PARLIAMENTARY DEBATE
US Tariffs: Scotch Whisky - 7 October 2019 (Commons/Commons Chamber)
Debate Detail
To ask the Secretary of State for International Trade to make a statement on what discussions Her Majesty’s Government have had with the US and EU, following the announcement by the United States trade representative of their intention to impose tariffs of 25% on single malt Scotch whisky and other UK products on 18 October.
The United Kingdom continues to be a champion of the international rules-based order of which the World Trade Organisation is the cornerstone. However, the United Kingdom is clear that resorting to tariffs is in no one’s interests. Low tariffs and free trade underpin prosperity and jobs in the UK and globally, which is why we are pursuing an ambitious free trade agenda, lowering tariffs and quotas where possible and working on an ambitious package of bilateral free trade agreements.
The Government are disappointed by the United States Administration’s announcement that they intend to impose tariffs on the UK and our European partners following the most recent ruling. My right hon. Friend asks what communications there have been between the Government and the United States. We have continued to raise this issue at the highest levels; my right hon. Friend the Secretary of State has spoken to US Trade Representative Lighthizer, Commerce Secretary Ross and Vice-President Pence; my right hon. Friend the Chancellor has raised the issue of Airbus tariffs with the US Secretary of the Treasury; and the issue was raised by my right hon. Friend the Member for Maidenhead (Mrs May) with President Trump during his state visit to the United Kingdom in June this year.
The dispute has a long history; indeed, it goes back to 2004. I will not detain the House by setting out that history, but it is long and complex and has led to the WTO judgment. Although the UK, France, Germany and Spain took steps to bring their support into compliance with the WTO, the WTO ruled last year that further steps were required to bring that support fully into compliance. Following that ruling, the UK and other Airbus nations have now taken steps to bring their support fully into line. The Airbus nations are seeking confirmation from the WTO in the ongoing proceedings that those steps are sufficient to achieve compliance. A ruling is expected in the coming months.
However, WTO procedure allows for the US to seek authorisation to retaliate against the EU in parallel to the ongoing proceedings and before the WTO has confirmed whether the Airbus nations have now complied with their WTO obligations. On 2 October, the WTO announced that the US can be authorised to impose up to approximately $7.5 billion in tariffs annually. Following that, the US published a list of tariffs on the EU, targeting products produced by the Airbus nations and the wider EU. These measures are not in the interests of the UK, the European Union or the United States. Tariffs will only inflict damage on businesses and citizens on both sides of the Atlantic and harm global trade and the broader aviation industry at a sensitive time.
We are working closely with the US, the EU and our European partners to support a negotiated settlement to the Airbus dispute, along with the separate Boeing disputes. I reassure the House that we will continue to press the issue at the highest levels and urge the United States to withhold tariffs until the WTO has confirmed that we have complied in the compliance proceedings—something that we expect to happen within the next couple of months.
Single malt Scotch whisky has been tariff free with the United States for more than 25 years now, and whisky exports to the US are worth more than £1 billion annually. Single malt producers are often small and medium-sized companies, and the tariffs will hit those who can afford them least. We will continue to talk to the US at the highest levels to press for a settlement and for the US to hold off applying the tariffs until we have had time for a ruling.
As the Minister said, the US market is vital for the Scotch whisky industry, with a turnover of more than £1 billion. The distilleries involved in exporting malt to the United States are often small. They are often craft distilleries, whose establishment in recent years we particularly welcomed in Scotland. If tariffs are imposed, those industries will have to scale back their efforts in the United States. The industry estimates that there could be a loss of £228 million in revenue, and that 3,000 jobs, mainly in rural Scotland, could be affected by the proposals.
I want the Government to show even more urgency than they have done to date. There are two things that can be done immediately. First, the industry has made it clear that if the Government announce that when the UK leaves the EU on 31 October this year that they will not impose tariffs on bourbon or American whiskies, that would greatly help the dialogue with the United States.
Secondly, I know that the Minister has the close ear of the Prime Minister, and it is important that he urge him to intervene directly with President Trump. It was my duty to welcome President Trump to Scotland last year. During that event, he told me that he loved Scotland. If the Prime Minister could convey directly to President Trump the damage that the proposals would do to Scotland, particularly rural Scotland, that could have an impact. I would be pleased if the Minister confirmed that he would indeed urge the Prime Minister to make those representations.
I can entirely understand my right hon. Friend urging the Government to adjust section 232 countermeasures by removing the tariff on bourbon. We believe in the international rules-based order. It would be the easiest thing in the world simply to say to him, “Yes, we are going to do that.” However, while we remain a member of the European Union, we have to comply with the rules of the European Union. What I would say to him is that when we leave the European Union, nothing is off the table.
It is no secret that the American President has sought to define his Administration as one of trade warfare, seeking to put the interests of America first and to repatriate jobs and industry to the USA. He believes that a trade war is one that the US can win. Does the Minister agree that no one wins in a trade war? That much is clear from the spurious Boeing case against the importation of C Series aircraft and the use of section 232 national security measures to prevent steel and aluminium exports to the US, and now again in respect of automotive imports.
