Select Committee on Scottish Affairs Minutes of Evidence

Examination of Witnesses (Question Number 720-734)



Mr Lazarowicz

  720. Baroness, you will recall we had a discussion earlier about the discrimination faced by whisky producers in India and India is not the only example of discrimination against whisky and other producers. The Scotch Whisky Association have identified 130 countries where there are barriers of some sort. I was pleased to hear your reference to the issues that the government will be pursuing in the next WTO negotiation but I wonder if you could give us an indication of the specific action the government is taking to overcome the difficulties faced by whisky in particular when trading in international markets.
  (Baroness Symons of Vernham Dean) There are a number of ways in which the government is able to help when these incidents are brought to our attention. Reference has already been made to the fact that one of my colleagues, Douglas Alexander, will be making a direct approach in India today. In incoming visits—i.e., officials or ministers from countries where we believe some sort of discrimination is being practised—the discrimination may be very varied according to different countries. Indeed, some countries may practise more than one type of discrimination. Equally, when ministers or officials from this country go overseas, we can make representations. Our posts are regularly in touch. As I hope I made clear in my opening remarks, we believe that there is a strong relationship between our people in posts and I made a point of speaking about BTI, British Trade International, who are able to make representations. We can also make demarches which we do with our colleagues in the European Union. India in particular has been the subject of such a demarche and that might be one form of approach. Lastly, we can also seek action through the WTO where the country practising any alleged discrimination is a member of the WTO if we do not believe that they are performing their obligations. There are a number of paths that we can follow in trying to help the industry where it believes it is a victim of discrimination.


  721. We have a new witness. Could you identify him, please?
  (Baroness Symons of Vernham Dean) I have two colleagues with me who deal with competition issues which are outside my ministerial remit because I understood you might have one or two questions on this: Mr White and Mr Metcalfe. I have also asked Mr Crowhurst to join us. He is an expert in trade policy and if you have any detailed questions on trade policy with which I am not as yet conversant he will be able to help us out.

Mr Lazarowicz

  722. Have there been any instances to date in which the government has made use of the WTO GATT mechanisms for raising examples of discriminatory practices and are there any intentions to use those in the future?
  (Baroness Symons of Vernham Dean) We have started to try to use the proceedings in a number of instances. We try to do this through our EU membership so that we do so with the full weight of the European Union around us. I am sure we can give you a full list. I believe we have a list in annex B, which was sent to the Committee, which goes through in some detail a number where we have been pursuing these issues. We have some successful outcomes using the WTO procedures. You will find those in relation to Japan, Korea and Chile. If you would like further information on any of those—we have tried to err on the side of brevity in giving you these rather quick, thumb nail sketches of what is happening country by country—and if there are specific instances in which you are particularly interested, I can give you a fuller account. I suggest it might be more suitable to do that in writing if there are particular countries that are causing concern. I know that India obviously will be one and indeed India is one of the countries where I would say that we are not just dealing with issues around particularly heavy tariffs but also in relation to such things as very heavy interest on warehousing charges for imports which of course also adds very considerably to the cost of whisky, for example.

  723. I am sure that information would assist the Committee but there is one country which has also been identified by the Scotch Whisky Association as presenting a particular problem and that is Turkey and the relationship between Turkey and the European Union. I understand the Trade and Industry Committee was told by the government in the last investigation that the government had taken up the question with the Commission and I wondered what response the Commission had given to those invitations from the government.
  (Baroness Symons of Vernham Dean) The problem with Turkey is again a fairly complex one. We believe a lot of this is about protecting their own particular spirits distributor which I believe is called Tekel. The main concerns there are not only questions of imports; it is also about import permits, about certificates and about labelling. We have been lobbying very heavily on this. We have done so through our own embassy in Ankara and also through the EU. We are making progress slowly over this. This is one of the issues obviously that we will want to resolve with Turkey given their status as a would be applicant country for EU membership, but I am afraid at the moment we are making progress rather slowly. We are going to continue to liaise with our colleagues in the Scotch Whisky Association but our main problem is going back to the monopoly industry which Tekel is in terms of being a Turkish monopoly distributor. It is the Turkish government's desire to protect that industry which we believe lies at the heart of our problems here, but we will continue to liaise with the industry and to do all we can to pursue our concerns, not only bilaterally but through the Commission in the way that we are.


  724. I want to look for a moment at Interbrew. I understand this area may be outside your responsibility but Mr White and Mr Metcalfe might be able to help us. Would the suggestion that Scotland might be identified as a separate beer market be a reasonable interpretation of one of the proposed options concerning the Interbred acquisition which were considered by the DTI?
  (Mr White) We have not identified Scotland as a separate market. We have left the question open. When the Director General advised the Secretary of State on whether or not this should be moved into a second phase investigation by the Competition Commission, he said it was not necessary to reach a conclusion on this before it went to the Competition Commission. The Competition Commission also left the question open after its report. It looked to the market as if it were a Scottish market or a series of regional markets and as a GB market.

