IT was arguably a missed opportunity for the Scotch whisky industry when Boris Johnson did not make a detour to the Highland Park Distillery during his recent flying visit to Orkney
The Prime Minister happily posed with a couple of giant crabs when he made a surprise appearance at Stromness harbour last month – part of a much-heralded trip to drum up support for the Union amid rising backing for Scottish independence.
Had he made the time to take the short journey from Stromness to Edrington’s Highland Park facility in Kirkwall, he would surely have been told about the effect the US import tariffs are having on single malt Scotch whisky in its most valuable export market.
To recap, the Trump administration slapped a 25 per cent import tariff on single malt and Scotch whisky liqueur, as well other Scottish products such as cashmere and shortbread, in October as part of an ongoing diplomatic dispute with the European Union (EU).
The move, sanctioned by the World Trade Organisation (WTO), was Washington’s response to subsidies doled out to Airbus, the aircraft manufacturer, by EU member states, including the UK.
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And it has already had a hugely damaging effect on Scotch whisky distillers, which in 2019 exported £378 million worth of single malt to the US (and more than £1 billion of whisky in total to the market when blended Scotch is taken in account).
The Scotch Whisky Association (SWA) said exports to the US have plunged by more than 30% since the retaliatory action was taken, with the industry losing around £30m of exports per month since the tax was first imposed. That tally is currently standing at around £200m.
The effect of such a loss of trade would be devastating at the best of times, but when it coincides with a massive economic downturn sparked by a pandemic, the effects are all the more damaging.
“US tariffs present a strategic, long-term threat to the Scotch whisky industry,” a spokeswoman for the SWA said in a statement to The Herald.
“If these sort of losses are sustained, there will be an impact on jobs the industry and our supply chain supports, in Scotland and across the UK.”
The latest figures from the SWA show that exports to the US fell by 47% in April and 65% in May, a period coinciding with lockdown measures enforced to halt the spread of the virus, when compared to the corresponding months last year.
And there are real fears that there is even worse to come for an industry that employs 11,000 people in Scotland, around 7,000 of whom are based in rural areas.
The US trade representative is scheduled to review the tariffs by August 12, and while that could conceivably result in the import taxes being quashed, the smarter money would appear to be on the list of tariffs being extended.
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It is understood the US is mulling whether to widen the list to include blended Scotch whisky and gin, which would deal a further, devastating blow to the Scottish economy.
Although regarded in some circles as less fashionable than single malt, blended Scotch continues to account for the majority of whisky exported from Scotland.
In value terms, blends were responsible for nearly £3.2bn of the £4.9bn of Scotch exported in 2019, with £674m worth shipped to the US.
Gin, meanwhile, has been a huge success story for the Scottish drinks industry in the last decade, with many distillers counting the US as a key market.
Diageo set out the risk as it presented its preliminary results yesterday, with Ewan Andrew, the company’s global supply and procurement chief, revealing that it “wouldn’t be immune from further escalation” of the trade war.
He emphasised that the Scotch whisky giant is a “resilient business” with a broad range of products that sell well in the US.
But he expressed concern over the effect the tariffs are having on smaller players.
Indeed, there is already evidence of smaller distillers altering their plans to take account of the situation in the US.
As reported by The Herald in the immediate aftermath of the tariffs being introduced in November, Kingsbarns Distillery in Fife said it had delayed the launch of its debut single malt across the Atlantic. Nine months on and its position has not changed.
Given how much is at stake, it is no surprise that the SWA has been on the front foot to raise awareness of the damage being inflicted, and in recent weeks has been urging people to contact their MPs through its #CallTimeOnTariffs campaign.
The industry, which has been supported by the Scottish Chambers of Commerce, will certainly be hoping UK trade secretary Liz Truss got the message before she jetted off to the US at the weekend, and is able to put forward a compelling case for the whisky industry when she meets her counterparts as trade talks between the two countries re-commence.
But the clock is ticking and, moreover, few would surely bet on definitive progress being made, given how little has been achieved in attempts to conclude the much-vaunted UK-US free trade deal.
Despite the usual bravado we have come to expect from the Johnson Government when it comes to how straightforward such deals will be to complete (as evidenced by the seemingly fruitless Brexit negotiations), it now appears any deal the UK is able to strike with the US will take a lot longer to conclude than the Conservative administration had hoped.
Indeed, with the US Presidential election looming in November, there have been reports the UK Government has all but given up hope that a deal will be concluded before the end of the year.
On that basis, the Scotch whisky industry is facing the prospects of many more months of damaging tariffs, wiping out millions more in US exports and putting vital jobs in Scotland at risk.
And it should be noted that whisky is not the only Scottish product that is being damaged by the trade war: textile and shortbread producers are also being hampered in their efforts to export to the US because of the protectionist barriers.
The UK Government has long championed the freedom to forge trade deals of its own as a key benefit of leaving the EU.
Unfortunately, there has so far been scant evidence of that supposed perk having any positive effect.
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