The concern for British exporters is that the recent findings of the WTO in relation to aircraft subsidies will be used to secure an advantage for American producers and for American interests in any future trade agreement between our nations. The US trade representative has been clear that the US will impose countermeasures in the first instance and will seek to discuss how to resolve this dispute with the EU thereafter
“in a way that will benefit American workers”.
Other European leaders have been clear in their condemnation of the measures, but our Government have been decidedly more reserved, perhaps for fear of jeopardising any future trade talks. I note in the Government’s response published last week that the UK was seeking clarification from the WTO that the UK was compliant with measures regarding subsidies to Airbus, so I ask the Minister when he expects that such confirmation will be given and whether this indicates a divergence from the EU response.
Many products that these tariffs are being imposed on are subject to geographical indications, which are awarded under trade agreements to protect products of cultural heritage. It is no surprise that these products have been targeted first, as American producers of rival products have made no secret of their desire to destroy such protections. Does the Minister agree that this is not just about responding to the subsidies ruling, but about undermining and eliminating competition in favour of US producers who have long sought to do away with product labelling requirements, restrictive geographical indicators, and even sanitary and phytosanitary standards? Does he agree that going after some of our most iconic products is part of that strategy?
The Scotch whisky exports from this country amount to £6 billion a year—21% of all our food and drink exports, and 41 bottles a second. That is faster than I can drink it! Scotch whisky is so important to our exports. In fact, I think it is our third largest export, so the Government need to do all they can to protect it. These measures come at a time when the UK Prime Minister still insists that we could have a no-deal Brexit in a matter of days—a scenario under which substantial tariffs could be imposed on our exports to the EU. That would be a double whammy for British producers.
The impact of these tariffs on our biggest markets would be enormous, particularly for products such as Scotch whisky. No amount of new trade agreements overseas could mitigate that imminent threat. The EU is understood to be exploring what position to take in respect of these new tariffs. What role will the Minister’s officials be taking in those discussions, given our pending withdrawal?
The hon. Gentleman is absolutely right to highlight the importance of the Scotch whisky industry to the UK. Whisky is the UK’s biggest single agrifood export, accounting for more than 21% of all UK food and drink exports. In 2018, exports of all whisky from the UK totalled £4.8 billion, of which the Scotch Whisky Association claims £4.7 billion is Scotch whisky. Scotch whisky is the biggest single contributor to the UK balance of trade in goods, and the largest single market for UK exports of all whisky—not just Scotch whisky—by value is the United States, which imported more than £1 billion-worth in 2018 or a volume of 84,791 tonnes.
Beyond that, a further £268 million is injected into the economy through the supply chain, leading to a UK-wide impact of just under £5 billion. Some 40,000 jobs are directly supported by the Scotch whisky industry, 7,000 of which are in rural areas of Scotland. This is an absolutely vital sector to the United Kingdom and one that we are determined to do everything we can to protect.
The shadow Secretary of State will have heard me say to Mr Speaker earlier that the dispute that has led to these threatened tariffs in 10 days’ time is a very long and complex one and is being governed by the investigations at the WTO. It is regrettable, although we accept it, that we were found not to be in compliance and the WTO has given the United States permission to go down this route.
The hon. Gentleman asked me about our belief that we are now completely compliant and have taken the remedial measures necessary to bring ourselves into compliance in this dispute. We hope that that will happen within the next couple of months. We are pressing the WTO for an early decision on that, because the evidence base on this stuff is incredibly important, particularly in our conversations with the United States.
I am anxious this afternoon to dial down the atmosphere and not engage in deep personal attacks on people in other countries. The hon. Gentleman was very restrained, and rightly so, in what he said. We want to keep it on the issues. We think that the proposed tariff is unfair, wrong and unjust, and if we can demonstrate that we are now in compliance in this very long-running dispute and have taken the necessary measures, I hope that we can engage calmly with the United States.
I hope the hon. Gentleman will agree that one of the reasons why the United Kingdom is so internationally necessary, and why our taking up our position again in the WTO when we leave the EU is a good thing and is widely welcomed internationally, is that we believe in the international rules-based order. We believe that any fair, reasoned, rational observer who looks at this will conclude that these tariffs are unjust, unfair and wrong and are targeting people who have done absolutely nothing in terms of the dispute that has given birth to these retaliatory measures. I hope that, with constructive engagement and calm dialogue, we may persuade the United States to think again.
Can the Minister update the House on what steps the Government will take over the next 10 days to try to stop these tariffs taking effect from 18 October, which feeds into the important Christmas market? I also reiterate the point that a zero tariff on bourbon and American whiskey when we leave the European Union would send the strongest possible message to the US that the UK is on its side, and it should take away these tariffs?
As for what we can do to get this message across, the United States ambassador to the UK, Ambassador Johnson, is known to many of us, and he is known to be very close to President Trump. I encourage all Members across the House to contact the American ambassador and make him aware of the strength of feeling on this subject in this House and across the country.
