Looking forward after Brexit

03 Aug 2016

It is only just over a month since UK voters made the seismic decision to vote 'leave' in the referendum. A huge amount has changed since then and it is almost as if a decade of politics has been compressed into a few weeks. Meanwhile, business has been watching, waiting for things to settle down - and preparing for what comes next.  Certainly at the Scotch Whisky Association we have been busy consulting with all our members and other business leaders, meeting with government officials, and talking to Parliamentarians, as I did at Holyrood on 28 July, to try to get a sense of what Brexit will mean for us. 

I personally spent much of my diplomatic career negotiating in the EU and I know only too well the mammoth task that now awaits the UK Government in detaching itself from these existing arrangements. So these will be challenging times and we are looking carefully at the consequences of the vote. 

But there are also opportunities. Before the referendum I said repeatedly that we refused to be catastrophist about a Leave vote and indeed we are now focusing on the potential new prospects for us. One thing we can be sure of in all this, I believe, is that the Scotch Whisky industry will continue to be the international spirit of choice. We have been around as an organised industry for two centuries and been through much turbulence in that time. Yet we have continued to grow and to succeed. We will do in the future as well. 

For us this is about trade. Britain exports £4 billion of Scotch Whisky annually and, because we import so little, Scotch is in fact the country's biggest single net goods exporter. So our performance has an impact upon the entire UK economy.

What I see as reassuring for the industry is that many things will not change. Scotch will not face a tariff on exports to Europe: the EU's current external tariff is zero and that cannot change. Moreover, in most global markets tariffs will not change. In many they are zero now and will remain so, including in our largest, the USA. In others, although they are high and problematic, for example India with its 150% tariff, Brexit will not change that.  And we will still have the means to fight against fakes in the EU and beyond.

In some markets the situation is less positive. One of our biggest challenges is the unavoidable fact that Brexit is likely to mean the UK will lose access to the EU's Free Trade Agreements. In a small number of countries this will increase the tariffs we face: for example in Korea the tariff will go back up to 20% from the current zero.  There will be similar changes in places like Colombia, Peru, or South Africa.

To help combat this we're calling on the UK Government to do its best to "grandfather" the EU's FTAs, ie for Britain to continue as a participant even after leaving the EU, or negotiate some other transitional arrangement.  We also need the Government to put in place plans for the UK's own network of FTAs, though this will obviously take time.  And we look to British Embassies round the world to do even more than they already do in pressing our case to knock over barriers that stop fair access for Scotch Whisky in many markets round the world. 

But we are concerned about more than just tariffs. Modern trade is about rules and regulations and Scotch Whisky is bound by a huge number of rules set at EU level, for example on the very definition of whisky, or on other issues like food safety or labelling.  The Government has not made clear yet whether after Brexit the UK will continue to be a participant in these single market rules, or whether we will need UK-only rules to replace them in the British market.  That is an important decision that needs taking soon so that we have a sense of the complexity of the transition. 

Scotch Whisky is a global free-trading industry. The last thing we want is for Brexit to make Britain inward-looking and defensive. I hope the Government can be clear soon about the kind of trade policy Britain will have.  Our interests are in open markets and free trade, and a focus on measures that can give Scotch even better access to world markets than now. 
So there will be complexities to deal with. In some markets we will face problems. In others there will, eventually, be opportunities if the Government can seize them.  We look forward to working closely with the Government to make a success of Brexit and to ensure that Scotch Whisky has an even brighter future to come. 


David Frost's evidence to the Scottish Parliament's European Committee