What Brexit means for scotch

03 August, 2016

The Scotch Whisky Association has been consulting members on what leaving the European Union means for one of the UK’s most important businesses and exports.

The SWA says more than 90% of scotch is sold outside the UK. Scotch is the biggest single net contributor to the UK’s balance of trade in goods, and without this contribution the UK’s trade deficit would be more than 10% larger. Of the £3.8 billion worth of scotch exported last year, £1.2bn – almost a third of the total - was shipped to the EU.

It is acknowledged that the association has a wealth of knowledge and experience of EU and global trade and legal issues, built up over many years.

The SWA has set out the potential consequences of Brexit for scotch – including challenges and opportunities – and what action the industry wants to see from governments.

It states:

1.  “We can be confident certain things will not change, whatever the future arrangements:

"Scotch whisky will not face a tariff on exports to the EU. 0% is the current EU tariff and World Trade Organisation (WTO) rules mean it won’t change.

“In many markets scotch will also continue to benefit from existing zero tariffs, for example in the US, Canada, and Mexico, as these are offered to all countries already. In many other markets that already demand high tariffs, for example India, Brexit will not make the situation any worse.

“We will be able to protect scotch whisky across the EU and globally to the extent we can now, although the precise mechanisms for some markets will have to change, and we will have to put other measures in place to ensure continuity.

2.  “Other things will definitely change:

“As for other UK, there will be new administrative requirements - rules of origin - for exports to the EU.

“The UK will eventually lose access to the EU’s Free Trade Agreements (FTAs). Unless there are transitional arrangements, scotch will lose significant tariff reductions in certain markets, notably Korea, South Africa, and Colombia and Peru. The UK will eventually need to negotiate its own FTAs or rely, as the EU largely does with most countries, on WTO rules.This will take a major upgrade of capacity within the UK Government and can’t be done quickly.

“We will no longer be subject to EU rules on excise duty or VAT.

3. “There are some major uncertainties:

“The Government has not yet been clear whether it is looking for the UK to have European Economic Area (EEA) status, like Norway, or a more distant relationship based on a Free Trade Agreement with the EU, like Canada or Switzerland. The key difference is that EEA status keeps most EU single market laws in force in the UK, at the price of accepting free movement and a budget contribution. An FTA relationship means Britain would need its own rules in these areas.

“The difference is crucial because many laws setting out the rules for Scotch and the food and drink sector generally are made at European level – for example rules on the definition of whisky, food labelling, bottle sizes, and so on. If these laws are to be rewritten it will make Brexit more complicated and the industry will need to start planning now.

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