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US tariffs blow £500m-plus hole in Scotch whisky exports to America

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Losses suffered by the whisky industry as a result of tariffs on exports to the US have topped £500 million, in a situation the industry warns is unsustainable.

A 25% tariff was imposed on single malts in October 2019 and since then exports of Scotland’s national drink to the US have fallen by 35%, amounting to more than £500m in lost exports, according to trade body the Scotch Whisky Association (SWA).

It said the tariff was not only causing short-term losses to the industry but also long-term harm to the Scotch whisky category, since the market share lost as a result of tariffs may take years to rebuild.

There was deep disappointment among whisky-makers last month after the UK government failed to conclude a “mini-deal” with the US.

It would have removed tariffs on Scotch and other products caught up in the dispute, like cashmere.

This has left distillers continuing to pay the price for an aerospace dispute that has nothing to do with whisky.

Subsidies

The dispute centres around subsidies provided to Airbus and Boeing –  respectively by European governments, including the UK, and the US government – which were later found to be illegal by the World Trade Organisation (WTO).

SWA is now urging the UK government to call for the immediate suspension of all tariffs on unrelated sectors.

It also wants the government to “work to resolve the aerospace dispute” as soon as the new US trade representative assumes office.

SWA added: “Only then will the tariffs be permanently lifted and the UK government be in a position to live up to its aspiration to be a champion for free and fair trade within the international, rules-based system.”

‘Unsustainable’

In addition, SWA is calling for support to the industry, given the level of losses, including a cut to excise duty in the March Budget and a sustained push to reduce the basic customs duty in India, which is currently 150%.

SWA chief executive Karen Betts said: “The current situation is unsustainable.

“Since tariffs were put in place, our exports to the US have fallen by 35%, amounting to over half a billion pounds in lost exports.

“This is being borne by large and small producers alike, who are losing sales and market share in what has been for decades the industry’s largest and most valuable market, which they may never now recover.

“It’s very hard for Scotch whisky producers to understand why the UK Government is so unwilling to address the UK violations of WTO rules on aerospace subsidies at the root of the tariffs.

Karen Betts

She added: “Distillers are suffering terrible losses and still the government, after 16 years of unsuccessful litigation, is unprepared to take the necessary steps to ensure subsidies comply with the UK’s international obligations.

“The UK government must now act urgently and call for the immediate suspension of all tariffs on unrelated sectors and, at the same time, redouble efforts with the new US administration to resolve the aerospace dispute and lift tariffs permanently.

Distillers are suffering terrible losses.”

Karen Betts, chief executive of the Scotch Whisky Association

“The government must also offer some support to distillers, who are shouldering tariff losses alongside dealing with unprecedently difficult trading conditions as a result of Brexit and global restrictions to curb Covid-19 transmission.

“As part of this, the chancellor must deliver a package of support for the industry, including a cut to spirits duty in next month’s Budget.”

According to SWA, whisky exports to the US between October 2019 and November 2020 were worth just under £950m, compared with annual sales of nearly £1.5 billion before the tariffs.

Whisky is one of the UK’s most important industries, employing more than 10,000 people in Scotland and supporting a further 40,000 supply chain jobs throughout Britain.

The sector is estimated to be worth more than £5.5bn a year to the UK economy.

 

 

 

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