US-imposed Trade Tariffs

Statement

My Lords, with the leave of the House, I will now repeat in the form of a Statement the Answer given to an Urgent Question today by my right honourable friend the Minister of State for International Trade in the other place. The Statement is as follows:

“The UK continues to be a champion of the international rules-based order of which the WTO is a cornerstone. However, the UK Government are clear that resorting to tariffs is in no one’s interests. Low tariffs and free trade underpin prosperity and jobs in the UK and globally. That is why we are pursuing an ambitious free trade agenda, lowering tariffs and quotas where possible, and working on an ambitious package of bilateral free trade agreements. Our Government are disappointed by the US Administration’s announcement that they intend to impose tariffs on the UK and our European partners following the recent ruling.

My right honourable friend asks what communications there have been between the Government and the United States. We have continued to raise the issue at the highest levels. My right honourable friend the Secretary of State has herself spoken to US Trade Representative Lighthizer, Commerce Secretary Ross and Vice-President Pence. My right honourable friend the Chancellor raised the subject of Airbus tariffs with US Secretary of the Treasury Mnuchin in July. My right honourable friend the Member for Maidenhead raised the issue with President Trump during his state visit to the UK in June of this year.

This dispute has a long history, going back to 2004. I will not detain the House by setting out that history, but it is long and complex. It has led to this WTO judgment, and although the UK, France, Germany and Spain took steps to bring their support into compliance with the WTO, the WTO ruled last year that further steps were required to bring this support fully into compliance.

Following this ruling, the UK and other Airbus nations have now taken steps to bring their support fully into line. The Airbus nations are seeking confirmation from the WTO in ongoing proceedings that these steps are sufficient to achieve compliance. A ruling is expected in the coming months. However, WTO procedure allows for the US to seek authorisation to retaliate on the EU in parallel to these proceedings, and therefore the WTO has confirmed whether the Airbus nations have now complied with their WTO obligations.

On 2 October, the WTO announced that the US can be authorised to impose up to approximately $7.5 billion annually in tariffs. Following this, the US published a list of tariffs on the EU, targeting products produced by the Airbus nations and wider EU. These measures are not in the interests of the UK, the European Union or the United States. Tariffs would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time. We are working closely with the US, the EU and European partners to support a negotiated settlement to the Airbus dispute, along with the separate Boeing dispute. I would like to reassure the House that we will continue to press this issue at the highest levels and urge the United States to withhold tariffs until the WTO has confirmed that we have complied in the compliance proceedings, something we expect to happen in the next few months.

Single malt scotch whisky has been tariff-free with the US for more than 25 years now, and whisky exports to the US are worth over £1 billion annually. Single malt producers are often small and medium-sized businesses, and these tariffs will hit those who can afford them least.

We will continue to talk to the US at the highest levels to press for a settlement and for the US to hold off applying these tariffs until the WTO has had time to rule”.

My Lords, with this episode we move from the sunny uplands of the free trade world, which we so often hear about, to the reality of trade activity. It should not be a surprise that this is happening. It is no secret that the American President has sought to define his Administration on a trade warfare basis. He seeks to put the interests of America first and to repatriate jobs and industry to the USA. What else could we expect? We should not be surprised at this latest démarche. We saw the United States’ negotiating objectives for a future trade agreement with the UK. It was obvious that the language of the UK-US document was extremely aggressive, demanding concessions but offering little in return. The introduction says it all:

“The United States seeks to support higher-paying jobs in the United States and to grow the US economy by improving US opportunities for trade and investment with the UK”.

We have seen it all before.

The measures being imposed by the United States will see tariffs on a range of food, drink and textile products including olives, cheese, wine, jumpers and Scotch whisky. Many of these products are subject to geographical indications, appellations awarded under trade agreements to protect products of cultural heritage. American producers have made no secret of their desire to apply iconic labels such as Stilton cheese or Scotch whisky to products made wholly in the USA using similar production techniques.

I have a question about this. During the proceedings on the Trade Bill, we got the Government to agree to support the continuation of EU GIs. Is that still our policy?

My Lords, I repeat what I said before to the noble Lord and I declare my interest in the register of a shareholding in the drinks industry.

