“Historic” deal to boost UK’s top export

23 June 2021, 08:05 AM
  • The five-year removal of a retaliatory 25% tariff comes as good news for whisky makers
“Historic” deal to boost UK’s top export

A breakthrough on trade talks between the UK and US has resulted in a “historic” deal to suspend punitive tariffs on products including Scotch whisky for five years.

The 25% tariff on single malt Scotch whisky, which stemmed from a 17-year-long dispute between US and European aircraft manufacturers Airbus and Boeing, is estimated to have cost the sector more than £600m in exports to the US since it was imposed in 2019. With whisky being the UK’s most valuable export, the tariff has been a blow to the industry, especially for smaller producers looking to export.

“As independent bottlers of whisky, we’ll always celebrate the removal of a tariff or lowering of a tax. Such things have complex reasons for existing, but from our perspective, they don’t add value to the product we love,” Sam Laing, head of content at Cask88, told Speciality Food. “Our American audience will no doubt be as delighted as we are that the 25% surcharge on single malt Scotch whisky has been removed.”

Karen Betts, chief executive of the Scotch Whisky Association, said, “The past two years have been extremely damaging for our industry. This deal removes the threat of tariffs being reimposed on Scotch whisky next month and enables distillers to focus on recovering exports to our largest and most valuable export market.”

Plus, with premiumisation boosting the whisky market, Sam says consumers today are willing to spend more on quality. “This bodes well for whisky producers, as whisky is definitely a product associated with high standards. I think that whisky will continue to do very well while the price of the bottle reflects the care and effort needed to produce it,” he continued.

The agreement over the tariff came after many months of intense negotiations between international trade secretary Liz Truss and US trade representative Katherine Tai, and the government described it as a “major win”. Liz Truss said the deal would support Scotch whisky jobs. She added that the UK’s exit from the European Union was critical to the breakthrough: “We took the decision to de-escalate the dispute at the start of the year when we became a sovereign trading nation, which was crucial to breaking the deadlock and bringing the US to the table.”

But as the SWA’s Karen noted, the underlying dispute has still not been resolved. “What’s critical now is that the governments and aerospace companies on both sides stick to their commitments and work with one another constructively,” she said.

The impact of the Australian deal

The whisky sector also has something to celebrate after the government secured a free trade deal with Australia. Although farmers have warned of being undercut by cheaper imports, the agreement eliminates a 5% tariff on whisky. Karen Betts said the move would “help Scotch whisky distillers continue to expand exports to Australia, which have almost doubled over the last decade, making Australia our eight largest market by value.”

What’s more, Ivan Menezes, chief executive of drinks giant Diageo, added that the opening of trade talks with India, the largest whisky market in the world, means that “the UK’s newly independent trade policy is now bringing major benefits for Scotch and Scotland”.

However, it hasn’t all been good news. In its latest trade snapshot, the Food and drink Federation (FDF) said exports of food and drink, including whisky, to the EU dropped in the first quarter of 2021, compared with 2020, due to Covid and Brexit. From 2019 to 2021, exports of whisky dropped more than 32% in value, or £256.5m versus £378.9m.

Overall, whisky exports were down by around 18% from the first quarter of 2019 thanks to rises in markets including Japan and South Korea. For Scotland’s whisky makers, as trade with the Continent falters, opportunities are emerging further afield.

more like this
Speciality Food Daily Briefing

Stay connected and receive the latest news, analysis and insights from our industry's top commentators