  725. When the Interbrew acquisition was originally being reviewed, what consideration was given to the public interest, including the prospect for employment and regional economic development that was implied?
  (Mr White) It was not possible to look at the public interest in this case because the Interbrew /Bass merger originally fell under the aegis of the European Community Merger Regulation and we asked for it back, as we can under Article 9 of the Regulation, and the Commission agreed. When you have a case back, you cannot look at anything but the competition issues.

  726. Can I go back to a previous question concerning the successful appeal by Interbrew against the original decision by the then Secretary of State for Trade and Industry concerning that company's acquisition of Bass Brewers? Belhaven Brewery Company suggested that one of the options proposed seemed to suggest that Scotland could be identified as a separate beer market which "could effectively set a precedent for the future regulation of other industries in Scotland."
  (Mr White) I am not conscious that Belhaven have suggested that we have defined the market separately. That is not the case. We avoided the issue when making reference to the Competition Commission. The Competition Commission avoided the issue in making its report and we have not since then had to redefine the markets again.

Mr Weir

  727. Can I take it that the option is still open and has not been closed off? No one has grasped the thistle, so to speak, of deciding the issue rather than just rejecting it?
  (Mr White) It has not been necessary to reach a conclusion in order to take the action we have taken and it is a very difficult issue which is why we have avoided it. If it is not necessary to reach a conclusion, you do not do so.

  728. Is it perhaps not in the interests, particularly of the beer industry in Scotland, that such a decision be reached because it can protect this situation arising again in a subsequent takeover?
  (Mr White) Whether you need to reach a conclusion is going to depend on what is happening. I am only talking at the moment about the consideration of the Interbrew/Bass merger and the fact that we made reference to the Competition Commission who made an adverse report. If it was necessary to reach a conclusion, we would do so.

  729. Is it not an argument to pre-empt that situation if it is considered to be appropriate and helpful to redesignate Scotland at this stage to avoid using this pass the parcel situation in the future?
  (Mr White) You have to re-examine the situation every time you examine a new merger situation and decide then, at that time, whether or not there are distinct markets. These things are fluid and can change.

  730. Do I take it that even if it was designated as a separate market now, that may not be the case in the future, depending on the type of acquisition or takeover that was proposed?
  (Mr White) It would depend on a number of factors. In reaching a conclusion on the geographic definition of a market, you take a number of different factors into account. You will take the players in the market into account; you will take prices in those markets into account. All those factors can change over time. To reach a conclusion one day that the Scottish beer market is distinct from the English beer market does not necessarily follow.

  731. Are you saying that each time there is such a merger the whole issue has to be re-examined? You cannot designate a market and leave it designated?
  (Mr White) Yes.

Mr Carmichael

  732. You have identified already that there are economic development issues at stake here. That is something which has now devolved to the Scottish Parliament. What interaction is there between your Department in London and the relevant department in Edinburgh, which I think would probably be Enterprise and Lifelong Learning, when an issue like this comes up as it did in relation to Interbrew?
  (Mr White) We invite comments from any other relevant government department in any merger situation. They will be taken into account. We also have within the Office of Fair Trading a mergers panel which is a committee that meets if we think there are serious issues arising on a merger. Other government departments which have an interest in that merger will be invited to the meeting. They have quite an extensive involvement if they wish.

  733. Do you recall what you got from the Scottish Executive?
  (Mr White) I cannot offhand recall.


  734. Can you give us a note?
  (Mr White) Yes, but of course it was not a purely Scottish merger.[34] It was a merger in England and Wales as well.

  Chairman: Thank you very much for your attendance this morning. I can assure you your evidence will be of great value to us when we come to make our report which we hope will be fairly soon.

34   I can confirm that in considering the initial assessment of the potential competition effects arising from the merger of Interbrew and Bass Brewers, and whether these justified reference to the Competition Commission, the Scottish Executive were invited to a meeting of the Mergers Panel on 30 August 2000 but were unable to attend. The merger was, of course, subsequently referred (on 7 September 2000) to the Competition Commission and the Scottish Executive made representations at this stage-these are recorded at paragraphs 6,412 and 6,413 of the Commission's published report (Cm 5014). In response to the OFT's consultation document on potential remedies issued on 4 July 2001 (following the reference back of this matter by the court to the Secretary of State for Trade and Industry) the Scottish Executive confirmed that its views remained as set out in the Competition Commission's report. Back

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