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This year, we should be celebrating 25 years of tariff-free spirits trade between Europe and the US. Instead, we are facing 25 per cent US tariffs on a range of Scottish products.
The US is the world’s largest export market for Scotch whisky, and for more than a century, Scotch and US whisky industries have been closely entwined. Despite that history, today, a 2019-release Scotch whisky that has spent the past 25 years ageing in US bourbon barrels, ready for tariff-free access to US markets, finds new and unwelcome obstacles in its way.
Scotland is proud to be a trading nation with a plan to increase our exports to 25 per cent of our gross domestic product in the next 10 years, thereby growing exports by £25 billion. However, delivering that plan requires a supportive trading environment. The US tariffs directly damage Scottish business. I will detail the specific impacts shortly.
The effects of barriers to trade are also a stark warning of the greater impact that is to come from the loss of tariff-free access to the European Union, particularly in the case of a no-deal Brexit. It demonstrates why Scotland’s interests must be taken into account in the development of all future United Kingdom trade arrangements.
Dean Lockhart knows fine well—he should know—that any Brexit is bad for Scotland. The people of Scotland did not vote for Brexit and, in stark contrast to the behaviour of the Conservative Party, the Scottish Government and the SNP will not support anything that damages Scotland’s economy.
On 18 October, the US applied 25 per cent tariffs to a range of products from EU countries, including the UK, in accordance with World Trade Organization rules. The imposition of those tariffs is the latest development in the long-running Airbus and Boeing saga—a dispute between the US and the EU about subsidies to the aviation industry. Next year, the EU expects the outcome of a WTO decision on tariffs that the EU can apply to US products: tit for tat.
Trade disputes may seem far removed from most people’s day-to-day lives, but the impact of the tariffs on Scottish businesses, and potentially on people’s jobs, is immediate and real. The tariffs target single malt Scotch whisky, cheese, butter, cashmere and sweet biscuits, including shortbread. That is profoundly worrying for Scottish producers who export, or are planning to export, to the US. It jeopardises the industry’s own target to double its value to £30 billion by 2030, as set out in “Ambition 2030”, the national food and drink strategy.
I spend much of my time talking to businesses and business associations to understand how Government can best support them. I know that the impacts of the tariffs are being felt across Scotland, from the villages of Speyside to the west coast island distilleries and the textile manufacturers of the Borders.
The USA is Scotland’s single biggest export market for whisky. Many single malt distilleries are located in remote and rural areas, particularly in island communities, and they are often small businesses. The Scotch Whisky Association has highlighted to me that its industry is paying 62 per cent of the UK’s tariff bill in a dispute that has nothing to do with it.
There is also a disproportionate impact on rural areas, especially Moray, which is home to distilleries, food producers and cashmere manufacturers.
That is indeed the case. As the member knows, the tariff is a target on malt, so even within the whisky industry, there is a disproportionate impact.
It is not just about whisky: biscuit and shortbread manufacturers are also badly affected. One major manufacturer exports approximately 5,000 tonnes of shortbread a year to the USA, supporting 200 jobs.
I know from my experience in business that margins, particularly for small businesses, can be tight. Any changes in the trading environment that make a product less competitive or reduce margins can have a big impact on profitability and jobs. This is a situation in which there are no winners. When I was in Washington last month, I met representatives of the US spirits industry. They also stressed the impact of the tariffs on their businesses, including potential job losses in the US.
Scottish ministers and officials have taken what steps we can to encourage a resolution to the dispute. I know that the EU is working towards a negotiated settlement with the US, and we support the EU in that approach.
The First Minister recently wrote to the Prime Minister highlighting the threat to the Scotch whisky industry. I also raised the issue with the UK trade minister, Conor Burns, in October. We have urged the UK Government to work with the EU to find a solution.
Also in October, I raised the impact of the tariffs on Scottish exports with the assistant US trade representative in Washington DC, the US consul general in Edinburgh and the US embassy in London.
This year, we should be celebrating 25 years of tariff-free trade in spirits between Europe and the US. Last year, we celebrated a tariff-free trade arrangement that is twice as long, with the 50th anniversary of the EU customs union. For most of that time, Scotland has had tariff-free access to the EU market.
The impact on Scotland of the targeted US tariffs on specific sectors is a stark warning of the far greater challenges that await Scotland if we lose tariff-free access to the EU across a wider range of sectors.
As members know, the Scottish Government believes that the best option for the future wellbeing of Scotland is to remain in the EU. That position is consistent with the will of the people of Scotland, who overwhelmingly voted to remain. The benefits of EU membership to Scotland are clear. The EU is the largest single market for Scotland’s international exports. Estimates show that EU trade barriers could cost the UK between 4 and 7 per cent in lost GDP growth by 2030, while the UK Treasury’s own figures show that, taken together, signing free trade agreements with all the English-speaking countries, including the US, and with all the emerging economies of the BRICS countries—Brazil, Russia, India, China and South Africa—would increase GDP by only a maximum of 0.4 per cent.
Any form of Brexit will cause significant harm to Scotland’s economy and result in lower household incomes. However, a no-deal Brexit could push the economy into recession in 2020. That stark conclusion is set out in the Scottish Government’s report, “No-deal Brexit: economic implications for Scotland”. Unemployment figures could rise by up to 100,000 and exports could fall by up to 20 per cent.
If we Brexit with no deal, the EU will have no choice but to impose the same tariffs on us as it imposes on other third countries. The UK Government has conceded that that could mean an annual loss of almost £2 billion to the UK’s food and drink sector alone.
I totally understand the arguments that the minister has made about tariffs. What I cannot understand is how he can say that it would be a complete disaster to leave the EU and have to face tariffs when 60 per cent of our trade is with the rest of the UK and there is a real danger of a hard border and tariffs if we go down his road of separation.
The member will be well aware that the Scottish Government’s position is that there should be no tariffs between Scotland and the rest of the UK, or indeed with the EU, because we intend to maintain membership as a full member of the EU after independence. If he is saying that the UK position is that it would erect tariff barriers between the UK and the EU, that speaks more to the UK’s attitude to international trade than to Scotland’s attitude of seeking to do what we can to protect business, rather than putting barriers in the way.
There are those who argue that the US tariffs are an EU issue and will be solved by Brexit. However, that displays a deep misunderstanding of the situation. Leaving the EU will not remove the UK’s current US tariff liabilities, which are related to UK subsidies for Airbus. Instead, it clearly demonstrates two things.
First, a so-called clean break, no-deal, WTO Brexit is a fallacy. The dispute shows that the free trading UK of Brexiteers’ dreams would still be subject to a supranational rules-based body—one with teeth, as the dispute has demonstrated. That body will just be based in Geneva, rather than Brussels.
Secondly, the dispute demonstrates the difficulties that the UK will face in negotiating a free trade agreement with the US—a country that is unpredictable at best, and one that drives a very hard bargain. The Airbus WTO tariffs give the US a strong card to start with, and one that they will not give away through a love of the UK, but will seek to exchange for who knows what—perhaps food standards, or access to our national health service. In that situation, the UK could find itself without even the counterweight of a WTO Boeing ruling in the EU’s favour to balance the scales.
The imposition of US tariffs indicates why Scotland’s economic and other interests and priorities must be taken into account in the development of future trade arrangements. Although there are similarities, there are also differences in what, and where, Scotland trades compared with the rest of the UK. Scotland has valuable protected geographical indications, such as Scotch whisky, Scottish farmed salmon and Scotch beef, which are crucial to our export performance and growth. Our approach to trade also differs from that of the UK as a whole, with a specific set of values that reflect the priority that we give to protecting the environment, our public services and workers’ rights.
One year ago, the Scottish Government published “Scotland’s role in the development of future UK trade arrangements”, which strongly made the case that the Scottish Parliament and the Scottish Government must have guaranteed roles in formulating and agreeing future trade deals. One year on, those issues are as relevant, if not more so, with the UK Government talking up the benefits of a US trade deal. This Parliament has previously called on the UK Government to engage in a process with the Scottish Government and the other devolved Administrations that ensures that the interests and priorities of all parts of the UK are represented. I reiterate that call today.
These US tariffs have seen Scotland caught up in a trade dispute that is not of our making. They have a direct impact on Scottish businesses, and post-Brexit tariffs with the EU would multiply the scale of that impact on the Scottish economy. Our healthy current trade with the US shows that we do not need to leave the EU to trade successfully with the US; what we need is a trading environment that allows our businesses to thrive and which is supportive of what, and how, Scotland trades. We can increase our exports to 25 per cent of our GDP in the next 10 years, but Scotland’s voice must be heard, and our interests must be represented, in future trade deals.
That the Parliament regrets the recent imposition of United States tariffs on a range of Scottish goods, including single malt Scotch whisky, liqueurs, cheese, butter, biscuits and woollen and cashmere products, and their impact on Scottish businesses; welcomes the efforts of the EU to reach a negotiated settlement with the United States to bring the Airbus/Boeing dispute to an end, and recognises the damage that any form of Brexit will inflict on Scottish businesses that trade with EU member countries and, in particular, the price that will be paid by businesses and employees of a no-deal Brexit.
This is a very important debate. Everyone across this chamber will recognise the importance of the Scotch whisky sector and the other sectors that are affected by US tariffs arising from a trade dispute between the EU and the US.
I will first deal with the Scotch whisky industry and the significant contribution that it makes to Scotland’s economy and trade, and the huge tax revenues that it generates to support public services in Scotland. Scotch whisky accounts for more than £4 billion in international sales, making it one of the largest exporting sectors in the UK. It employs more than 11,000 people across Scotland, and many more indirectly through supply chains, the majority of which jobs are in rural Scotland.
On 18 October this year, an import tariff of 25 per cent was imposed on all single malt Scotch whisky and Scotch whisky liqueurs entering the US market. Those tariffs are the latest chapter in a 15-year trade dispute between the US and the EU over subsidies for Airbus and Boeing, and they follow a related decision of the European Commission to impose tariffs on US whiskey last year.
All of that means that Scotch whisky, and some of our other vital sectors, have become collateral damage in a much wider EU-US trade dispute. In the words of the Scotch Whisky Association,
“Scotch is now caught up in a multidimensional trade dispute between the EU and the US. A 25% EU tariff has applied to US whiskeys since July 2018 despite our vocal opposition and calls for this to be removed. This will have contributed to the US decision.”
The US tariffs will affect single malt exports going into the US that are worth more than $500 million. The SWA has said that exports of single malt to the US could decline by some 20 per cent over the next year if these tariffs continue, which would amount to a decline of more than $100 million a year in exports. Clearly, this is an important issue for all of us to address.