The Minister listed a number of conversations that have been had, but I would like him to clarify what conversations have taken place since Thursday with both the EU and the United States? Is it not the case that a post-Brexit, isolated UK would have much less negotiating power than it currently has as part of one of the world’s largest trade blocs when it comes to fending off someone like Donald Trump?
My hon. Friend is absolutely right to say that America is the largest market for Scotch whisky. What other levers can he pull to promote whisky in the emerging markets of Asia and further afield—for instance by using the efforts of the GREAT campaign? This is a real opportunity to push our whiskies into other markets.
Perhaps you should lead by example, Mr Speaker. Mr Speaker’s 10-year-old single malt sells for £29 a bottle, which is a remarkable increase on what it retailed for 10 years ago. Perhaps as your parting shot, Sir, you should immediately commission, as a gesture of confidence in the Scotch whisky business, a new bottle of Speaker Bercow’s brew.
My right hon. Friend is absolutely right about the growing interest in Scotch whisky around the world. As I have said, the Taiwanese market has been discussed several times in Vietnam in the last few days. I wonder whether my right hon. Friend might be on to something. Perhaps we should tie it to the GREAT campaign, and perhaps we should invite our new prime ministerial trade envoys in the beefed-up programme to make this a priority.
Scotch whisky is genuinely one of those international iconic brands. It is up there with Rolls-Royce, and all the other brands that are instinctively recognised as British. It is as well known as Buckingham Palace or, indeed, this very building, and it is integral to our promotion of ourselves as global Britain.
The North British Distillery, which is in my constituency, is one of Scotland’s oldest and largest grain whisky producers, and is a very important employer in Edinburgh South West. While this tariff is of course aimed at single malts, it is a worrying indication of how the US Government may treat iconic Scottish food and drink products in any trade negotiation. As my hon. Friend the Member for Glasgow East (David Linden) suggested, if the Prime Minister’s alleged good offices with President Trump cannot resolve this problem, what hope is there for future trade negotiations outside the EU?
No Conservative Member would ever speak of the Scottish economy in such denigrating terms. It is, in fact, because of our respect for the people of Scotland and the Scottish economy that Government Members passionately believe in Scotland’s integral place as a part of the United Kingdom. It is we who passionately believe that we are better together, and it is we who passionately believe that the best interests of the Scottish people are served by membership of this United Kingdom. It is this Government, serving every part of the United Kingdom, who will do all that we can to protect that sector, and to protect whisky producers in every part of this country. But if the hon. and learned Lady, who has taken some time off from her court cases to come here today, genuinely believes that the best way of resolving this dispute is to attack and denigrate personally the President of the United States, I think that shows how naive she is.
The hon. Gentleman says that I should have had these meetings last week, but I was in Vietnam last week. I arrived back in the UK today, and my officials and I have been working today and reaching out. I am actually quite fond of the hon. Gentleman, but I think that he is deliberately teasing me and misrepresenting what I said. I hope to have those conversations tomorrow, but what I said was that I could not guarantee that people would pick up the phone.
My hon. Friend makes a powerful point. If we are going to advance our international trade objectives, that is done not just Government to Government, bilaterally; it is done trade organisation to trade organisation. To coin a phrase, we are all in it together.
By the way, on this point of who has spoken to whom, I outlined the representations made by this Government to our counterparts in the United States, which have been made at the level of the Chancellor and of the Secretary of State to Vice-President Pence and to her counterpart US trade negotiator. We have made incredibly high-level representations on this subject and will continue to do so, because we have a determination to try not to point-score, but to come to a successful resolution on behalf of the Scotch whisky sector.
The Minister will know that this White House is the most transactional in history and will have seen from developments in, for example, Ukraine that it has thought nothing of ratchetting up leverage in as many ways as possible, as a precursor to securing concessions at a later date. Can he therefore say what the Government are doing to limit those 25% tariffs, or whether we are going to become another Ukraine?
I am genuinely touched by the belief that my picking up the phone from Vietnam or anywhere else would have resolved this when people much higher up in the Government—at Cabinet level and at a very senior Cabinet level—have quite rightly been making these representations. I will now join in and support them in making these representations.
How many times do we say these things? The Secretary of State for Business, Energy and Industrial Strategy spoke to the Vice-President of the United States when he was here very recently. She spoke to her counterpart, and the Chancellor made representations to the US Treasury Secretary. I will endeavour to make sure that the Prime Minister, when he understands the strength of feeling here, raises these matters with President Trump. I will say it again: those who are watching this, those who have returned home and been foolish enough to put the Parliament channel on, will not want us to score points against each other. They will want us to deliver for the Scotch whisky sector.
The world-leading brands that are produced and bottled by Diageo in Fife are almost exclusively blended whiskies, so on the face of it we are okay, but I am uncomfortable, partly because so many others are not okay and partly because something that damages part of our whisky industry damages all of it. Does it worry the Minister at all that without the UK Government being able to do anything about it we have been put into a position where it will be seen as a massive success just to get back to where we were before? Is that a precursor of what trade deals will be like in the brave new world of the WTO?
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