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