In response to the imposition of US tariffs, the Scotch whisky industry has made a number of reasonable requests of the UK and Scottish Governments. First, it has called for them to work together to encourage the EU and US authorities to reach a negotiated settlement to the dispute. To that end, I welcome the action that has been taken by the Prime Minister, who has raised the issue directly with the US President a number of times. The UK Government has also approached the WTO to confirm that the UK has been fully compliant with rulings on Airbus tariffs and, therefore, should not be subject to those tariffs.
Pending a resolution to the trade dispute, the Scotch whisky sector has proposed a number of targeted measures that can be taken to support the industry, which include reducing the tax burden on spirits and reforming excise duty to minimise the competitive disadvantage to Scotch whisky. That is a reserved matter, and I am pleased to report that, last week, the UK Government announced that it will review alcohol duty to ensure that the UK tax system provides much-needed support to the UK drinks industry. That follows last year’s UK budget, in which spirits duty was frozen at the request of Scottish Conservative MPs in Westminster.
The whisky sector has also called for the exclusion of glass from the Scottish Government’s deposit return scheme, to reduce the regulatory burden on whisky producers. I ask the minister whether he will listen to the Scotch whisky sector and, today, rule out the inclusion of glass in the DRS.
The sector has highlighted problems arising from the painfully slow roll-out of superfast broadband in rural areas, which affects countless distilleries. I ask the minister to explain to the sector today why his Government is failing to meet targets for the roll-out of superfast broadband and what steps he is taking to address that issue.
The Scotch whisky and other sectors that are impacted by the tariffs are too important to get caught up in politics, which is why our motion calls on the Scottish Government to work closely with the UK Government to address the issues.
As Bruce Crawford knows, the responsibility for implementing the roll-out is the Scottish Government’s. He wants to talk about funding and, as the convener of the Finance and Constitution Committee, he will be well aware of the extra £2 billion that will be coming to the Scottish Government as a result of an increase in the UK block grant.
I turn to the Scottish Government motion and its reference to Brexit.
I will give way in a second—let me just make a bit of progress.
By mentioning Brexit in the context of US tariffs being imposed on Scotch whisky, the minister undermines his own policy on Brexit. The only reason that Scotch whisky and other sectors are being hit by US tariffs is that we are still a member of the EU and, in this trade dispute, the EU has prioritised the interests of European aerospace, French champagne and other sectors at the expense of Scotch whisky. After Brexit, we will be free to negotiate our own free trade agreements with the rest of the world. We can then prioritise the interests of Scotland’s whisky, fishing, agriculture and other vital sectors.
I remind the minister that SNP policy is to take Scotland back into the common fisheries policy, which will damage fishing communities; to take us back into the common agricultural policy, which will damage Scottish farmers; and to take us back into EU-wide free trade agreements, which, as we can now see, prioritise European exports at the expense of Scotch whisky.
If I have a bit more time, I will give way to Ivan McKee.
I am really struggling to know where to start with that catalogue of distractions.
On co-operation with the UK Government, the Scottish Government has produced document after document and tried to sit down and talk with the UK Government about future trading arrangements, but it is not talking to us about that, which is a problem.
On the prioritisation of sectors, Dean Lockhart should be aware that the UK is also specifically named in the ruling on the US tariffs because of the UK’s support for Airbus. If the UK was not a member of the EU, it would still be liable for those tariffs. That is the reality—I have had those conversations with the US trade representative and the US embassy in London—so that would be part of the trade negotiations with the US. Pretending that exiting the EU would solve the problem is completely incorrect. [Interruption.]
Hold on just a minute. I am in control here. Please, stand up Mr Lockhart. We had time to allow that intervention and you have time to respond to it. I remind all members that the terms of the motion and the amendments in the Business Bulletin really should be adhered to. Mr Lockhart.
Thank you, Presiding Officer.
In the motion, the Scottish Government highlights its concerns about a no-deal Brexit. If the SNP is so concerned about a no-deal Brexit, why has it voted four times against a deal, which the SWA has said
“stands up well against the priorities of the Scotch Whisky industry”?
The SNP is the party of no deal.
The minister should have come to the chamber today with a series of measures to help the Scotch whisky sector and other sectors that are affected by the tariffs. Instead, he has come to the chamber with nothing to offer those sectors and just a list of political points to make. The Scotch whisky, cashmere and other sectors that are affected by the tariffs deserve better from the Scottish Government. At least they can still rely on the UK Government, which has taken urgent and effective measures to support their businesses.
I move amendment S5M-19851.1, to leave out from “, and recognises” and insert:
“; welcomes the efforts of the UK Government in continuing to press the United States administration and the EU to remove these tariffs, which are a result of an ongoing EU-United States trade dispute; further welcomes the commitment by the UK Government to deliver a multi-year plan for the future of alcohol duty in order to give the drinks sector certainty; acknowledges the requests from industry bodies such as the Scotch Whisky Association to assist the sector following the imposition of tariffs; calls on the Scottish Government to respond urgently and in full to these requests; recognises that, following the UK’s departure from the EU, the UK will be able to enter into free trade agreements that prioritise the interests of vital sectors of the Scottish economy, such as single malt Scotch whisky, liqueurs, cheese, butter, biscuits and woollen and cashmere products, and calls on the Scottish Government to work with the UK Government for an urgent resolution of these issues.”
It is deeply disappointing that the US has decided to inflict tariffs on iconic Scottish produce. However, that should not surprise us, as we have seen across the globe how the US uses its might and disproportionately large market to inflict its will on other nations. What is frightening is that we might well depend on the US market in the near future. It does not augur well that the World Trade Organization allowed the tariffs to happen. At 25 per cent, their size is not only punitive but deeply damaging for our produce.
The malt whisky industry has been drawn into the dispute. We have seen a resurgence in the Scotch whisky sector in recent years that has provided jobs and an economic boost. On the back of that, we have also had created a new market for gin. While new distilleries wait for their whisky to mature, they produce gin, which provides a steady income for those fledgling distilleries because it does not have to be aged. The US is the largest market for Scotch whisky and it was worth £1 billion last year, but the tariffs could cost the Scotch whisky industry 20 per cent of its sales of malt whisky at a value of $103 million.
The tariffs have implications for food sales as well, with meat, cheese and biscuits among the foods that are affected. Walkers, which is famous for its shortbread, exports 10 per cent of its products to the US, and that is concentrated around the festive season. Should the tariffs continue into the new year, they will affect Walkers’s annual sales.
Cashmere and wool and other high-quality products have also been hit. Sadly, most of those products come from the Highlands and Islands, a region that struggles economically. The attack on those sectors will have a disproportionate impact if it is not addressed quickly. If the current situation continues, the size of the tariff will make it impossible for it to be absorbed by businesses for any length of time. It could lead to falls in sales and, ultimately, job losses.
Brexit has led to discussions about new markets and how we need to expand our trade base. President Trump has made it clear that he is keen to do business. Unfortunately, the tariffs show the manner in which he does business. With the EU, we have a voice at the table and a veto, and we are equal partners with other member states. We have no such deal with America. The US has shown that it is not reasonable, and our economy will be subject to its whim if we become too dependent on trade with the US. Therefore, should Brexit happen, we will need to maintain very close trading relationships with the EU. We will not have the same voice, but we will need to ensure that we are not too dependent on one market.
Despite all that, we are still rolling out the red carpet for Trump, but not just around his development at the Menie estate. Earlier this year, it was discovered that the state-owned Glasgow Prestwick Airport Ltd had been waiving service fees for inbound US military aircraft. Despite that, we are penalised. It is therefore foolish to reject our close trading partnerships with those who show us loyalty.
That said, the biggest market for Scottish produce is the rest of the United Kingdom. As we discuss these damaging tariffs and how they affect our trading relationship with the US going forward, we are also discussing the implications of Brexit for our trade with Europe. It makes no sense at all for the Scottish Government to continue to talk about separating from the rest of the UK, which is our largest market. Doing that would leave us even more at the whim of other countries and their trade deals.
If Brexit has taught us anything, it is surely that we damage our country and create division by constitutional wrangling. The uncertainty damages the economy, regardless of the outcome, and we alienate our closest friends. We have had enough of that already.
The United Kingdom is, regrettably, hell-bent on leaving the European Union, and, if that happens, the UK will have its own policy on trade. Can the member explain, based on the experience of recent years, exactly what influence Scotland can expect to have on such a trade policy and why it would not be better to have one of our own?
I think that the member is trying to say that, as part of the European Union, we would have a greater say on trade policy than we would have as part of the United Kingdom. That makes no sense to me at all. We would have the same or greater influence on UK trade policy as we would have on EU trade policy, simply because of the numbers game. The number of MEPs that we send to Europe is a lot less than the number of MPs that we send to the UK Parliament. That argument makes no sense.
That would be as part of a union along with 27 other countries, rather than as a family of nations of four countries. That still makes no sense. There is also the fact that there is no guarantee that we would be in the EU. As the minister knows, to join the EU, we would need to join the euro, which the SNP has decided against. There are no guarantees in what the minister has put forward. We would be much better served by remaining part of the UK and, indeed, part of Europe.
I move amendment S5M-19851.2, to insert at end:
“; notes past failures of the Scottish Government to stand up to President Trump, and recognises that independence will also have a detrimental effect for Scottish businesses that trade with the rest of the UK as it is Scotland’s largest trading partner, accounting for 60% of exports.”
The Liberal Democrats believe that the motion rightly makes it clear that any Brexit will be damaging to our economy, and particularly our food and drink industry. The motion also highlights the fact that a no-deal Brexit would be even more damaging. A no-deal Brexit is simply the worst of all worlds. Even the most benign Brexit imaginable will cost our economy 2 to 8 per cent of growth over the next decade, according to the UK Government’s own figures.
That is why I am genuinely astonished by Dean Lockhart’s contribution on behalf of the Conservatives. As far as I understand it, the Conservatives used to pride themselves on being sound on the economy, but their amendment would remove the motion’s reference to the economic damage that any kind of Brexit will do to the British economy. The Conservative UK Government recognises that damage, but the amendment would remove that reference. How the Conservatives—certainly in this chamber—have changed! I do not know about elsewhere, but the Conservatives in this chamber have changed dramatically, and not for the better.
Businesses cannot simply uproot decades of trade and investment with our partners in the EU and suddenly find new buyers and markets that did not exist before. It takes years of investment and development for a business to break into new markets, particularly in the US market, which has so many local competitors. Despite the current US President’s warm words about Brexit, his actions, aggressive nationalism and protectionism tell a completely different story. We do not share his values. Everyone loses from escalating trade wars.
Are we about to do a great beneficial deal with Mr Trump? I think not. Trade tariffs on whisky, wool clothing and blankets, biscuits, books, cheese, meat, butter, seafood and fruit will be a bitter blow to our rural economy and will be deeply damaging to people’s jobs on both sides of the Atlantic.
However, it is clear that it is an example of the type of behaviour that we will face if Brexit forces us into the hands of a US trade deal wished for by Mr Trump.
