Lost exports top £500m from Scotch whisky US tariffs

The Scotch Whisky Association (SWA) said on Tuesday that losses suffered by the industry as a result of tariffs on Scotch Whisky exports to the United States have reached half a billion pounds in a situation it warns is “unsustainable.”

The SWA estimates that cumulative Scotch Whisky exports to the US from October 2019 to November 2020 fell £508.2 million or 34.87% to £949.3 million — down from around £1.4 billion.

“A 25% tariff was imposed on Single Malt Scotch Whisky in October 2019 and since then exports of Scotch Whisky to the US have fallen by 35%, amounting to over £500m in lost exports,” said the SWA.

“These tariffs are not only causing short-term losses to the industry, but also long-term harm to the Scotch Whisky category, since the market share lost as a result of tariffs could take years to rebuild.

“There was deep disappointment across the Scotch Whisky industry last month after the UK government failed to conclude a ‘mini-deal’ with the United States, which would have removed tariffs on Scotch Whisky and other products caught up in the dispute, like cashmere.

“This has left distillers continuing to pay the price for an aerospace dispute that has nothing to do with Scotch Whisky.

“The dispute centres around subsides provided to Airbus and Boeing respectively by European governments, including the UK, and by the US government, which were found to be illegal by the World Trade Organisation (WTO).”

The SWA said it is urging the UK government to call for the immediate suspension of all tariffs on unrelated sectors.

At the same time, the SWA argues that the UK must work to resolve the aerospace dispute by addressing UK violations of WTO rules on subsidies and by agreeing a future regime of support to aerospace with the US that is WTO compliant.

“Only then will the tariffs be permanently lifted and the UK government be in a position to live up to its aspiration to be a champion for free and fair trade within the international, rules-based system,” said the SWA.

“The SWA is also calling for support to the industry, given the level of losses, including a cut to excise duty in the March budget and a sustained push to reduce the basic customs duty in India, which is currently 150%.”

Scotch Whisky Association CEO Karen Betts said: “The current situation is unsustainable.

“Since tariffs were put in place, our exports to the US have fallen by 35%, amounting to over half a billion pounds in lost exports.

“This is being borne by large and small producers alike, who are losing sales and market share in what has been for decades the industry’s largest and most valuable market, which they may never now recover.

“It’s very hard for Scotch Whisky producers to understand why the UK government is so unwilling to address the UK violations of WTO rules on aerospace subsidies at the root of the tariffs.

“Distillers are suffering terrible losses and still the government, after 16 years of unsuccessful litigation, is unprepared to take the necessary steps to ensure subsidies comply with the UK’s international obligations.

“The UK government must now act urgently and call for the immediate suspension of all tariffs on unrelated sectors and, at the same time, redouble efforts with the new US administration to resolve the aerospace dispute and lift tariffs permanently.

“The government must also offer some support to distillers, who are shouldering tariff losses alongside dealing with unprecedently difficult trading conditions as a result of Brexit and global restrictions to curb COVID-19 transmission.

“As part of this, the Chancellor must deliver a package of support for the industry, including a cut to spirits duty in next month’s budget.”

A UK Department for International Trade spokesperson said: “The Secretary of State for International Trade has led intensive talks with the US to get these unfair tariffs on UK exports removed.

“We will continue to push hard for a resolution that works for the whole of the UK – including our brilliant Scotch whisky producers.

“We have a clear strategy in place to de-escalate the dispute and we will work with the new US administration at the earliest opportunity to find a solution.”