Written Evidence submitted by the Wine and Spirit Trade Association (TER 006)

Who we are

The Wine and Spirit Trade Association (WSTA) represents over 300 companies producing, importing, exporting, transporting and selling wines and spirits in the United Kingdom. Members range from major retailers, brand owners and wholesalers to fine wine and spirit specialists, logistics and bottling companies. We campaign for a vibrant and sustainable wine and spirit industry, helping to build a future in which alcohol is produced, sold and enjoyed responsibly. In our membership we have companies who export significant quantities of alcoholic drinks to the US market, whilst also having some of the largest US companies in the industry, such as E&J Gallo Winery, Brown Forman and Beam Suntory, amongst our membership. For many/most of these companies the UK is currently the hub for imports to the EU. 

WSTA’s Brexit policy paper: www.bit.ly/WSTABrexit

Key requirements

A well-thought out and structured agreement, not a hasty one

Removal of tariffs on wine

Retention of nil duties on spirits

Mutual recognition of production standards

Mutual recognition of geographic protections

Make use of the international outlook of the sector

Introduction

The UK Wine and Spirit industry supports the Government’s commitment, as set out in the Brexit White Paper, to strike free trade agreements with countries around the world and that the US Administration has signalled an interest in an early trade deal with the UK. A UK-USA Free Trade Agreement would, if executed well, increase the flow of both wines and spirits in export and import categories. The few remaining tariffs that affect this sector should be removed, before moving to focus discussions on wine and spirits towards mutual recognition of production standards, including product definitions, and co-operation towards reducing non-tariff barriers to trade. Significant economic growth could be achieved through trade liberalisation.

However, the development of an FTA with the US cannot and should not be seen in isolation.  The terms of any UK-EU Free Trade Agreement will have a significant impact on any UK-US agreement in certain policy areas in particular.  For example, the EU food and drink sector will want to ensure the UK continues to recognise geographical protections while it is well documented that the scale of EU protected names continues to be a bugbear for the US.  Therefore as discussions progress on both fronts it will be critical to ensure policy coherence.

Additionally, it is important that the UK keeps communicating signals that we have a strong hand to play. If we project indications that a proposed UK-US FTA could be agreed and ratified within two years or something similar it may prove problematic[1]. There is a great level of detail to be pursued, and trade negotiators, as well as business, will need time to work through that detail. Suggestions that the UK is willing to do a quick deal with the Trump administration may send signals that the UK is willing to compromise on our asks and concede position to the US. For the food and drinks sector this could be particularly problematic, as it is important we find a point of compromise that does not damage our current high standards of production and consumer confidence in our products[2].

Finally, any quick move to push through a deal could see resistance from UK citizens, coordinated by the anti-trade lobby and NGOs. As the first major post-Brexit deal, it is worth taking time to negotiate a strong deal for UK citizens and building a case for free trade as the best route for everyone, so that Britain may expand on this to pursue further deals around the World. A move to pursue a swift deal, focused on deregulation, will simply make subsequent deals all the more difficult and reduce confidence in the free trade agenda which we will need post-Brexit.

What the UK’s priorities and objectives should be in negotiating any such agreement?

The UK should look to achieve an integrated and far reaching trade deal with the US. It should look for a fair representation at the table for UK companies and their interests, with an awareness of how any deal struck with the US may affect our goals of trade deals elsewhere, including affecting the general public debate on Free Trade. The WSTA would argue that the removal of tariff barriers is important and relatively straight forward for many - but not all – products.

However, regulatory changes should be approached sensibly and each discussion treated on its own specific merit as changes to regulation, whilst potentially providing opportunities, could also provide future trade issues. The UK currently has strong regulatory harmonisation with the EU and to diverge from this position too far may hurt UK EU trade. Mutual regulatory recognition with the US may be a better objective, instead of regulatory harmonisation, which is discussed below. Business should continue to be consulted fully and throughout any negotiation. A formal structure for engagement with Business should be set up.

The possible impacts (positive and negative) on specific sectors of the UK economy from such an agreement;

The WSTA is in a strong position as a trade association to assist Government with FTA work, as we represent an industry comprised of both exporters and importers, many of which are global companies working across different borders. That means that we can influence both sides of the argument. We are happy to work with international colleagues and our global membership to try bring forward one industry position for both nations’ trade teams to consider.  This could lead to a stand-alone sectorial agreement or a chapter in a wider agreement.

The UK wine industry would wish to see a removal of the tariff on US exports of wine to the UK, which is in place as a result of a common external tariff of the EU. Additionally, we should look for mutual recognition of production standards and that regulatory barriers around labelling and other key areas should be reduced.

Whilst spirits face no tariff entering the US or EU under MFN rules, there are a number of things that could be done to increase the flow of goods on the regulatory side, such as mutual recognition of labelling practices. Agreement could be reached about the requirements around information on packaging should be and added to any FTA as a chapter or annex. For example, both parties could agree that any mandatory information that is unique to one or other market could be affixed to labels after importation but prior to the point at which the product is released for sale. This is but one of a number of things that could help to facilitate trade without interfering with or reducing the quality of the goods for sale.

How any agreement should approach regulation, including regulatory harmonisation?

A certain standard of regulation allows for consumers to have a high confidence in the quality of goods, and the fact that wines and spirits are well-regulated ensures that consumers associate them as safe products. This is the case for goods sold in both the UK and US markets, as standards around alcoholic beverages are high. The WSTA supports keeping in place such standards.

It is important that the UK avoids progressing down a path of regulatory harmonisation with the US, and instead pursues an agenda of mutual regulatory recognition. This will allow for freer work with other key stakeholders in future UK trade policy. The UK should also look to develop cooperation mechanisms with the US that future proof regulatory development, ensuring that any future regulations will sit well within the remit of the FTA and the goods traded through it, keeping barriers low.

As globally traded goods with a large production footprint and extensive supply chain, it is in the interest of both the UK and US wine and spirits industries that an agreement around regulatory recognition can be reached[3].

Separate to this FTA inquiry, but useful in facilitating trade and related to regulatory recognition with the US, the UK should apply to join the World Wine Trade Group, which is a trade facilitation group working around mutual recognition of production standards[4].

What dispute-resolution mechanism should form part of any such agreement?

Any agreement should have a balanced, rigorous and independent structure, which will allow for a swift resolution of disputes. This area is one which was a particular flashpoint for anti-trade campaigners around TTIP, so much care will be necessary to get it right.

Any dispute should originally be open to consultation and voluntary negotiation, for a period of time deemed to be appropriate. Should the dispute not be resolved, the UK and US should form an arbitration committee, to hear and resolve the issue. The final version of CETA has further details of how this process might work - detail in Chapter 29 - and should be explored for potential adaptation[5].

What involvement, if any, the UK should seek to have in the North American Free Trade Area or any future regional free trade agreement involving the USA.

The future of NAFTA remains relatively uncertain under the Trump Administration, but could be of interest to our sector should it become possible to join the regional agreement. Equally so, joining TPP or other regional agreements should be kept under consideration.

The UK’s first goal however should be to grandfather or roll over the trade rights that the UK currently enjoys as a member of the European Union. For example, by replicating CETA as an individual country, the UK wine and spirit sector would benefit from tariff free access to Canada, removing tariffs on gin, rum and vodka, whilst Canada would gain tariff free access for wine exports to the UK. This would reduce any benefits from joining NAFTA. Equally, the UK should look to rollover access or grandfather any access to EU FTAs with third countries, with a view to improve terms of trade, where possible, in due course.

We would be happy to provide further evidence on this topic, should the committee wish.

February 2017