Thankfully, the EU remains the largest export region for Scottish whisky and, rather than turning our back on it, we must maintain as much frictionless trade as possible. Brexit will create barriers with our largest export partner. A different trade deal with the US will be no substitute for what we already have as part of the EU.
It is in no one’s interests to resort to tariff barriers. As long as standards are maintained—that is important—low tariffs and free trade underpin prosperity and jobs in the UK and globally.
Other EU leaders have been clear in their condemnation of US trade tariffs but, because of Brexit, the UK Government is living in fear of jeopardising any future trade talks.
The whisky industry alone 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 those US tariffs. The impact on the wool and whisky industries in Scotland might also have a detrimental impact on our tourism industry.
The European Union is the biggest market for Scottish products, including—at 30 per cent by value and 36 per cent by volume—whisky. However, the fact that, as we have heard, single malts are being targeted, is damaging for smaller producers, who stand to be the hardest hit.
I find the current UK Government soundbite—“Let’s get Brexit done”—reprehensible. It is a fraud. If it happens by 31 January, one thing is sure—Brexit will not be “done”. There will be years of wrangling with the EU over future trading arrangements and years of wrangling—[Interruption.]
The people of the United Kingdom voted for that, but I stand by the principles on which I was elected to this Parliament. I would have hoped that other members, who shared that view, would also have stood by their principles. I do not refer to Mr Mundell, because he took a different view from me on that.
I am trying not to refer to the general election, but in response to that intervention, I must say that, yes, we had a referendum three years ago. The UK is facing a general election. It is up to the people of the UK to decide what they want to do in that general election. The general election is important; it trumps a referendum. It is up to the people of the UK to decide their future direction. My party and I hope that we do not leave the EU on 31 January. However, that is up to the British people.
Brexit cannot be “done”.
I am afraid that I am in my last minute.
If people believe that soundbite, there will be many more disillusioned people after 31 January, when they see that Brexit cannot be just “done”.
The Liberal Democrats are clear that the best deal for the UK, including for Scottish food and drink, is for us to stay in the EU. The only way to end the Brexit madness is to stop it in its tracks. We will soon see whether the British people take the opportunity to do just that.
I remind members that they should stick to the terms of the motion and amendments. I do not mind quick points in response to anything that has already been said, but please remember the terms of this afternoon’s debate. Speeches should be no longer than six minutes. I have some leeway with regard to time.
I am pleased to speak in today’s debate. The motion states that
“the Parliament regrets the recent imposition” of tariffs by the United States
“on a range of Scottish goods”.
“single malt Scotch whisky, liqueurs, cheese, butter, biscuits”, which means our shortbread,
“and woollen and cashmere products”.
That list has already been mentioned.
I represent the South Scotland region, and I feel that it is important to speak up for businesses that will potentially be affected by these terrible, Trump-imposed tariffs, such as Spirit AeroSystems, which operates out of Prestwick airport and has a contract with Airbus.
The sooner a resolution is found, the better. No one benefits from trade wars and no one benefits from these trade tariffs. We must urge the United States and the EU negotiators to find a solution to the Airbus and Boeing dispute, which is having a knock-on effect on our Scottish businesses.
As we consider the motion that is before us, it is important that we understand how we ended up in this situation. The issue has arisen because of a dispute about the EU’s provision of subsidies to aerospace giants, due to their manufacturing of assets in France, Germany, Spain and the UK. It is important to restate that the dispute is not new; it is the latest chapter in a 15-year battle between the US and the EU over perceived illegal subsidies for aeroplane manufacturers Airbus and Boeing.
The US first filed a case against the EU with the World Trade Organization in 2004, arguing that European loans to support Airbus amounted to illegal state subsidies. The EU, and subsequently the Council of the European Union and, by extension, member states, voted to fight the case. The legal battle came to a head this year, after the World Trade Organization ruled in favour of the US Government, which left the EU, UK and Scotland with no choice other than to accept the unwanted and damaging imposition of £6.1 billion of tariffs.
The dispute began with aeroplanes, but the Scottish produce that is now affected has nothing to do with aviation. The punitive tariffs are a risk to jobs and investment.
The US is the world’s largest export market for Scotch whisky. As members said, the industry employs 11,000 people, with 7,000 jobs in rural areas. We even have two distilleries in Dumfries and Galloway, Bladnoch and Annandale, which are potentially affected.
The member mentioned rural areas. Small distilleries such as Glen Garioch, in my constituency, are deeply worried about the tariffs. In addition, the industry as a whole is concerned about US power over trade deals. People are concerned that, post-Brexit, the US Government will want to flood the Scottish market with cheap American whiskey. Is that not also a great threat to Scottish whisky and the Scottish drinks industry in general?
I thank Gillian Martin for raising that issue. When I was a member of the Finance and Constitution Committee, we heard worrying evidence that trade negotiators in America are eyeing up the Scotch market, with a view to branding their three-year-old grain whiskey as malt. We need to be concerned about that.
Some 137 million bottles of Scotch were exported in 2018—that is four bottles every second. I know that folk in the USA like their Scotch. My husband still has close links with US whiskey folks, who take great pride in sourcing, obtaining and sharing popular and rare brand malts from US distributors.
“The tariff will undoubtedly damage the Scotch Whisky sector ... We expect to see a negative impact on investment and job creation in Scotland, and longer term impacts on productivity and growth across the industry and our supply chain.”
Those words come from the whisky industry leadership. The disruption to the industry is dangerous and it is the last thing that we all need right now, in the current chaos of another snap general election and Boris’s Brexit boorach.
I am keen to highlight the part of the Conservative amendment that says:
“the UK will be able to enter into free trade agreements that prioritise the interests of vital sectors of the Scottish economy”.
Currently, the EU is a large trading block and a powerful voice in trade negotiations with our transatlantic partners. If we want the US to take brand Scotland, we will have to take brands from the US. We will have to accept US foodstuffs. I am curious as to how strong the UK voice will be.
I draw members’ attention to the US Food and Drug Administration’s “Food Defect Levels Handbook”. The FDA approves certain levels of what it terms “defects” in food, spices and crop-based products. One defect is “Mammalian excreta”—or simply, rat poo. On page 15, the handbook notes that the acceptable defect level for cocoa beans is an
“Average of 10 mg or more mammalian excreta per pound”.
Here is another acceptable defect on page 12. The acceptable level of defect in ground paprika is
“75 insect fragments per 25 grams”.
That is what US trade negotiations open us up to.
UK negotiators negotiate on behalf of Scotland; we do not have a voice in trade negotiations. There is no EU, UK or Scottish acceptable defect levels equivalent. I had the Scottish Parliament information centre check that for me. I am therefore interested to know whether the Conservative members think that it is worth accepting those defects—rat poo, rat hair and insect carcases—and a host of other defects. That is what I am worried about.
I again ask the Scottish Government to do all that it can to put pressure on the UK Government, if we get a new one, and the EU to address these issues as soon as possible to ensure that we continue to fight against yet further issues because of Scotland being forced out of the EU.
Thank you, Deputy Presiding Officer. I will try to stick to the subject of the motion, unlike the last speech that we heard.
I welcome the opportunity to speak about the implications of the imposition of US tariffs on Scottish products. As we know, on 18 October, the US Government applied a 25 per cent tariff on some British food and drink exports.
President Trump has stated that EU support for Airbus impacts on American jobs, and the US trade representative has defended the President’s actions and accused Europe of
“providing massive subsidies to Airbus that have seriously injured the U.S. aerospace industry and our workers.”
Following the ruling, the WTO allowed the US to impose tariffs on £7.5 billion of goods that it imports from the EU. The UK expects to be hardest hit by Trump’s latest tariffs, with an annual loss of $1.4 billion. Moreover, the latest figures reveal that the whisky industry is now bearing 62 per cent of the UK’s tariff liabilities. With the inclusion of cashmere and shortbread in the tariffs, it is clear that Scottish products will be disproportionately affected. Whisky distillers and shortbread producers having to pay the price for disagreements over aeroplane subsidies is categorically unjust and unfair.
Last year’s whisky exports to America were worth $1.3 billion, which translates into about 137 million bottles. After the EU imposed a 25 per cent tariff on the import of bourbon last year, imports of US whiskey fell by about 20 per cent. The industry on this side of the Atlantic expects a similar decline in the next year, as the tariff inevitably means that Scotch will become less competitive in the US market.
That is a calamity for North East Scotland: a huge proportion of our whisky industry is there. It must also be recognised that shortbread producers Walkers and Dean’s, which are also based in the north-east, will also be unjustly affected. Last year, Walkers alone exported 5,000 tonnes of shortbread, which is more than a tenth of its total production, to America.
Johnstons of Elgin, which is the largest manufacturer of knitwear in the UK, will also be adversely affected by the imposition of a 25 per cent tariff. The US is its third largest market, and its chief executive, Simon Cotton, has said:
“This is going to hit consumers in the US, their cashmere will be more expensive. That in turn means we will be able to export less, grow less and we will have to downscale our plans.”
The situation will hit businesses and rural communities in the north-east unfairly, and we must do everything in our power to mitigate its effects.
The Prime Minister is in constant contact with the EU and the US, including Donald Trump, and will continue his efforts to get the tariffs dropped. The Conservative Government has frozen the rate of tax on spirits for the past two years, thereby supporting Scotland’s national drink. The Prime Minister has announced a major review of alcohol duty, and has signalled that the industry could be in line for a tax break, if he wins the general election. That has been greatly welcomed by the industry, as it is, I am sure, by all of us. It is in stark contrast to the complete and utter silence from the SNP and the Scottish Government. It seems as though the party that claims to speak for Scotland does nothing to support its national drink.
The fact that the tariffs have been imposed because of a disagreement between the US and the EU surely gives us even more reason to get Brexit done, so that we can strike better and more positive trade deals. The decisions to subsidise Airbus unfairly and to impose a 25 per cent tariff on—to name but two products—US bourbon and orange juice, were made by politicians in Brussels, not by politicians in the UK.
Brexit will be done before the end of next January.
Scotland, and the north-east in particular, will be hugely adversely affected by decisions that are made in Brussels rather than here in the UK.
The UK’s single largest trading nation is the United States, accounting for 16 per cent of all UK exports. We must fully grasp the opportunity of a trade deal with the US post-Brexit, maximise the potential opportunities for Scottish industries, and open up new markets for our high-quality exports.
No one wins in a trade war, so we must do all that we can to protect the communities and industries that are affected by the tariffs. The efforts of the Prime Minster to deal directly with Donald Trump, to freeze the duty on spirits and to review alcohol duty will no doubt help to mitigate the impacts. What has the SNP done? As we have heard today, it has done precisely nothing.
Furthermore, we must note the opportunity that Brexit presents us with to negotiate new trade deals around the world, and to open up new markets for Scotch whisky, shortbread and other world-renowned Scottish products. There is a great prize to be won.
