Scotch Whisky: powerhouse in Europe

26 Jun 2014

I was happy to be back in Brussels this week, my old stamping-ground when in government.  I was speaking at the launch of SpiritsEUROPE'S brochure on the importance of spirits exports to European prosperity. 

Its title says it all, Spirits: a European powerhouse for trade.  The keynote speaker was the European Commissioner for Trade, Karel De Gucht.  Also on the panel, compered by Paul Skehan, SpiritsEUROPE'S director, were my opposite number in France, the head of the Cognac association (BNIC), Catherine Le Page, and Hosuk Lee-Makiyama, from the think-tank ECIPE.  

All of us in our different ways underlined the success of the European spirits sector.  Over the decade to 2013, European spirits exports outside the EU doubled to €10 billion, making them the EU's most valuable agricultural export.   Scotch Whisky represents about 40% of this total.  We also underlined the sector's capacity to carry on increasing exports significantly over the next five years, and stressed how important it was for the incoming European Parliament and Commission to carry on supporting a positive trade agenda. 

I said the following about the success of the Scotch Whisky industry over the last decade:
1.  We currently export €170 of Scotch Whisky every second from the UK, with about €100 going outside the EU, and that proportion growing.   The growth in our exports tracks growth in emerging markets, and even in difficult markets our record is good.  For example, in India our exports increased by 12% last year, despite all the barriers and a 150% tariff; Brazil is our 10th biggest market, with exports up by nearly 20%.  And in Nigeria, although exports are still well below potential, we saw them increase by over 40% last year.  Getting fuller and freer access to these markets is vital if we are to continue to succeed.
2.  We have succeeded because:
- we make a long-term commitment.  Scotch Whisky companies have had a presence in the main emerging markets for years.  They know local preferences and networks and can work with them.  They have invested in high-reputation brands that appeal to aspirational consumers.
- we protect our reputation.  We've made a determined effort to make sure Scotch Whisky is produced to high and rigorous standards, in Scotland.  We've determinedly chased down fakes and products that, by implication, suggest they are Scotch Whisky when they are not.  Over a long period, this pays dividends.  Just as German machine tools command a premium and are sought by customers, so is Scotch Whisky from Scotland. 
- like the rest of the spirits industry, we've used trade policy mechanisms to get results.  We were a pioneer in getting trade deals through bilateral EU agreements, for example the Spirits Drinks agreements with the US and Mexico.  We press when necessary for the use of WTO and single market enforcement mechanisms.  In all this being able to work closely with both the Commission and British Embassies is vital. 
3.  But we could do more.  On what basis?
- The potential of EU Free Trade Agreements is not yet fully developed.  The EU's FTA negotiations started off ten years ago as an emerging markets programme, to help improve the business environment in those countries and deal with behind the border barriers.   In practice is has become a developed markets programme, with deals concluded with developed economies like Korea, Singapore, and Canada, and with the most live negotiations with the US and Canada.  Meanwhile, progress is slow on major emerging market talks such as with Mercosur, with SE Asia, and with India.  We hope the new Commission will give new energy to these vital negotiations.
- FTAs also need to actually generate free trade.  We are disappointed that alcoholic drinks were excluded from liberalisation in the West Africa EPA and perhaps will be from other EPAs too. 
- There could be more creativity in trade negotiations.  The EU/US TTIP is potentially an excellent example here, with the proposed Spirits Drinks Annex to set out best regulatory practice as an example to others. Moreover, the TTIP will enshrine the Commission's excellent idea of a "living agreement", ie providing a framework to negotiate issues that don't make it into the initial deal.  This too could be a model.  With our biggest partners, we could aim at continuous negotiating processes providing periodic agreements, rather than big bang deals.  This would mean that sectors not in an initial agreement could still look forward to the prospect of liberalisation, rather than, as now, losing it for a generation.  
- Finally, we'd like to see DG Trade getting more resources.  The scope of its work has expanded massively in the last few years, and resources have not kept pace.  The Commission needs to be more rigorous in moving people from low to high profile areas, and be more willing to take in staff from Member States on a temporary basis to help get things done.  

David Frost, Scotch Whisky Association chief executive

You can read the brochure here: