Beware of angry Scots

British Industry on US exchanges

Beware of angry Scots

by Pininvest Analysis

As reported by the Greenpeace investigation on Unearthed in December ‘17, ‘informal’ discussions between the UK Department for International Trade and their US counterparts have gotten underway, highlighting some key issues

By common agreement, exchanged information, papers and discussions will be classified as either “sensitive” or “confidential”, making it well-nigh impossible to keep abreast of the terms of any future agreement

  • In principle, the Department’s push for discretion is understandable because the UK cannot transact any trade agreement with third countries as long as Great Britain is part of the  European common market
  • Also, the complexity of free trade agreements does not lend itself to glaring publicity as long as painful compromises have not been reached

However, the approach makes a pantomime of the widely publicized commitments of the UK government, and of Mr. Fox, Secretary of State, to work in full transparency – a promise no official should ever be making

The initial contacts confirm the hurdles of UK-US trade negotiations, as documented recently by Ed Balls and reported by many others

  • The UK cannot rely today on competent trade negotiators because the complexity of trade has been subcontracted to the EU Commission for Trade for decades. Describing the first meeting between Mr. Fox and his US counterparts deadpan, Unearthed reports on a 27-strong UK delegation lacking any expert with substantial trade discussion experience, facing the US 77-strong team including at least 20 experienced officials
  • Unsurprisingly, the contacts focused on agriculture, a perennial US trade bugbear and – as widely assumed – on non-trade barriers, in most negotiations the critical stumbling block. We will not make the case – after many other more proficient commentators – about the wide difference between European anathemas and US proponents of chlorine chickens, GM food and biotech seeds, pesticides, hormone and antibiotic growth promoters or animal byproducts (abattoir offcuts and waste) recycled in animal foodstuff


Of special interest in our opinion is an excerpt of the US 2018 National Trade Estimate Report on Foreign Trade Barriers, prepared by the Office of the United States Trade Representative, page 166 (pdf page 173) which has the Scotch Whisky Association up in arms and lends itself to more general conclusions

Whisky since 1887 Scotland
Whisky since 1887 Scotland

Quoting from the US report - Distilled Spirits Aging Requirements

“The EU requires that for a product to be labeled “whiskey” (or “whisky”), it must be aged a minimum of three years. The EU considers this a quality requirement. U.S. whiskey products that are aged for a shorter period cannot be marketed as “whiskey” in the EU market or other markets that adopt EU standards, such as Israel and Russia. The United States has a long history of quality whiskey production, particularly by micro-distillers, which has not entailed minimum aging requirements, and views a mandatory three-year aging requirement for whiskey as unwarranted. Recent advances in barrel technology enable U.S. microdistillers to reduce the aging time for whiskey while producing a product commensurate in quality. In 2017, the United States continued to urge the EU and other trading partners to end whiskey aging requirements that are restricting U.S. exports of whiskey from being labeled as such. “

Unsurprisingly, the Association firmly expresses its support for current EU legislation to which the Association has been a direct contributor

To wit, quoting a communiqué

EU rules impact on almost every facet of trade in Scotch Whisky. EU laws on spirits definitions, labelling, geographical indications, bottle sizes and the movement of excise products, together with the EU's trade policy agenda, have meant that the Scotch Whisky Association has long been very active on EU policy

3 comments seem warranted

  • Parties involved in every aspect of trade negotiations, on the UK side, require a full-fledged governmental effort to involve British stakeholders and their representatives. The Brexit papers of the Whisky Association demonstrate their ‘activity’ in the drafting of EU policy and logically, their involvement in any future regulatory framework should be at least as high. This does not appear to be the case today
  • Any change to the existing regulations, as required by US Trade and accepted by the UK, might allow freer trade between their 2 markets but the EU would continue to impose its existing regulations on any whisky imports from the UK (with or without additional duties), forcing the Scottish Whisky distillers to maintain their current – more expensive – production requirements. This would not exactly be a ‘level playing field’ with potentially cheaper US imports
  • Less frequently highlighted is the risk future EU-US trade negotiations might entail : the European trade commission would have no obvious reason to maintain the current high standards of Scottish distillers and could, as a ‘bargaining chip’ accept to open the EU market more widely to US whiskey (with an ‘e’) imports… Literally, the worst of all worlds for Scottish sales on their key European markets

As probably thousands of products are involved and currently aligned on EU requirements, which they contributed to define, from protected designation of origin, which safeguards products such as Cornish pasties or Melton Mowbray pork pies, to multi-layered food regulations, the prospect of successful trade agreements is dire

Mrs King's Melton Mowbray pies
Mrs King's Melton Mowbray pies

 

Pininvest Analysis

Pininvest Analysis

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