Little did we know, when Donald Trump took up residence in the White House three years ago, that the special relationship between the United States and the United Kingdom would be so severely strained. We need look no further for evidence of that strain than the dispute over subsidies to Airbus and the predatory response on international trade that has been pursued by the Trump Government, which has resulted in $7.5 billion-worth of tariffs being proposed for European goods.
On 18 October, as others have said, a new tariff of 25 per cent on single malt Scotch whisky and Scotch whisky liqueurs entering the US came into effect. The US is the single largest market for single malt Scotch whisky, with the value of exports to the US in 2018 being about $516 million.
There are examples of whisky producers in my Stirling constituency who, as Dean Lockhart put it, will be the “collateral damage” of the trade dispute. Deanston and Glengoyne distilleries are shining examples of very high-quality Scotch whisky producers, which are also major economic contributors and employers locally.
As we have heard, another commodity that is proposed for tariffs is biscuits. Callander is home to the oldest bakery business in Scotland: Campbells Shortbread is a successful company that exports worldwide, including to the US. Biscuit products such as those that are made by Campbells also face a 25 per cent tariff. The price of such punitive tariffs will land at the door of fantastic businesses like Campbells and their employees.
The new list of tariffs also includes dairy products—in particular, cheese. That could have a big impact on the many dairy farmers in the Stirling area who rely on cheese producers, especially cheddar producers, to buy their milk. Dairy farmers are finding trading conditions tough enough without the imposition of such tariffs.
Tariffs will also apply to some woollen garments, including wool and cashmere sweaters, pullovers, sweatshirts and waistcoats, as well as men’s and boys’ suits. Sheep farmers across Scotland and in the Stirling constituency could see a knock-on effect from disruption to trade in those products with companies in the United States.
I recently wrote to Ivan McKee, the trade minister, on the matter, because it is causing real concern in my constituency. In his response, he pointed out that the First Minister has written directly to the Prime Minister on the subject, and that he has, as he told Parliament today, raised it directly with the UK Department for International Trade, as well as with the US Government. All that is being done with the aim of urging the parties involved to work towards settlement of the overall dispute. As the Scottish Government does, I support the European Commission’s efforts to reach a negotiated settlement on behalf of all the affected member states of the European Union.
Right now, the whole UK is facing a range of significant economic challenges that are being brought about by the threat of Brexit in any form. We have seen, across these islands since the Brexit vote, companies leaving the UK, downsizing their operations, collapsing entirely or halting investment decisions. I mention that in a debate about US tariffs because the tariffs are being imposed on an economically weakened UK.
It will not have escaped people’s notice that the attack on a number of UK products by the US Government comes from the very Trump Administration that Boris Johnson boasts we will have a post-Brexit trade deal with. President Trump himself has indicated that that will be possible only with a no-deal Brexit, which would mean that the UK Government would be negotiating a trade deal while in a state of huge economic turmoil.
The “Please, sir, I want some more” approach that the UK would be forced to take would no doubt also put at risk our NHS and wider public services, and would hold our industries to ransom to the protectionist agenda of Donald Trump. It would not be contrary to the nature of the sitting President were he to change his tune at an opportune moment and drive forward damaging clauses, tariffs and restrictions to a US-UK trade deal the moment the UK leaves the EU.
God forbid that it ever happens. I actually loudly applauded the speech by Mike Rumbles. That has not happened often in this chamber, but he did a grand job today, so I wish that he were here to hear me say that.
The US is not an equal trading partner with the UK, neither does it behave like one. Anyone who thinks so is deluding themselves. This entire episode should be a warning to us all of the dangers of post-Brexit trade negotiation with the Trump Administration. I echo the calls of the Scottish Government to the UK and US Governments, as well as to the EU, to continue to work to reach a settlement that will benefit farmers and producers, including those in my constituency.
All the turmoil has made crystal clear the benefit of negotiating international trade as a partner in the European Union. We need only look at the value of Scotch whisky exports to the US—which grew from £280 million in 1994 to more than £1 billion last year—to see the benefit of being a member of the European Union when exporting to the US. To kid on that some sort of independent trade deal between the UK and the US would do better than that record is, frankly, to live in a fantasy land.
The election is just four weeks away: I urge voters to vote to stop Brexit and to call an end to the unholy alliance between Donald Trump and Boris Johnson.
I welcome the Scottish Government’s debate, but as a Highlands and Islands member, I am seriously concerned that US tariffs will be a major red flag for and a clear and present danger to quality Scottish exports such as whisky from the Scapa distillery in Orkney, shortbread from Walkers of Aberlour and cashmere sweaters from Johnstons of Elgin. I shall focus my remarks on the effect of the new tariffs on the whisky industry, particularly single malts, although I will start with the bigger picture.
The sanction of US tariffs was not some random Trump-inspired maverick initiative—although, of course, we have seen our fair share of those over the past three years. It was a WTO-arbitrated decision, based on, as we have heard, allegedly unfair EU Airbus subsidies.
Some Brexit supporters have claimed that the WTO provides a safety net for the UK. In his recent book, “Brexit: What the Hell Happens Now?”, Ian Dunt wrote:
“They portray the WTO as a virile, regulation-free wonderland just waiting for Britain to take its place as one of the world’s leading trading nations.”
The reality is different. Ian Dunt said:
“The WTO is a potential regulatory nightmare, where each and every member can trigger a trade dispute against you.”
With remarkable insight, Dunt, who wrote his book in 2016, predicted the current US tariffs on Scottish products. He said:
“ministers should not be under any illusions about sentimentality, even from the likes of the US or Australia. The UK is dealing with professional trade negotiators. These people squeeze you. It’s what they do. Trade negotiations are not the place for a group hug.”
As an aside, Scottish exporters also benefit from the EU’s protected geographical indication system, which is really important. For example, champagne must come from the Champagne region of France, parmesan must come from one of five areas across northern Italy, and Stornoway black pudding—members have guessed it—must come from Stornoway. The US is not a fan of that system and prefers trademarks to PGIs. Will the system be protected in a post-Brexit Britain? What will be the effects on whisky exports?
From last month, there has been an ad valorem—a tax based on the value of the transactions—import tariff of 25 per cent on single malt Scotch whisky and liquors that enter the US. As many other members have said, that is extremely serious for the industry. The US is the single largest market for single malt, and the value of US imports is about $516 million. The Scotch Whisky Association has expressed concern that the tariffs could impact on investment and job creation in Scotland. As I said in my intervention on the minister—I appreciate that he accepted it—the key concern is that smaller distillers will be hit disproportionately, given that the majority do not produce blended whisky, which is not affected by the tariff.
What about the future? We would need the predictive powers of the Brahan Seer to work out the next steps in the Brexit saga. Although a post-Brexit Britain could negotiate a new trade deal with the US, the UK would need to make concessions in order to get rid of the 25 per cent tariff, which would take whisky exports back only to the status quo. What would those concessions be? Would it be access to our NHS, for example?
In Scotland, the tariff disproportionately affects my region, the Highlands and Islands, where the bulk of the distillers are located. Action is needed, first of all, to de-escalate the trade dispute. EU-US trade issues are nothing to do with the Scotch whisky sector, yet the small distillers in my region will pay the price for them.
How can the Scottish Government help the sector now? We all know that the export of Scotch whisky to the US market has been a success: 137 million bottles are exported to the US, which is four bottles per second, as Emma Harper said. The key reason for that success is tariff-free trade between the EU and the US. As the minister pointed out in his opening speech, since 1994, there has been a zero-for-zero agreement, and the US-EU bilateral trade in spirits has grown dramatically to become the largest and most valuable single market, worth more than £1 billion. It is a key industry.
The other key point is that there has been integration of the US and UK industries for more than a century. The Scottish industry spends about £70 million on importing US bourbon barrels, which are used to mature Scotch. Sixty per cent of those casks come from the US, because the US has a single-use policy for bourbon casks in order to protect its local industry.
The success of whisky exports to the US has helped the industry to put more than £500 million of investment into industrial sites in the past five years. Let me give a regional example. Speyside Distillers is reconsidering plans to increase exports to the US. Its managing director, Patricia Dillon, said:
“Because of the 25% tariffs that have been implemented in the US, this is something that we can’t possibly absorb into our business”.
Whisky is an incredibly important export for Scotland in general and for the Highlands and Islands in particular. The industry has 11,000 employees, of whom 7,000 are in rural areas. The Scotch Whisky Association estimates that one fifth of single malt exports to the US could be lost in 12 months. The Scotch whisky industry is bearing 62 per cent of the UK’s tariff liabilities in a dispute that has nothing to do with it.
We need to de-escalate the dispute, because no one wins a tariff war—it is a race to the bottom. We need to support the industry now and protect our vital rural and urban jobs.
I end by quoting Humphrey Bogart’s famous last words, which were allegedly, “I should never have switched from Scotch to martinis.”
Cheese, olives, jumpers and whisky—that is not my Christmas list, but the items that are now being targeted by the United States, thanks to new trade tariffs. Those tariffs are targeting Scottish products, Scottish businesses and the livelihoods of many of our constituents as a result. As we know, a 15-year running battle between the European Union and the United States led to the ruling from the World Trade Organization that allowed the tariffs to come in. Since last month, US trade tariffs have been set at a 10 per cent rate on aircraft and at a 25 per cent rate on agricultural and other items.
I hope that we can all agree that trade wars are in no one’s interests, so it is important that we focus on finding a resolution to avoid being drawn into the politics of hitting back, which seems to be the driving mission of the current US Administration. As the American President tweeted in 2018,
“trade wars are good, and easy to win.”
America is playing politics with the livelihoods of the people who work for some of Scotland’s largest employers, but bully-boy tactics are the last thing that we need in an era of political flux.
Ahead of today’s debate, my office spoke to Ian Palmer, the managing director of InchDairnie Distillery, which is just outside Glenrothes. InchDairnie began life back in 2014 but, as whisky fans will understand, it has not yet produced its first bottle, because of the nature of the distillation process. Until its single malt has matured for at least a decade, InchDairnie will provide fillings for MacDuff International’s blends, which include Grand Macnish, Lauder’s and Islay Mist.
Ian Palmer told me:
“A significant proportion of what we produce is traded within the industry, primarily for blended whisky. So the impact the tariffs will have will be indirect and long term ... The issue will be the long term effect of the loss of sales in an important market and the ripple effect it will have on the industry in the wider sense. The tariffs will have an effect on changing the market so that when the tariffs are removed the market will have changed and the product will have to build up to the position it had prior to the imposition of the tariffs. If there is a slowdown in production at some malt distilleries this will have an effect on our trading position in the blended whisky market.”
