UK Government Pressures US to Rethink Its Plan of Imposing Tariff on Scottish Whisky
Sun, April 18, 2021

UK Government Pressures US to Rethink Its Plan of Imposing Tariff on Scottish Whisky

The US has announced its plans to impose a 25 percent tariff on various European products. / Photo by gopixa via 123rf

 

The British government is putting pressure on the United States in the hope that it will rethink its decision of imposing tariffs on Scottish whiskey. This is according to the UK trade minister Liz Truss, as reported by Reuters.

The US has announced its plans to impose a 25 percent tariff on various European products, including the single malt Scottish whiskey after it was given a go-ahead ruling by the World Trade Organization as its form of retaliation for illegal EU subsidies to airplane maker Airbus.

 

The Airbus-Boeing WTO dispute

In the nearly 115-year-old legal battle, both the US and the European Union claim that their respective airplane manufacturer is unfairly subsidized. Airbus is a European multinational aerospace corporation while Boeing is an American multinational corporation that designs, manufactures, and sells airplanes. German-based news platform DW has reported that it was the United States that first filed a case in 2006 with the WTO, claiming that Airbus had received €19.4 billion (US$22 billion) illegal subsidies. Airbus is jointly owned by Britain, Spain, France, and Germany’s BAE Systems. US officials have estimated that the illegal subsidies resulted in an economic benefit of over $200 billion.

 

WTO’s $7.5 billion ruling against EU’s Airbus

In a countersuit, the EU alleged that it was Boeing that received $23 billion in subsidies from the United States for research and development projects. After years of appeal, countermeasures, and calls for a settlement, the WTO body has formally authorized the US to impose trade sanctions of as much as $7.5 billion worth of EU goods and ruled that EU’s Airbus received illegal subsidies and hindered the sales of US rival Boeing. As a result, the Trump administration wanted to impose sanctions on the UK.

 

The Trump administration wanted to impose sanctions on the UK. / Photo by W.Scott McGill via 123rf


The trade countermeasure against EU

The tariffs recently announced by the office of US trade representative Robert Lighthizer are expected to affect winemakers, olive growers, and small firms in Europe. Even the EU agriculture ministers have already warned that smaller food growers in their country will experience a decline in their revenue and a possible fight for survival.

Lighthizer said that after 15 years of litigation, the WTO has finally confirmed that the US is “entitled to impose countermeasures.”

Meanwhile, UK trade minister Truss shared with the parliament that she already made it “very clear” to the Americans that it will not be helpful in terms of their relationship with them if the tariffs will be placed in such an “iconic industry.” This is why they are also “putting as much pressure” on the US while they are also looking for other measures to help the European industry.

 

How much will the tariff hurt the sales of Scotch?

Undeniably, Scotch whiskey is one of the most famous exports of Scotland to the US. The Scotch Whisky Association’s analysis showed that its exports to the US last year amounted to £1 billion (US$1.3 billion). Out of such an amount of Scotch exports, 33 percent comprise single malts. The United States likewise accounted for 10.7 percent global volumes and 22 percent global value of Scotch whiskey exports. While it is not easy to estimate how much the US tariff would hurt the sales of Scotch as well as the whiskey producers, Britain is aware that the industry employs about 11,000 people.

 

 

The import sanctions will also affect other products, including Spanish olives, French wines, and Italian cheeses. The agriculture minister of Spain, Luis Planas, said in an interview with CNBC that they are worried because the agri-food sector, which has nothing in common at all with the air industry, is affected because of the US tariff. Scotch Whisky Association's chief executive Karen Betts commented via BBC that they need the Scottish and the UK governments to join forces so distillers can "weather the storm."

The British Prime Minister Boris Johnson has also urged US President DonaldTrump not to push through with the tariffs in a phone call but hopes were receding. Scotch Whisky Association’s director of strategy and communication Graeme Littlejohn explained that if US tariffs do come in, it is important that the UK government has a strategy so that the tariff will be removed the soonest possible time. Littlejohn also urged the Scottish and the UK governments to support even the smaller distillers because they would receive the worst hit.

 

UK trade: July 2019

According to the UK's Office for National Statistics, the country’s independent producer of official statistics, the import of goods fell from £14.1 billion (U|S$18.15 billion) to £119.5 billion (US$153.84 billion) in the previous three months up to July this year. On the other hand, the total trade deficit both of goods and services widened to £43.2 billion (US$55.62 billion) in the 12 months to July. 

Meanwhile, the trade in services surplus slightly narrowed to £26.4 billion (US$33.99 billion) in three months to July. The decline in services imports was also offset by exports. The office estimated the UK trade flows by compiling the internationally agreed-upon standards.