The TTIP of the trade iceberg

17 Dec 2014

At the Scottish Parliament's European & External Relations committee last week, I had the opportunity to participate in an interesting and often lively debate on the importance of the EU-US Transatlantic Trade and Investment Partnership (TTIP). 

The SWA attaches a high priority to ensuring that free trade agreements (FTAs) deliver benefits to the whisky industry.  TTIP therefore matters to Scotch but not perhaps in the most immediately obvious of ways. 

The USA is already Scotch Whisky's largest export market by value, with annual exports of over £800 million.   Around £1 in every £5 in Scottish exports to the USA is accounted for by whisky.  Scotch already benefits from a zero tariff, a reasonable and non-discriminatory excise duty, and robust legal protection. That suggests that further EU-US trade liberalisation is likely to deliver only modest direct commercial benefits. 

There are benefits to be gained however.  The removal of remaining border fees on whisky would save around £4 million a year.  Even more significant is the chance to secure improved regulatory coherence, setting globally relevant rules for labelling, certification and testing of spirit drinks.   Industry on both sides of the Atlantic has jointly proposed a 'spirits annex' that has the potential to reduce import costs, complexity and uncertainty, which would be a particular boost to SMEs.   The aim is that this would be backed by more robust dispute settlement procedures. 

Yet there is, frankly, a bigger picture and a long-term view is necessary.  An ambitious TTIP would set an important precedent, creating a gold standard for future FTAs in markets where trade barriers are more commercially significant.   Indeed, our experience is that TTIP is already having a positive impact on the wider environment. 

There is an argument that TTIP helped to kick start talks that led to a WTO trade facilitation deal which will make it easier to clear goods through customs and ports.  TTIP has also refocused other countries on trade, getting the EU-Canada agreement over the finishing line, whilst encouraging Brazil to look again at dormant EU-Mercosur talks.  Equally, Mexico is now keen to secure an improved 'next generation' FTA with the EU.   This matters at a time when the industry could benefit enormously from deals with the likes of India and Vietnam. 

Finally, TTIP is not the only game in town.  The USA is also negotiating with its partners along the Pacific Rim and a failure to conclude an ambitious TTIP would likely place EU exporters at a competitive disadvantage in relation to these countries. 

Any trade negotiation throws up uncertainties.  That is the nature of negotiation.  However, as the discussions over TTIP evolve, it is worth remembering that it is just one part - if an important part - of a wider FTA landscape that could have significant implications for whisky's future growth.

David Williamson, SWA Government & Communications Director