The value of Scotch whisky exports to the US grew from £280 million in 1994 to more than £1 billion last year, and the American market accounted for 22 per cent of the global value, and 10.7 per cent of global volumes, of Scotch whisky exports in 2018. Scotch Whisky Association figures from last year tell us that 137 million bottles were exported to America, which is the equivalent of around four bottles a second.
That is really important to those who represent constituencies like mine. One of the largest employers in my constituency is Diageo. From Leven, Diageo packages more than 38 million cases of spirits a year, with a workforce of more than 1,000 people. Workers in my constituency send whisky all over the world. Earlier this year, the Leven site was named as Diageo’s top supply chain site, which is the company’s top global manufacturing award. In August, I was delighted to welcome the Scottish Government’s trade minister, Ivan McKee, to present the award to staff at the Leven plant. Diageo is investing in and recognising the hard work of its workforce, but it is doing so in the teeth of adversity.
The American and Scottish whisky industries have been intertwined for more than 100 years—since before Donald Trump’s mum left Stornoway—as we heard from the minister. The SWA points to the £70 million that is spent every year on importing US bourbon barrels, which are used in the maturation process. Imagine hundreds of those barrels, stacked to the rafters, American bourbon brands stamped on their side, all in a storehouse at the back of a field outside the new town of Glenrothes. Our trade is global, whether Donald Trump likes it or not. The American industry depends on us, just as we depend on it.
Therefore, we need a solution for the tariffs, which are unfairly harming key Scottish industries. I know that the Scottish Government is focused on playing its part and doing all that it can. The crunch point for today’s debate is that, under the current constitutional arrangements, any progress on moving us forward depends on Donald Trump and Boris Johnson. I do not accept that either of those individuals has the best interests of the industry or my constituents’ livelihoods at heart.
The Government’s motion makes direct reference to Brexit and, when it comes to trade, we must not ignore the elephant in the room, as the Tory amendment has done. I remind members about InchDairnie Distillery, which is 38 miles from here. Its creation would not have been possible without the European Union, a grant from which of more than £1.4 million allowed it to begin life back in 2014.
How will Brexit hurt folk in Fife? As managing director Ian Palmer told me,
“other markets will see the impact tariffs have and when we leave the EU this will be a lever that they can pull in the myriad of trade negations which will have to happen”.
US trade tariffs are exactly that: a lever to bring about economic uncertainty and exploit Scottish businesses. Further, thanks to the Tories and their obsession with Brexit—which, of course, Labour could have stopped, but did not—that exploitation will be even worse, because the real impact of tariffs, much like Brexit, will be felt by those who can least afford it: the people who work in our distilleries, the shelf packers, the sales assistants and others like them. Labour used to stick up for those folk, but now it rides both leave and remain horses. It is all things to all people. It would rather enable a Tory Government than allow this country to take a decision for itself and choose its own path.
The Scottish Government and this Parliament must have a meaningful role in any future trade arrangements in order to ensure that Scotland’s interests are protected. We cannot leave it to Trump and Trump Jr. Scotland has an escape route, so let us seize it.
Let us be clear: I believe that tariffs are just another barrier to trade, and the Scottish Conservatives, therefore, oppose tariffs, because we want to encourage free trade.
There is seldom a winner in a trade war, and the current one between the European Union and the USA is not in the best interests of the UK economy. That is why we support the efforts of the UK Government to lobby the EU and the US to remove the tariffs, which will hurt industries across the United Kingdom and particularly some in Scotland. Let us not forget that, as others have said, these tariffs came about because the EU and the US were subsidising aircraft manufacture in a way that distorted free trade. As we know, that resulted in the US imposing tariffs on the EU, which might still respond in its own right. Let me be clear: I believe that they are both in the wrong.
As a result of the tariffs, one of Scotland’s greatest export success stories, Scotch whisky, is under threat. Tariffs of 25 per cent imposed on single malt whisky will hit the industry hard. The new tariffs could mean that sales of Scotch whisky in the US drop by 20 per cent in the first year, and it is expected that those losses in sales will get worse as long as the punishing tariffs remain in place. A drop in exports will, in turn, affect investment, productivity and, ultimately, employment in relation to the UK’s most valuable drink export. That is bad news for the industry and bad news for the economy, because we know that the Scotch whisky industry directly employs about 11,000 people in Scotland and many more through the supply chain. More than 7,000 of those jobs are in rural areas of Scotland, and many are in the Highlands and Islands.
Of course, it is not just Scotch whisky that is affected. Other high-quality goods that are produced in Scotland, such as cashmere and shortbread, will be affected as well. That is a real concern for people in the Highlands and Islands. Walkers Shortbread and Johnstons of Elgin, both situated just down the road from me, are big names and big employers in the north, and the Highlands will end up paying for this spat if we do not get it sorted out.
It is not only those companies that I worry about. I am also concerned about what the impact will be on the many small Highland businesses that supply the businesses that are facing tariffs. I declare at this stage that, as a farmer, I produce barley that goes into Scotch whisky. All those businesses operate on tight margins and, therefore, any tariffs will be damaging to their future success. If we are to grow our food and drink industry so that it is worth £30 billion by 2030, which is our aspiration, we need to work with the industry to mitigate the damage that will be caused by the tariffs.
I welcome the UK Government’s decision to freeze spirit duties for the past two years, and I am delighted to hear that the UK Government plans to review alcohol duty rates to ensure that we have a competitive tax system so that our Scotch producers can be competitive across the world. Making those changes will provide certainty and will encourage business investment, despite the tariffs. However, more should be done, especially by the Scottish Government.
Only this week, I received a letter from a whisky producer in the Highlands who asked for more help to mitigate the effects of the potential trade war. One of their main requests was for better broadband, which is a major issue for them. The Scottish Government’s roll-out of superfast broadband has been so painfully slow that some distilleries can wait no longer and have taken it upon themselves, at a high cost, to secure better internet connections.
I would not have thought that the Tory Government’s failures on broadband would be within the scope of the motion.
With regard to the motion, the member will have heard Peter Chapman say that the blame for the current situation lies with the EU because of the sanctions that it imposed in the first place. The UK is a member of the EU and was party to those decisions. Does the member agree with the UK position in that regard?
I mentioned broadband because I received a letter this week from a distillery, which is seeking more help from the Scottish Government to mitigate the effects of the EU tariffs. It asked me to raise the matter, and I think that it is a valuable point to raise.
You have raised the matter, then, but I do not think that it is particularly relevant to the motion or to the amendments, and it should not have been the main thrust of some of the contributions that we have heard.
Presiding Officer, you are of course always right. I will have to curtail my speech about the need to do more to counteract the EU tariffs. However, it is really important that the Scottish Government, along with the UK Government, does all that it can to help to mitigate the costs of those potentially damaging tariffs, which are limiting free trade, and which I think members all round the chamber would agree are wrong.
I believe that our food and drink industries and our cashmere producers want us to end this tit-for-tat trade war, and I wholly support them on that. We need to return to the zero-tariff conditions that have been enjoyed for the past 25 years, and I am pleased that the UK Government is pressing for the return of that free trade and doing its bit by freezing spirit duties and reviewing alcohol rates. I believe that the Scottish Government could do more instead of complaining, and I wish that it would.
Scotland rightly values its trading relationship with the US. A number of members have rightly pointed out the damaging nature of the tariffs that are being imposed by the US Government. I have no doubt that every member in the chamber has numerous examples from their constituency—we have heard examples such as whisky, biscuits and cashmere. I will start with a specific example from my constituency that exemplifies the importance of whisky and the futility of other people’s trade wars from Scotland’s point of view.
In 2015, the Isle of Harris Distillery Ltd opened in my constituency of Na h-Eileanan an lar. It is already well known for its award-winning gin, and it also distils whisky, although that is still to see the market as the first batches are still being matured—in American bourbon barrels, it should be said—until they reach the optimum age. The distillery started with 10 employees and now provides jobs for nearly 40 people in Harris, which—as members know—is a fragile island economy with a total population of under 2,000 people. I have little doubt that the distillery in Harris will withstand whatever the US authorities choose to throw at it, but there is no doubt that a 25 per cent US tariff on whisky from Harris, or indeed from anywhere else in Scotland, is unhelpful to individual distilleries and to the wider industry.
I am sure that I do not need to elaborate on the risks that the whisky industry faces from those tariffs. After all, Harris is just one example among more than 120 active whisky distilleries across Scotland, stretching from Orkney to the Borders. The significance of the tariffs is considerable when it is viewed in that context. Last year, £1 billion of Scotch whisky was exported to the United States—a rise of nearly 400 per cent from 1994. We do not want to see that growth held back in the future if Scotch whisky producers’ prices increase in comparison with those of our counterparts, or competitors, around the world.
The value of Scotch whisky exports to the US has grown from £280 million in 1994 to more than £1 billion last year. A third of last year’s exports were single malts, with a value of £344 million. As a number of members have pointed out, the US market in single malts is particularly important. The US market accounts for 10.7 per cent of global volumes of Scotch whisky exports, with 137 million bottles of whisky being exported to America in 2018. The fact that the new tariff applies specifically to single malt whisky hits a growing and increasingly important sector of the industry.
In the words of both the First Minister and the UK Government’s little-seen Secretary of State for Scotland, tariffs “are in nobody’s interest”. However, tariffs there are, and whisky is not the only Scottish industry that is affected by them. Other Scottish products, such as biscuits, shortbread and cashmere, are also hit by the aggressive tariff. Although it does not seem that the world-famous Harris Tweed from my constituency will face any new tariffs per se, as it is a cloth, my understanding is that the picture is somewhat less clear when it comes to garments that are made from the tweed or other woollen materials.
I could quote examples from the cashmere industry, too, but the point is that the United States tariffs have a disproportionate impact on Scotland’s economy. As we have heard, Scotland is home to the largest exporter of shortbread and the largest producer of cashmere knitwear and, by definition, it is home to all Scotch whisky production. There is therefore no doubt that Scotland is disproportionately affected by the tariffs in comparison with the rest of the United Kingdom.
Short of delving into matters of presidential ancestry, as one or two members have done, it is difficult to see exactly what Scotland, or my constituency, has done to deserve any of this. As the Scotch Whisky Association made very clear in its briefing, the tariffs mean
“that Scotch Whisky is now paying for over 60% of the UK’s tariff bill for the subsidies it provided to Airbus, eight times more than the next most valuable UK product on the tariff list.”
The whole sorry episode shows just how unhelpful Scotland’s political association with Westminster can prove to be. In this case, Scottish businesses are paying the price for that association. That is before we even consider where the UK Government might be taking us in terms of tariffs on its European adventure that lies ahead.
The Scottish Government has made every effort to engage with UK ministers on the question of tariffs, but the UK Government’s attention seems to be elsewhere, if it is anywhere at all. The trade dispute once again highlights the need for Scotland to have some say over those questions, as of course we would have as an independent country, whatever the more miserable of the amendments that are before us today may say about the issue.
