US Tariffs: Scotch Whisky

We come now to the next urgent question. At the risk of embarrassing him, the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) tells me that this is the first time he has asked a question from the Back Benches in 14 years, but I am sure it will not show.

(Urgent Question): I know that you always indulge a novice in these proceedings, Mr Speaker.

To ask the Secretary of State for International Trade to make a statement on what discussions Her Majesty’s Government have had with the US and EU, following the announcement by the United States trade representative of their intention to impose tariffs of 25% on single malt Scotch whisky and other UK products on 18 October.

Oh, the Minister is making a second performance at the Dispatch Box. Excellent.

Thank you, Mr Speaker. I am grateful to my right hon. Friend for his question.

The United Kingdom continues to be a champion of the international rules-based order of which the World Trade Organisation is the cornerstone. However, the United Kingdom is 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, which 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.

The Government are disappointed by the United States Administration’s announcement that they intend to impose tariffs on the UK and our European partners following the most recent ruling. My right hon. Friend asks what communications there have been between the Government and the United States. We have continued to raise this issue at the highest levels; my right hon. Friend the Secretary of State has spoken to US Trade Representative Lighthizer, Commerce Secretary Ross and Vice-President Pence; my right hon. Friend the Chancellor has raised the issue of Airbus tariffs with the US Secretary of the Treasury; and the issue was raised by my right hon. Friend the Member for Maidenhead (Mrs May) with President Trump during his state visit to the United Kingdom in June this year.

The dispute has a long history; indeed, it goes back to 2004. I will not detain the House by setting out that history, but it is long and complex and has led to the WTO judgment. 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 that support fully into compliance. Following that 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 the ongoing proceedings that those 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 against the EU in parallel to the ongoing proceedings and before 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 in tariffs annually. Following that, the US published a list of tariffs on the EU, targeting products produced by the Airbus nations and the wider EU. These measures are not in the interests of the UK, the European Union or the United States. Tariffs will 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.

I welcome the Minister to the Dispatch Box and thank him for his answer. I welcome the fact that this urgent question was chosen to be discussed, because the matter is urgent. There are 10 days left until the US proposes to introduce tariffs of 25% on Scotch malt whisky, which represents 60% of the UK-origin goods included on the list and 10% of the non-aviation goods from across Europe that are on the list. Curiously, products such as brandy and cognac from France are not included on the list.

As the Minister said, the US market is vital for the Scotch whisky industry, with a turnover of more than £1 billion. The distilleries involved in exporting malt to the United States are often small. They are often craft distilleries, whose establishment in recent years we particularly welcomed in Scotland. If tariffs are imposed, those industries will have to scale back their efforts in the United States. The industry estimates that there could be a loss of £228 million in revenue, and that 3,000 jobs, mainly in rural Scotland, could be affected by the proposals.

I want the Government to show even more urgency than they have done to date. There are two things that can be done immediately. First, the industry has made it clear that if the Government announce that when the UK leaves the EU on 31 October this year that they will not impose tariffs on bourbon or American whiskies, that would greatly help the dialogue with the United States.

Secondly, I know that the Minister has the close ear of the Prime Minister, and it is important that he urge him to intervene directly with President Trump. It was my duty to welcome President Trump to Scotland last year. During that event, he told me that he loved Scotland. If the Prime Minister could convey directly to President Trump the damage that the proposals would do to Scotland, particularly rural Scotland, that could have an impact. I would be pleased if the Minister confirmed that he would indeed urge the Prime Minister to make those representations.

I am grateful to my right hon. Friend for those questions. He represents a powerful voice on behalf of the industry and the people of Scotland, along with my hon. Friends around him. It is not just whisky—but I will return to whisky in a second—it is pork, cheese and cashmere. There are a number of areas that will be harmed by the tariffs. Earlier this afternoon, I spoke to Karen Betts, chief executive of the Scottish Whisky Association, who is in South Africa. It is a measure of her concern that she took time out of her schedule to talk to me. The Government are enormously sympathetic, and as I said in my answer, we would urge the United States—tariffs are not in place, and there are 10 days before they are introduced, as my right hon. Friend said—to think again. These tariffs are in no one’s interest. The President of the United States prides himself on being the champion of the little guy, the little business. Well, it is the little business and the little guy who will be harmed most directly if the tariffs come into play.

I can entirely understand my right hon. Friend urging the Government to adjust section 232 countermeasures by removing the tariff on bourbon. We believe in the international rules-based order. It would be the easiest thing in the world simply to say to him, “Yes, we are going to do that.” However, while we remain a member of the European Union, we have to comply with the rules of the European Union. What I would say to him is that when we leave the European Union, nothing is off the table.

I welcome the urgent question asked by the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell). I welcome, too, the measured tone of the Minister’s response, the factual information that he provided at the Dispatch Box and his support for the international rules-based order.

It is no secret that the American President has sought to define his Administration as one of trade warfare, seeking to put the interests of America first and to repatriate jobs and industry to the USA. He believes that a trade war is one that the US can win. Does the Minister agree that no one wins in a trade war? That much is clear from the spurious Boeing case against the importation of C Series aircraft and the use of section 232 national security measures to prevent steel and aluminium exports to the US, and now again in respect of automotive imports.

The concern for British exporters is that the recent findings of the WTO in relation to aircraft subsidies will be used to secure an advantage for American producers and for American interests in any future trade agreement between our nations. The US trade representative has been clear that the US will impose countermeasures in the first instance and will seek to discuss how to resolve this dispute with the EU thereafter

“in a way that will benefit American workers”.

