THE DRINKS INDUSTRY IN SCOTLAND
8. Trade barriers
96. During the inquiry a good deal was heard from
the spirits industry concerning its treatment in foreign markets.
Export sales have always been vitally important to spirits and,
indeed, to the UK economy. Over 90 per cent of Scotch whisky is
sold abroad, and it is the UK's fifth-largest export earning industry.
Scotch whisky exports were worth just over £2 billion in
Recent SWA figures show that foreign sales increased by 3 per
cent to £2.1 billion in 2000.
The transfer of much of the UK's white spirits production to Scotland
also means that trade barriers increasingly affect economic prospects
97. The SWA described a considerable range of measures
that affects its ability to trade freely, and estimated that its
members face some form of barrier in 130 foreign markets.
As examples of the discriminatory treatment to which whisky is
subjected to, the SWA singled out its treatment in Turkey and
In Turkey, daunting access barriers remain in place despite an
agreement with the EU designed to facilitate trade. These included
restrictions on the issue of import licenses, unreasonable certification
requirements, discriminatory labelling requirements, a ban on
advertising and excessive spirits taxes of around 190 per cent.
The Minister for Trade and Investment acknowledged that the problem
was complex, but thought essentially Turkey was protecting its
own particular spirit.
98. The Trade and Industry Committee raised the matter
in its report on Industrial and Trade Relations with Turkey,
when it encouraged the Government to "make a representation
to the Commission on the issue of spirit exports to Turkey on
behalf of UK spirit producers.
In its reply to the Trade and Industry Committee, the Government
wearily said that it had "made a number of representations
to the Commission" concerning the difficulties caused by
the failure of Turkey to meet its Customs Union obligations. It
continued to work with the Commission and the SWA to find ways
to ensure that appropriate action is taken by the Turkish authorities.
99. The situation with India is even more acute.
Department of Trade and Industry (DTI) analysis confirmed that
the total duty on imported Scotch whisky before April 2001 amounted
to 222 per cent. Licensing and other restrictions also apply on
Scotch whisky. These included, until April 2001, limitations on
the import of spirits bottled at source so that all imports are
therefore in bulk form. Following the lifting of this ban, however,
the Indian government imposed an array of new protectionist measures,
and the SWA has identified what it believes are at least five
clear breaches of WTO/GATT agreements. These include an "exorbitant
and discriminatory fiscal burden, ranging between 464 per cent
and 706 per cent".
100. The problems in India and Turkey by no means
represent the only tariff and non-tariff barriers to trade faced
by spirits companies in foreign markets, penetration of which
is vital to the continued success of the industry in Scotland.
The SWA noted the support given by the Government.
The Trade and Investment Minister told us that the industry has
regular access to DTI ministers.
The DTI in particular has continuously worked to remove unwarranted
barriers to trade in spirits, which unfairly protects foreign
producers against legitimate competition.
We fully support the Government's efforts.
127 HC 114-v, Session 2000-01, p.281, Annex A. Back
exports top £2 billion for eighth consecutive year".
Scotch Whisky Association Press Release, May 2000. Back
973-ii, Session 1999-2000, p.41, para 6.1. Back
Department of Trade and Industry provided a complete range of
the discriminatory practices that spirits are subjected to in
foreign markets. See HC 114-v, Session 2000-01, pp.276-286. Back
situation concerning trade in spirits with Turkey is described
fully in HC 973-ii, Session 1999-2000, p.42, para 6.3, and
HC 114-v, Session 2000-01, p283. See also HC 324-i, Session 2001-2002,
p.331, para 40. Back
324-i, Session 2001-2002, Q.723. Back
Report, Session 2000-01, HC 360, para 28. Back
Special Report from the Trade and Industry Committee for Session
2001-2002, Appendix 5, HC 197. Back
324-i, Session 2001-2002, p.330, para 39. Back
973-ii, Session 1999-2000, p.42, para 6.4. Back
324-i, Session 2001-2002, Q.674. Back
full description of the DTI's activities in this respect is detailed
in HC 114-v, Session 2000-01, pp 282-286. Back