Scotland values its trade with the US. Indeed, we value it too much to trust an unelected Tory Government to negotiate a trade deal with the United States for us. The tariffs make me wonder what a post-Brexit trading environment would look like for Scotland: bad for Scottish businesses, bad for Scottish jobs, bad for the Scottish economy and bad for Scotland. More widely, in the long term, it should make anyone ask whether protectionism and trade wars work for anyone, which is a question that both the White House and Downing Street would do well to consider.
Many members in today’s debate have been quite rightly critical of Donald Trump and his willingness to use trade and tariffs as a weapon of attack against any country that crosses him or does not fall into line with the world in the eyes of Trump.
One might say that trade, and the ability to trade, are what make the world go round, yet trade is not a subject that is much talked about around the dinner table or even down the pub. Indeed, trade was not an issue of widespread discussion during the Brexit referendum, but it was the right-wing Tory Party’s main goal and the main driver in its desire to get out of Europe.
The dispute that we are debating today has its roots in an argument about aircraft subsidies and is indirectly connected to steel and aluminium imports. To many observers, it is also a symptom of the protectionist, “America first” philosophy of the Trump Administration. The Office of the US Trade Representative announced the imposition of tariffs on a wide variety of imported goods from EU nations—10 per cent on large civil aircraft and 25 per cent on agricultural and other products, including single malt Scotch whisky and single malt whiskey from Northern Ireland. The tariffs are the result of a WTO judgment—the largest in its history—that the US should be allowed to impose tariffs worth just under US$7.5 billion a year against EU nations, which is linked to a trade dispute that goes back 15 years.
The 25 per cent tariff has the potential to seriously damage the Scotch whisky industry and the wider Scottish economy. Some key points are that Scotland had 280 distilling-related local business units in 2019; 23 out of Scotland’s 32 local authorities have distilling businesses present in their areas, including many wonderful distilleries across Mid Scotland and Fife.
The spirits industry contributes approximately 1.4 per cent of total Scottish GDP and the industry employs around 10,000 people. Scotland is home to 133 malt and grain distilleries, which is the greatest concentration of whisky producers anywhere in the world. That is why the UK and Scottish Governments must do everything within their power to de-escalate the situation and find a solution. Scotland’s economy and labour market are fragile enough without imposing more tariffs that could close down the country’s distillery business, forcing people into unemployment and leaving communities worse off.
This latest episode demonstrates just how fragile the global economy can be and is. The US has argued that the UK, France, Germany and Spain breached the WTO laws by providing launching aid to the European aircraft maker Airbus—hence the tariffs that are now being imposed on us. It is also the case that the EU imposed a 25 per cent tariff on imports of US whiskey in retaliation for Trump’s tariffs on steel and aluminium from China and Europe. The Scotch Whisky Association has noted that EU imports of US whiskey then fell by about 20 per cent as a result of those tariffs.
The risks for our economy are therefore very real, not to mention the risks to the production of shortbread and cashmere knitwear, which are also included in the latest tariffs that are being imposed by the US, threatening further thousands of jobs here in Scotland. As many have said, these punitive tariffs have the potential to seriously damage the Scotch whisky industry and food and textiles industries across Scotland, imposing a wider economic risk to our country as a whole. The future of companies, jobs and communities across Scotland will be put at risk by the tariffs. The average turnover for Scottish distilleries is approximately £5.3 million and the industry employs around 10,000 people; Scotland’s fragile economy and labour market simply cannot afford to lose such lucrative businesses.
Our amendment also points to the fact that the SNP has a history of supporting Trump’s approach to business. Just ask the people of Aberdeenshire, where every credible environmental group in the land was objecting to the Trump development, warning that it would destroy a protected site of special scientific interest. The SNP might not like that fact, but it is nevertheless a fact.
Finally, how can it be that the SNP is desperate to separate from our largest market, the rest of the UK, at a time when 60 per cent of our trade goes there and at a time when we are feeling directly the impact of Trump’s trade wars around the world? It makes no sense. This is an example, and Brexit is another, of why we need to be taking down walls, not building them, and breaking down borders, not building them.
It is the distillery employee, the artisan cheese maker, the textile worker and other vulnerable employees and businesses that will pay the price of this on-going trade war. As the 15-year long Airbus-Boeing saga rumbles on, businesses around Europe are reeling from the new WTO-sanctioned tariffs that were imposed by the US.
The textile industry is important for the south of Scotland—indeed, for Scotland as a whole—and it is particularly affected. There are 550 textile companies in Scotland, with 22,000 employees, and the sector accounts for 7 per cent of our exports. Of course, textiles are a hugely important sector for the economy of the Borders in my South Scotland constituency, which includes the town of Hawick, where this trade war has caused grave concern.
The Borders are a byword for luxury when it comes to cashmere and wool. Chanel, Pringle of Scotland and Lyle & Scott knitwear products are in high demand around the world, and garments from the likes of Hawick Cashmere, Hawick Knitwear, Holland & Sherry, House of Cheviot, Johnstons of Elgin, Lochcarron, Shorts of Hawick and Hawico are highly valued in many foreign countries.
I understand that David Sanderson from Hawico has been pressing hard against the tariffs at all levels of Government. However, as others have said, this is a game of hardball. The chief executive officer of the UK Fashion and Textile Association, Adam Mansell, said recently:
“Waiting for the outcome of a potential free trade agreement with the US isn’t enough. We need the government to take direct action now to support our manufacturing industry”.
Whether operating within WTO rules or not, the object of a trade tariff is to frustrate international trade and make it more difficult for exporters to send and sell abroad. The US choice of an opportunistic and relatively high 25 per cent tariff says a lot—“Play by our rules or we will hit you hard.” Consumers in the US must pay inflated prices for those goods or buy local. Of course, in the US, you cannot buy local for Scotch whisky—yet.
Although tariffs are bad news for all the businesses that are dragged into this trade war, Scotch whisky feels especially vulnerable, and it is not just a Speyside or a Highlands and Islands product. In Dumfries and Galloway, for example—which is in my South Scotland constituency—we have Bladnoch whisky in Wigtown and the Annandale distillery. Its two single malts, Man O’Sword and Man O’Words, are produced just a few miles north of the border at Gretna, and have been important for the transformation of the town of Annan, which is near to where the distillery is situated.
Scotch is unique; it is sold without peer in 180 markets around the world and US sales were worth £1.04 billion in 2018. A third of that was single malt sales, which are now subject to the 25 per cent tariff. Before Brexit was a dangerous ripple in the Tory party consciousness, in 1992, the EU introduced protected geographical indications to protect goods. As others have said, there are 18 Scottish products among the 86 protected UK food names, and a GI gives a competitive advantage and adds value. It stands for quality and authenticity, and it prohibits imitation. Of course, Scotch whisky has GI status, but for how long?
The US has long had its eye on Scotch whisky in terms of competition with its own now burgeoning whiskey market. Whiskey sales—that is, bourbon sales—are second only to those of vodka in the States. At around one seventh of the sales of Scotch whisky, US whiskey sales are enjoying a renaissance, growing by almost 9 per cent between 2017 and 2018. According to experts in the industry, sales will rise further, and bourbons and craft whiskies from around the globe are rising in popularity, too. Given this growth market, together with the trade war and the 25 per cent tariff that was imposed on US whiskey in 2018 by Europe and its trading partners, it is no coincidence that more single malts are feeling the pressure.
The Scotch Whisky Association is of the view that the new tariffs will undoubtedly damage the sector. A 21 per cent drop in single malt exports to the US would mean a drop in income from £344 million to £272 million. A lot depends on whether distillers, importers or consumers absorb extra costs, which might happen in the short term in respect of high-quality, much-loved brands. Distillers say that the smaller players will suffer, as they work with smaller US importers who do not have the financial muscle to absorb extra costs. There is a clear threat to the 11,000 Scotch whisky jobs in Scotland, particularly the 7,000 jobs in rural communities, where the impact of tariffs might be felt most.
Scotch whisky and all Scottish sectors on the tariff list face a double threat from Brexit and the trade war, which has already been running for 15 years. We will and should keep trading successfully with the US, which is what Scottish employees and businesses want. The US is the destination of 17 per cent of our global trade and exports are growing fast.
This is a bitter taster of how vicious trade wars can become. We know, as things stand, that the UK Government will not publish texts of proposed trade agreements prior to ratification, that Scotland’s consent will not be sought in UK trade negotiations after Brexit, and that Scottish parliamentary scrutiny of and power to consent to free trade deals will be denied. The Scottish Government is right to keep up the pressure on UK Government ministers regarding post-Brexit trade arrangements and ending the trade war. Ordinary Scots are under threat from Brexit and the vagaries of a Trump Administration that is intent only on putting America first.
I am grateful for the opportunity to speak in today’s important debate.
We are aware of the background to the debate. Basically, the EU and the US have claimed that Airbus, in the case of the EU, and Boeing, in the case of the US, have been unfairly subsidised by each side. It is worth noting that Airbus is owned jointly by Germany, France, Spain and BAE Systems in the UK.
Subsequent to the accusations, the WTO has upheld the claims of both sides. It has ruled that the US can impose tariffs on EU goods and, as has already been said, it is expected to rule that the EU can impose similar tariffs on the import of US goods into the EU.
The Scottish Government’s motion that we are debating is a bit of a puzzle. Quite how the Scottish Government managed to shoehorn Brexit into a debate on an EU-US trade dispute will be beyond all but the SNP’s most ardent supporters. Most people will recognise that, for the SNP, the debate is about blatant politicking, rather than tackling the serious issues that the dispute raises and finding solutions for businesses in our constituencies.
No matter how the SNP tries to manufacture a grievance, Brexit has absolutely nothing to do with the trade dispute, and it is shameful that SNP members try to misinform the public and leverage their narrow independence agenda into every debate.
I listened to Emma Harper’s “rat poo” speech. We need some reality here. There is not a chance—
Yes, the reality is in there, but that does not mean that we have to accept those standards. To trade with us, any trading partner will have to conform to UK standards, so we will not have to accept them. I tell you this—
Excuse me a wee minute. Sit down, the two of you. This should not be a wee conversation between the two of you, delightful though that might be. I am not sitting here as a passive observer, so please speak through the chair and make interventions. You may continue, Mr Whittle.
I apologise, Presiding Officer.
As I said, we do not have to accept any trading partner that does not conform to UK standards.
I say to Mike Rumbles of the undemocratic Liberal Democrats that we are on the side of democracy. If there is a vote and the majority of people vote a certain way, it is incumbent on us to accept the result of the public vote and go with the intention of the people.
I thank the member for that, because it gives me the opportunity to explain to him that neither Scotland, England, Northern Ireland nor Wales is a member of the EU—the UK is a member of the EU. The vote of every person in the UK was equal and the UK voted to leave the EU. That was not what I and the member campaigned for, but that, sir, is democracy.
