Written evidence submitted by Scotch Whisky Association (PSI0010)

Call for Evidence: Promoting Scotland Internationally

The Scotch Whisky Association (SWA) is the industry’s representative body and aim to protect and promote Scotch Whisky, at home and worldwide. Our member companies include distillers, blenders, bottlers and brand owners of Scotch Whisky.

The Scotch Whisky industry supports 42,000 jobs across the UK. The industry employs 11,000 people directly in Scotland, 7,000 of whom work in rural areas. With £5.5 billion economic impact across the UK economy, the sector is one of the largest net contributors to the UK balance of trade in goods. Scotch Whisky represents 75% of all Scottish food and drink exports, 22% of all UK food and drink exports, and 1.4% of all UK exports.

As the UK’s largest food and drink export and one of Scotland’s global success stories – an iconic product that accounts for 75% of all Scottish food and drinks exports – we recognise the role that Scotch Whisky plays in promoting Scotland internationally.

How successful have UK bodies and the UK Government been in promoting investment in Scotland and Scottish products internationally, and what steps could they take to improve this?

As an industry we work closely with the UK Government to help address market access issues and look to secure the best possible conditions for trade. We engage regularly on the industry’s priority offensive interests in bilateral trade negotiations, as well as tackling individual market access barriers where they arise worldwide. The SWA is represented on a range of industry advisory groups set up by the Department for International Trade (DIT) and the Domestic Advisory Group relating to the UK/UK Trade and Co-operation Agreement.

Greater success on reducing import duties over the last 20-30 years as global trade in spirits has gradually liberalised has seen a growth in non-tariff barriers (NTBs), such as inconsistent standards, inappropriate licensing and labelling restrictions, and overly burdensome certification requirements.  Although the industry still faces significant tariff barriers in major markets, such as India’s 150% import duty, these NTBs are assuming a greater importance as barriers to  Scotch Whisky market access.  Often, it is not the policy goal itself that causes problems, but regulatory requirements that are more trade-restrictive than necessary to achieve that goal.

As Scotch Whisky’s global exports and reputation grows, the industry continues to face challenges of counterfeit and fake products. As trade agreements are reached, its vital that they secure standards and protections that enable the industry itself to  take action against those who wish to take advantage of Scotch Whisky’s reputation and provenance.  For example, the recent UK/New Zealand Free Trade Agreement (FTA) protects certain regional names relating to Scotch Whisky, such as ‘Highland’, while also committing New Zealand to supporting a UK application to tighten the legal definition of ‘whisky’ in both New Zealand and Australia.

How are Scottish interests represented and promoted in UK embassies and missions around the world?

As an industry we engage regularly with different UK overseas missions and recognise the work many of them do in promoting Scottish products. Products like Scotch Whisky can play an important role in soft influence and there is a greater role that can be played in gastro diplomacy. We have had some discussions with FCDO about how we can better support the promotion of Scotch Whisky to showcase it through the embassy network. At present, the UK punches below its weight in showcasing its food and drink products, such as Scotch Whisky, through its diplomatic network but we recognise there is a desire to change this. A consistent rather than ad hoc approach would benefit both UK export sectors and UK soft power.

How effective have the Scotland Office, in coordination with the FCDO, been in promoting Scotland internationally, and could this be strengthened (i.e. by how well they coordinate their activities)?

Last year’s utilisation of the Carrier Strike Group’s visit to India to promote Scotland and giving an opportunity to showcase Scotch Whisky is a good example of joint working between the Scotland Office, FCDO and the GREAT campaign. Coming out of that visit we were able to see the imported duty on spirits in Maharashtra cut by 50%, a significant reduction from 300% to 150% that will curb smuggling and yield greater revenue for the Maharashtra government.

As the UK continues to chart its course in seeking new trade agreements there will continue to be opportunities for such working to showcase Scottish products.

What is the role of the UK Government in promoting Scottish trade and exports, and what steps should the UK Government take to maximise the benefits of recent and upcoming Free-Trade Agreements for Scotland?

Even in Scotch Whisky’s most successful export markets, the industry can face significant barriers.  The retaliatory tariffs imposed on Single Malt Scotch Whisky by the United States under the WTO Airbus dispute cost the industry £30 million in lost exports every month until the UK Government secured their suspension in 2021.  This illustrates that tackling market access barriers and resolving trade disputes can deliver as much, if not more than, an FTA could in the short to medium term.     In many emerging economies we face significant market access barriers, both tariffs and non-tariff barriers.  The removal of these is critical to Scotch Whisky’s future growth and will accelerate our recovery from the coronavirus crisis.  Now, more than ever, government advocacy with foreign authorities to ensure fair and balanced markets and regulation, as well as pressure to remove protectionist measures, will make a difference to our businesses here in the UK. The most immediate example is India, where liberalisation of the 150% tariff, together with implementation of all Indian commitments under a concluded FTA, would be the biggest step forward made in over 30 years in enabling Scotch Whisky to achieve its potential in the world’s biggest whisky market.

As powers have returned to Scotland and the UK as a result of Brexit, so has the responsibility on government to ensure that domestic legislation complies with international trade rules.  Care must be taken to ensure that new legislation to achieve recognised, legitimate policy goals, such as protection of the environment, are the least trade restrictive necessary in order to comply with WTO rules.  Scotland’s Deposit Return Scheme, for example, will restrict trade in imported beverage alcohol; trading partners will need assurances that alternative measures with less impact on trade are not available.  Equally, the mere fact that Scotland or the UK are developing proposals for new environmental legislation should not stop the UK from raising legitimate concerns regarding the proportionality of measures taken by overseas governments in the same general area.

How effectively is Scotland’s cultural offer promoted overseas by the UK Government and its associated bodies?

N/A

How effectively has hosting major international events, such as COP26, been capitalised on to boost Scotland’s profile/promote Scotland overseas?

COP26 was a good example of the industry’s work with the Scottish and UK governments to ensure that Scotch Whisky was showcased as part of the high profile gathering. There continue to be lessons to learn to ensure that future events promote Scottish products and show them in their best light. For Scotch Whisky, this incudes how we showcase Scotland’s national drink to a global audience – including how it is served. While the traditional dram remains important, it is also vital to bring attention to modern serves that reflect how consumers around the world enjoy Scotch Whisky, including in long drinks and in cocktails. Work still needs to be done within the governmental structures of the UK to see Scotch Whisky as more that simply an after dinner drink.

September 2022