Resorting to tariffs is not in the interests of this country, the EU or the United States if we are to have the productive economic relationship with the United States which we are working on and want to have. It is already our largest trading partner outside the EU. It is clear that we need to have a positive, mutually beneficial relationship with the United States. We believe that that is the way forward because the United States is an important market for our produce.

Geographical indicators is not my specialist subject, I am afraid, but it seems to me that Scotch whisky comes from Scotland and Bushmills comes from Northern Ireland. We should cherish our produce and I am grateful to the noble Lord for his remarks.

My Lords, given the indicators under WTO rules that these products are unique, they will become even more vulnerable to a tariff regime that the United States may play across the European Union. This industry is uniquely Scottish and British. As with distinct elements of our cashmere industry, which was referenced in the Answer to the Statement—I represented many mills in my former constituency—the industry has been able to flourish in the past, certainly within textiles, because when it has been a victim of international trade disputes, European structural funds have supported it. What are the Government’s contingency arrangements for rural businesses and the whisky industry?

The noble Lord gave figures for the Scotch whisky industry showing that single malts account for one-third of the £1 billion in whisky exports. There are 7,000 rural jobs in that sector, and the cashmere and textile industry is particularly vulnerable. Will the Government give a commitment that whatever the European Union decides, we will be in lock-step with it? If so, the tariff proposals we have just been questioning the noble Lord, Lord Callanan, on will have to be amended to be in lock-step with the EU response to the United States. I hope that Ministers have given that commitment to our interlocutors from the United States. It would be helpful if the Minister could clarify that that commitment has been given.

My Lords, as I have said, we are working with the EU. This issue concerns tariffs imposed on the EU, and we are part of the Airbus quad that I have been learning about. We are working very strongly with our EU friends and partners, in working with our American friends and partners, on something that we in this country do not think is beneficial for American trading interests or our own. Whatever our status—whether a member of the EU or not—we are clear that we do not believe that this is right or beneficial. If we have left, we will also be saying that this is not a basis on which we should be working. These tariffs are not beneficial to the EU, the UK or the third party in this, the United States.

My Lords, does my noble friend agree that, according to the figures from the Food and Drink Federation, Scotch whisky is the single most successful export across the world? Is he not as concerned as I am that the US seems to have chosen to pick on UK brands such as Bushmills from Northern Ireland and Scotch whisky? Why has it not been extended to products from another Airbus nation, such as French champagne or brandy? Does the Minister share my concern that this does not augur well for our future trade relations after the UK leaves the EU?

My Lords, my understanding is that tariffs will be levied on the Airbus nations and the EU. The data shows me that 38% of French trade is directly targeted, compared to 10% of ours. These tariffs will affect the EU as well. My noble friend is right—to repeat it and put it on the record—that Scotch whisky is the UK’s largest agrifood export, at £4.7 billion in 2018. It is the largest contributor to the UK’s balance of trade in goods and, thinking of Scotland, it provides 7,000 rural jobs and 11,000 in total. It is very important to Scotland.

My Lords, I thank the noble Lord for his answer but I cannot help but contrast it with the answer given by the Leader of the House, Jacob Rees-Mogg, on Thursday when asked a similar question about 25% tariffs on Scotch whisky. He saw the opportunity to attack the EU for what he calls its illegal acts and he stated that the Scotch whisky industry would be better off post-Brexit—if we can believe that, given the amount we sell to Europe.

In his answer, the noble Lord substantially reflects the press release the Government put out when the WTO ruling was made. I am reassured that he has repeated the Government’s view that they are not acting illegally, and that no European nation is; that is very important. If we can get the WTO to establish that, that is good. There is no question of illegality, despite what Jacob Rees-Mogg said, but now there is a question about support for engineering jobs in Airbus. He was disparaging about them. Some 124,000 people in the United Kingdom are employed or supported by Airbus. Will the Minister join me and the Unite union and write to every one of those 124,000 to say that the Government still support that industry?

My Lords, the Government are clear that the United Kingdom is compliant with WTO rulings in the Airbus dispute. That is where we pitch our line. We think we are compliant so it is not right that the US Administration should impose tariffs when we are clear that we are acting lawfully. I use this opportunity to encourage our friends in the United States to see that this is a time when we should be seeking free trade and encouraging these industries, wherever they are, whether they are small rural ones or large industrial ones.