As I have mentioned, the Scottish goods on which the 25 per cent tariff has been imposed include whisky and woollen goods. Members might be interested to know that every piece of knitted Harry Potter merchandise in the world is manufactured exclusively in Stewarton by Lochaven International of Scotland. I inform any Scottish families trailing around Universal Studios in Florida or any similar parks that the Gryffindor scarf that they are purchasing began life probably not too far from their house. I have visited Lochaven International a few times, as it is in my area and right next door to where I hold a surgery from time to time, and it is quite remarkable and well worth a visit.
When the current trade dispute began, the managing director of Lochaven, Colin Leishman, contacted me to flag up how it would affect him and to ask whether I would help. Business will always find a way, so Lochaven is exploring the option of registering an office in the US in order to minimise import tariffs. That is not ideal and not without a cost, but it is a solution nonetheless. I was aware that John Lamont—the MP about to retain his Borders seat—would have similar issues in his Borders constituency, so I contacted him to see what he was able to do to help bring my constituent’s concern into discussions about the dispute.
Sorry, Presiding Officer.
John Lamont shared with me a letter that he had received from the Rt Hon Elizabeth Truss, Secretary of State for International Trade and President of the Board of Trade. In that response, the international secretary made it clear that resorting to tariffs is not in the interests of the UK, the EU or the US and that the UK Government is working closely with our European partners to secure a negotiated settlement to the dispute and avoid tariffs before they really bite. Additionally, she stated that the UK Government seeks confirmation from the WTO that the UK has fully complied with the WTO rulings regarding support to Airbus and that it should not be subject to additional tariffs.
I will in two seconds.
The international secretary further stated that the issue of tariffs has already been raised at the highest levels of the US Administration. Ms Truss has been in discussions with US Trade Representative Lighthizer, Secretary of Commerce Ross and Vice President Pence. The Chancellor of the Exchequer raised the issue of Airbus tariffs with US Secretary of the Treasury Mnuchin and the Prime Minister raised the issue with President Trump during his state visit in June.
This is the second time that I have noted a kind of sleight of hand whereby Conservative members imply, by indicating that somebody is having a conversation about the issue, that somehow the UK is not liable to pay the tariffs. The reality is—the member should know this, and he should go and check it if he does not—that along with the rest of the EU members, the UK is liable for the tariffs that the US has imposed. It was the US that decided which countries and products it would place tariffs on, which was done precisely because those countries are involved in the Airbus subsidies.
I would have thought that the minister would understand that the UK is compliant with WTO rules and the other EU countries are non-compliant, but we are being lumped together. That is a fact. I would have thought that the minister would know that.
Throughout the current trade dispute, I have been able to keep my constituent apprised of the action that is being taken to address his serious concerns. That is how we work effectively and collaborate with colleagues to leverage solutions.
Whether we are in or out of the European Union, the issue remains the same. This debate is an absolutely shameful attempt by the ineffective Scottish Government to shift attention away from its failings in this parliamentary session. What happened to its commitments to education, health and justice? As was said only last week, where are the Government debates on those issues? Week in, week out, by its own actions, the Government is showing its true colours, because no matter what the issue, it seems that independence is the only solution. The SNP hides behind that mantra to avoid scrutiny and responsibility. The Scottish Conservatives will continue to seek a viable solution with our colleagues in Westminster for the sake of all our Scottish industries affected by the current trade dispute. That is what standing up for Scotland’s interests really looks like.
I remind members that I am the co-convener of the cross-party group on Scotch whisky.
Whisky is worth nearly £5 billion in annual exports and accounts for 70 per cent of Scotland’s food and drink exports and 21 per cent of Britain’s. The US is the largest single market, with more than £1 billion of whisky exported there last year, including £344 million of single malt whisky. As others have said, our whisky industry faces US tariffs of 25 per cent as a result of the World Trade Organization dispute between the EU and the US that began in 2004 and relates to aircraft subsidies paid by EU countries, including Britain. The WTO issued its final ruling last month, stating that the US can be authorised to apply tariffs worth $7.5 billion annually on the EU countries that subsidise Airbus, which are the UK, France, Germany and Spain.
Scotland’s whisky industry, which has been exporting tariff free to the United States since 1994, is being caught up in a dispute that has nothing to do with it. Not only that, but Scotland’s whisky industry is paying more than 60 per cent of the UK’s tariff bill for the subsidies that it provided to Airbus and, as Alasdair Allan said, the bill for whisky is eight times more than that for the next most valuable UK product on the tariff list.
That comes at the same time as the industry is facing potential access barriers or tariffs in the EU as a result of the Tory Brexit shambles, which has created the biggest threat to the economy of Scotland and the UK. It is taking us out of the single market, which is eight times the size of the UK market. The EU region has 500 million people who currently purchase £1.4 billion-worth of our whisky. The result of our removal from the single market and the imposition of US tariffs is a double whammy for the whisky industry. Access to two of its biggest markets are being undermined by decisions of the previous Tory Government.
So concerned is the spirit sector over US tariffs that 15 beverage alcohol trade associations from across the world, including the American Distilled Spirits Association and the Wines and Spirits Wholesalers of America, signed a letter that was sent to the EU Commission and the Executive Office of the President condemning the imposition of tariffs on Scotch whisky. Those associations warned:
“As a result, these new US tariffs on EU spirits and wines could result in the loss of 8,000 good-paying jobs across the US beverage alcohol sector, from importers, distributors, wholesalers, to the hospitality sector.”
If that is the potential impact in the US, we need urgent action, whenever the new UK Government is formed, to protect our rural economies. The letter continues:
“This open access to each other’s markets has significantly benefitted EU and US distillers, vintners, farmers, and the hospitality industry on both sides of the Atlantic, resulting in increased jobs, community investment and consumer choice.”
Scotland has benefited from increased investment to try to meet the demand for whisky, with seven new distilleries starting production in 2017, another four opening in 2018 and a further five beginning production this year, with many more in the pipeline for next year. Will that level of investment continue, given the impact of American tariffs and Tory Brexit? Will we lose market share? Who knows?
However, we know that the major owners of Scotch whisky are already investing elsewhere. Ireland is excluded from the new US tariff rules and has in recent years been increasing its whiskey output. In 2013, there were only four operational distilleries there, but this year, the 24th operational Irish whiskey distillery—the Killowen distillery in County Down—was opened. Sales of Irish whiskey increased by 39 per cent between 2013 and 2017 and, in 2018, the value of spirits exports from Ireland exceeded €1 billion for the first time.
Who is funding that expansion in Ireland? Diageo, which is the world’s biggest whisky producer, with malt whisky distilleries across Scotland producing Glenkinchie, Cragganmore and Talisker, to name but a few, is to launch a new premium whiskey distillery at St James’s Gate in Ireland. With 10 distilleries, including anchor brands Glenlivet and Aberlour, Pernod Ricard is the second largest Scotch whisky producer in the world. It recently announced that over the next two years, it will invest more than €150 million in Irish Distillers’ Midleton distillery in Cork and a bottling plant in Dublin.
The Scotch Whisky Association said in its press release:
“We ... expect to see a negative impact on investment ... in Scotland, and longer term impacts on productivity and growth across the industry and our supply chain.”
Bearing it in mind that it has taken 15 years to get to this point, we need to find a solution to the trade dispute over Airbus as quickly as possible. Our market share is under threat from other countries.
The US trade representative is legally obliged to review the retaliation list after 120 days and, thereafter, every 180 days. That presents an opportunity for the tariffs on the affected products to be lifted.
The previous Tory Government proved to be unable to protect a vital Scottish export industry. Therefore, to ensure that Scotland’s interests are protected and promoted, the Scottish Government and Parliament must have a meaningful role in the development and agreement of any future trade arrangements.
If there is a bright side to the debate, it is that it has given members a platform to advertise the excellent products that come from their constituencies. Almost every member who contributed spoke about their area and its products. However, the downside was that the debate has showed starkly how much of Scotland is impacted by the tariffs. If everyone in the debate was speaking about companies that are impacted, that shows the degree of difficulty that we face.
The importance of de-escalating the situation was highlighted by Alex Rowley and many others in the debate, including Gordon MacDonald, who just made that case. Escalating the situation hurts us all, so we need to find a way of de-escalating it and getting the tariffs removed.
Whisky bears the brunt of the tariffs, so it is not surprising that most members talked about it. David Stewart made the point that the tariffs disproportionately impact small distilleries, because they produce malt whisky rather than blended whisky, which is not affected by the tariffs.
Many small distilleries are springing up all around Scotland. As I said in my opening speech, they produce gin at the moment, but they will produce malt whisky. They are creating jobs in many small communities. Alasdair Allan talked about one that is close to my heart, Isle of Harris Distillers Ltd, which is producing wonderful gin at the moment, and will go on to produce wonderful whisky. It employs 40 people, which in a small place is a huge number of high-quality jobs. As Alex Rowley pointed out, 10,000 people in Scotland are employed in the whisky industry. It is wrong that the industry is bearing the brunt of the UK’s liability. Peter Chapman pointed out that 62 per cent of the liability for the whole of the UK is borne by Scottish whisky.
A number of members made the point that malt whisky is matured in bourbon barrels, which are bought directly from the US. That illustrates how strange the tariffs are. They will directly impact bourbon producers in the US, because they will lose some of the market for their barrels. The point was also made that the EU has placed tariffs on bourbon, which was highlighted by the Scotch Whisky Association in its briefing for the debate. The SWA has continually campaigned against the tariffs and has sought their removal, so it is unfair for the association to be caught up in that. That point has been made in the debate.
Dean Lockhart and Edward Mountain talked about the Conservative Party’s plan to review taxes on whisky. I have a number of questions about that. How would what is planned for whisky interact with the sale of other spirits? What is the policy’s purpose? Is it to help producers to gain or increase market share, or is it to help them to make their product more affordable, so that people drink more whisky? Malt whisky is a luxury good, so lowering its cost relative to the cost of other spirits could damage its reputation. We do not want to encourage people to drink more alcohol and we do not want to damage malt whisky’s reputation as a luxury good. I look forward to hearing how the Conservatives’ plan would work. It makes for a good soundbite, but I am not sure that the issue is so simple.
Members talked about other support that should be available to whisky distillers, some of which could have an impact in areas that are not affected by the tariffs. I am thinking about improved broadband. I also make a plea for improved ferry services, especially to places such as Islay, which has a huge number of distilleries and depends on ferries.
The tariffs have an impact on not just whisky but biscuits, foodstuffs, wood products and even Harry Potter scarves. Companies that produce all those things might not be impacted to the degree that whisky is impacted, but their businesses will be damaged.
The Labour amendment mentions Trump. Alex Rowley talked about the Menie estate business, which should have warned us about how Trump operates. The Scottish Government should have been really wary of doing business with him, instead of rolling out the red carpet.
