200m [US$251m] in lost exports. This damage has now been compounded by the impact of coronavirus: exports to the US fell 47% in April and 65% in May, compared to exports in the same months in 2019.”

Last month, the US Trade Representative (USTR) sought public opinions on whether to increase tariffs on EU products, and extend tariffs to other products, including gin and vodka made in the UK.

The SWA said the UK government must now “act swiftly to defend UK interests” by bringing the UK facets of the aircraft dispute and other EU/US spats within the scope of the trade talks between the US and UK that began on 5 May 2020.

The trade group said there would be a number of benefits for the Scotch industry and other sectors if a “good deal” is secured with the US. The UK has the chance to resolve the tariffs dispute “quickly and directly” within these talks “using the flexibility it had gained on leaving the EU”, otherwise distillers will “pay a heavy price”, the SWA warned.

‘Long-term threat’

Betts continued: “US tariffs present a strategic, long-term threat to Scotch whisky’s sales and growth in its most mature market. Losses in market share that the industry is starting to experience because the tariff makes Scotch uncompetitive against other spirits, including American whiskies, and will take years to rebuild. So, we need the tariff to be removed as quickly as possible. The UK has the opportunity to negotiate its removal with the US as part of the ongoing UK-US trade negotiations; as well as the removal of the EU’s tariff on American whiskey as it applies to the UK.

“We believe this must be a central part of the next round of talks. Now the UK has left the EU, the government must use the flexibility of once again having an independent trade policy to draw a line under the UK’s part in EU-US trade disputes and enable Scotch and American whiskies to flourish once again through tariff-free trade.”

The World Trade Organization has delayed its ruling on the retaliation that the EU can impose on US exports until the autumn. The SWA said this means no settlement negotiations regarding the aircraft dispute will take place before the US presidential election in November and discussions may not begin again until 2021. As such, the tariffs on Scotch could remain for many months to come, the SWA said.

“Time is of the essence – if a resolution is not found to whisky tariffs quickly then the US election will call a halt to negotiations, leaving tariffs in place well into next year and distillers paying a heavy price,” added Betts.

The SWA warned that the Scotch industry is in an “severe” situation and a sustained fall in exports could affect the supply chain. The Scotch whisky sector employs 11,000 people in Scotland.

Betts said: “If these sorts of losses are sustained, there will be an impact on the jobs the industry and our supply chain supports, in Scotland and across the UK. Companies are working as hard as they can to build back from coronavirus lockdowns across our export markets, where bars, restaurants and hotels are starting to reopen and where normal life is starting to resume.”