Bruce Crawford pointed out that Trump will negotiate with the UK only if we have a no-deal Brexit, which would be a dangerous situation for us to be in. Jenny Gilruth quoted Trump as saying that trade wars are “easy to win”. Of course they are easy to win, for the largest market. That should warn us very much about doing business with Trump, given how he operates.
The debate was about trade tariffs, but Brexit came up often. There is no doubt that Brexit will damage our trade. Uncertainty is already having an economic impact. Brexit will not be done by 31 January—there is no way that it will be done by then. There will be years of negotiations to dig ourselves out of the EU and to develop a new relationship with it.
It will be important to develop trading relationships. As David Stewart pointed out, we will need to negotiate trade deals with countries that are expert in negotiating their own trade deals; we have depended on the EU to negotiate for us. It is not going to be as easy as people think, especially as we know that WTO rules are no safety net.
The whole Brexit saga should sound a warning to those who seek to break up the UK. How on earth can the SNP not see that?
The debate has taught us about the importance of trade and about the need to be able to trade as freely as possible while maintaining the standard of the products that we take in.
Most members can find common cause on tariffs, if not on all the issues that have been raised in the debate. When it comes to international trade, I think that most of us can see that the imposition of tariffs, quotas and countertariffs on goods benefits no one.
The United Kingdom has long been a champion of free trade on the global stage. The ability to trade freely has not only created jobs and built prosperity, but has aided the creation of a truly international marketplace for ideas, collaboration and progress.
We are extremely disappointed by the US approach to the issue. On the European side, the UK Government has been sincere in its attempts to bring support for industry into a state of compliance with WTO rules. Our European partners and the United States should all be working to achieve compliance and to ensure that trade continues to flow.
The WTO is expected to make a ruling in a few months. In the meantime, we should avoid escalating the dispute. That goal has been the subject of high levels of engagement between our Government and the American Administration, including the Prime Minister and the US President. Their predecessors were involved in similar discussions about the dispute.
The tariff that was discussed most today was the one on Scotch whisky, which is understandable given the position of the sector in Scotland. Scotch whisky has been a great Scottish success story, alongside our wider Scottish and UK food and drink sector. My region, the Highlands and Islands, produces many of Scotland’s finest malts, including those from Speyside and the islands.
Exports of whisky to the United States are worth around £1 billion, and single malts represent a significant proportion of that figure. The US currently accounts for more than one fifth of all Scotch whisky exports from this country. The industry can ill afford high tariffs; its model largely relies on small and medium-sized businesses operating distilleries. However, it employs about 11,000 people and the knock-on benefits of the industry to Scotland are even greater.
We have also heard about the impact that tariffs will have on goods including shortbread—which is produced, notably, by Walkers in my region—Scotland’s cashmere exports, which are another noted Highland export, our cheeses and other goods.
Of course, the main point of dispute, which is the aerospace industry, will also be affected in the UK. That matters. For too long, there has been a lack of internationalisation of Scotland’s businesses, with too few being supported to export and many finding barriers to becoming significant exporters. In Scotland, we should be seeing greater co-operation between business, our enterprise bodies, and the Department for International Trade, in order to ensure that exporting is as simple a process as possible.
Dean Lockhart spoke about some of the issues that have been raised in the cross-party group on the USA. He also acknowledged the Scotch Whisky Association’s figure that exports of single malt to the US could fall by 20 per cent a year if the tariffs continue to operate. That would be a considerable cost to the sector. He also touched on a number of practical steps that the UK Government and Scottish Government could take to mitigate some of the pressure on the Scotch whisky industry, if tariffs are not removed.
Rhoda Grant highlighted the potential impact on our Highlands and Islands region, and David Stewart rather bravely wandered into the age-old Orkney debate about Scapa or Highland Park. All I will say is that they are both excellent when drunk in moderation.
Peter Chapman spoke about the impact of the tariffs on the north-east, and the UK Government’s freeze on spirit duty. Edward Mountain, my fellow Highlands and Islands member, also touched on that and on measures that have been taken to support the Scotch whisky industry, which is so important to our region. Many of those measures could and should have been taken already. Unfortunately, whisky suffers from many of the problems that are faced by other businesses in remote and rural areas of Scotland. Serious investment in infrastructure must be made, including in rural broadband, to help businesses to operate globally, and to drive down production costs.
Edward Mountain also examined some of the areas in which the UK Government has been actively promoting and supporting Scotch whisky in recent years. The Prime Minister has announced a review of alcohol duty rates. That was a key ask from the Scotch Whisky Association, so the review has been welcomed. The United Kingdom Government also hopes to provide more certainty with a multiyear plan for the future of alcohol duty as we leave the EU.
Mike Rumbles spoke about his opposition to Brexit. I believe that he is genuine and I accept his position, but he must remember that the referendum on our membership of the EU was Liberal Democrat policy for a long time, and the Liberal Democrats voted for the referendum bill.
Brian Whittle spoke about his area, the home of much Harry Potter merchandise, and nailed his colours to team Gryffindor, which I thought was brave.
Will the member accept that it was the UK Government that put a leaflet through everybody’s letterbox that said that it would implement the result of the referendum, but the bill that went through Parliament was advisory, so Parliament was not committed to it, obviously?
I will move on.
The tariff situation highlights the importance of a clear and open approach being taken to international trade. Tariffs and quotas are in nobody’s interests. Breaking down barriers to trade benefits us all.
We must not find ourselves drawn into disputes that are seen as zero-sum games, with one nation raising tariffs and others countering them with their own tariffs. That harms all parties, which should be foremost in our minds as Britain sets out to create new trade agreements around the world.
That is why the SNP has tacked a sentence attacking Brexit on to today’s motion. That was rather crass and opportunistic, and it belittles an issue of real importance to businesses across Scotland. The dispute is between the United States and the European Union, but it is one in which the United Kingdom and Scotland have been caught. We do not want a battle over trade; we want to work together to resolve the dispute that has given rise to the tariffs, and we want the tariffs to be consigned to the dustbin as soon as possible.
I welcome the support shown by most members across the chamber for companies affected by these tariffs. The main substance of this debate was well expressed by various members who pointed out the extremely serious impacts that these tariffs will have. They were right to do so. David Stewart did so at length; Dr Allan did so; Bruce Crawford did so; and Ed Mountain in the first part of his speech chose to do so—and that is quite right because this is a very serious situation.
I am pleased that we have had the opportunity to debate it, because I know from my discussions with companies, which I will come on to shortly, that this is a very serious threat to many businesses, mostly in the rural economy in Scotland. Those cover, as members have said, some of the most iconic and important sectors of our economy and touch just about every part of Scotland: the distilleries and bakeries of Moray; the rural cheese makers and island distilleries; the bottling plants and warehouses in Glasgow; and the textile workshops in the Borders.
I am particularly concerned about the impact of the tariffs in remote and rural communities. That concern was expressed across the chamber and we heard how many products found on shelves all over the world are manufactured in towns and villages across rural Scotland. So, it behoves us all to emphasise just how important the issues that we are debating are to our people, our businesses, our society and the communities in our rural and island Scotland.
It is also worth stressing something that was perhaps not mentioned as much as I thought it might be—just how important our trade relations are with the USA. We have had a long history in our relationship with the USA, between citizens and between businesses, with trade, exports and imports. Mr Crawford pointed out that the expansion of exports of Scotch whisky to the USA has been a dazzling success and a tribute to all those involved. So, too, have been our salmon exports and aquaculture. With £5.5 billion overall of exports in 2017, the US is our number 1 market for export growth.
Links between Scotland and the US could not be stronger in terms of trade and business. Morgan Stanley employs 1,100 people in Glasgow. Hewlett-Packard has been in Erskine for 25 years. GE/BakerHughes recently created a new centre of excellence in Montrose with 100 new jobs. I recently revisited LifeScan in Inverness for the umpteenth time—David Stewart has a connection with it, too, and he and I both know how important it has been as possibly the largest private sector employer in the Highlands. I know from my discussions with US managers and owners of some of these companies how much they value doing business in Scotland. Scotland is a great place to do business. Therefore, I thought it sensible to place on the record a sentiment that I hope is shared across the chamber—that although there is a very difficult and dangerous dispute, behind it is a much stronger connection, which will and should persist.
I did a little research on my own, and I found that Mike Pence, vice-president of the United States, said:
“America wins when we trade and export and import.”
Therefore, I hope that, in the resolution of this dispute, that longer view will prevail. I understand from my officials that litigation is on-going, so there is an opportunity for there to be prompt resolution. Obviously, we all wish that the negotiations about that are conducted as quickly as possible.
This debate is about trade tariffs imposed by the USA. It is also perfectly legitimately about trade tariffs that would result from a no-deal Brexit, so it is right that we look at EU tariffs. The impact of the EU’s tariffs would be considerable—they would be about 65 per cent on fresh boneless beef and 53 per cent on fresh boneless lamb, for example.
The UK’s proposal to remove import tariffs on eggs coming from the Ukraine, for example, would wipe out the sector in one fell swoop. I recently had extensive discussions with British egg producers’ representatives about the issue. That situation would leave egg producers here—who produce to higher welfare standards—vulnerable to cheaper imports, which could lead to consumers unwittingly eating eggs and egg products that are produced to lower welfare standards. That real fear was expressed by Emma Harper in her speech, which was absolutely relevant. I was pleased that the Presiding Officer confirmed that it was relevant, contrary to another member’s assertion.
The member is absolutely right. Just in case any members think that I am describing inaccurately the position of the US on those matters, I will read from the US’s published negotiating objectives for a no deal. It wants to
“Establish a mechanism to remove expeditiously unwarranted barriers that block the export of U.S. food and agricultural products”.
That is US policy. That is exactly what Emma Harper warned us about. I submit that that negotiating objective could not be more telling.
I heard what Brian Whittle said with great interest. Earlier, reference was made by one of his front-bench colleagues to Liz Truss, who has ministerial responsibility in the UK Government for international trade. She is on record saying that she wishes to remove regulatory impediments and move towards the kind of trade that would not do what Mr Whittle wants—indeed, it would do exactly the opposite of what he said. The issue is a matter of open public dispute between UK Government ministers, at least according to newspaper reports.
Our position is very clear. The matter is of growing importance, and farmers, particularly in Scotland, are becoming concerned. One of their main concerns is that we will be flooded with meat imports from countries that have little in the way of provenance and scant regard to animal welfare.
I have seen no evidence at all that the UK Government has done anything to prevent that from happening.
I welcome the opportunity to highlight the predicament that faces people such as Jim Walker, who is the managing director of Walkers, and those in the whisky industry and our cashmere sector, in standing against the unwarranted tariffs that have been imposed by the USA. I congratulate Mr McKee on his unstinting efforts to raise Scotland’s case in America, in London and here, and I wish him success in those efforts.