Other European leaders have been clear in their condemnation of the measures, but our Government have been decidedly more reserved, perhaps for fear of jeopardising any future trade talks. I note in the Government’s response published last week that the UK was seeking clarification from the WTO that the UK was compliant with measures regarding subsidies to Airbus, so I ask the Minister when he expects that such confirmation will be given and whether this indicates a divergence from the EU response.

Many products that these tariffs are being imposed on are subject to geographical indications, which are awarded under trade agreements to protect products of cultural heritage. It is no surprise that these products have been targeted first, as American producers of rival products have made no secret of their desire to destroy such protections. Does the Minister agree that this is not just about responding to the subsidies ruling, but about undermining and eliminating competition in favour of US producers who have long sought to do away with product labelling requirements, restrictive geographical indicators, and even sanitary and phytosanitary standards? Does he agree that going after some of our most iconic products is part of that strategy?

I am grateful to the shadow Secretary of State for his support; I think this is a relatively rare but very welcome moment where there will be an outbreak of consensus across the House.

The hon. Gentleman is absolutely right to highlight the importance of the Scotch whisky industry to the UK. Whisky is the UK’s biggest single agrifood export, accounting for more than 21% of all UK food and drink exports. In 2018, exports of all whisky from the UK totalled £4.8 billion, of which the Scotch Whisky Association claims £4.7 billion is Scotch whisky. Scotch whisky is the biggest single contributor to the UK balance of trade in goods, and the largest single market for UK exports of all whisky—not just Scotch whisky—by value is the United States, which imported more than £1 billion-worth in 2018 or a volume of 84,791 tonnes.

Beyond that, a further £268 million is injected into the economy through the supply chain, leading to a UK-wide impact of just under £5 billion. Some 40,000 jobs are directly supported by the Scotch whisky industry, 7,000 of which are in rural areas of Scotland. This is an absolutely vital sector to the United Kingdom and one that we are determined to do everything we can to protect.

The shadow Secretary of State will have heard me say to Mr Speaker earlier that the dispute that has led to these threatened tariffs in 10 days’ time is a very long and complex one and is being governed by the investigations at the WTO. It is regrettable, although we accept it, that we were found not to be in compliance and the WTO has given the United States permission to go down this route.

The hon. Gentleman asked me about our belief that we are now completely compliant and have taken the remedial measures necessary to bring ourselves into compliance in this dispute. We hope that that will happen within the next couple of months. We are pressing the WTO for an early decision on that, because the evidence base on this stuff is incredibly important, particularly in our conversations with the United States.

I am anxious this afternoon to dial down the atmosphere and not engage in deep personal attacks on people in other countries. The hon. Gentleman was very restrained, and rightly so, in what he said. We want to keep it on the issues. We think that the proposed tariff is unfair, wrong and unjust, and if we can demonstrate that we are now in compliance in this very long-running dispute and have taken the necessary measures, I hope that we can engage calmly with the United States.

I hope the hon. Gentleman will agree that one of the reasons why the United Kingdom is so internationally necessary, and why our taking up our position again in the WTO when we leave the EU is a good thing and is widely welcomed internationally, is that we believe in the international rules-based order. We believe that any fair, reasoned, rational observer who looks at this will conclude that these tariffs are unjust, unfair and wrong and are targeting people who have done absolutely nothing in terms of the dispute that has given birth to these retaliatory measures. I hope that, with constructive engagement and calm dialogue, we may persuade the United States to think again.

Mr Speaker, as you know from my application for an urgent question on this subject today, my constituency is severely affected by the announcements from the US last week. Moray is home to 40% of all Scotch whisky distilleries, as well as a sector that has not been mentioned so far: the biscuit industry. Some 50% of biscuits exported to the US are Scottish shortbread. Moray is home to Walkers of Aberlour, and when I spoke to Jim Walker earlier this afternoon, he wanted me to stress that figure. I met Lewis Maclean of Maclean’s Highland bakery in Forres on Friday, who expressed his concerns for his sector as well.

Can the Minister update the House on what steps the Government will take over the next 10 days to try to stop these tariffs taking effect from 18 October, which feeds into the important Christmas market? I also reiterate the point that a zero tariff on bourbon and American whiskey when we leave the European Union would send the strongest possible message to the US that the UK is on its side, and it should take away these tariffs?

I am grateful to my hon. Friend, who is a doughty champion for his constituents and the commercial interests in his constituency. I was aware of the presence of Walkers Shortbread in his constituency and the fact that it exports more than £29 million a year and is a significant local employer. Before coming to the House, I asked for a list of all Members who represent Scottish constituencies and how many distilleries they have in their constituency. I was more than surprised to find that my hon. Friend has a significant number—I think more than 40—in his constituency, which makes the following offer very easy to make: I would be delighted to visit him in his constituency and see some of those distilleries, and perhaps also Walkers Shortbread.

As for what we can do to get this message across, the United States ambassador to the UK, Ambassador Johnson, is known to many of us, and he is known to be very close to President Trump. I encourage all Members across the House to contact the American ambassador and make him aware of the strength of feeling on this subject in this House and across the country.

As the Minister will find out, it is quality rather than quantity that counts when it comes to Scotch whisky. As the chair of the all-party parliamentary group on Scotch whisky, I have no doubt that these tariffs will have a hugely negative impact on one of our most important, successful and growing industries. The Scotch whisky industry employs 11,000 people directly. I encourage UK Ministers to do everything they can to resolve this as quickly as possible, because it is in no one’s interests to have a trade war like this, where everybody will almost inevitably end up on the losing side and jobs, confidence and future investment will be affected. I fear that these tariffs will disproportionately impact on the small independent distilleries, of which there are many in my Argyll and Bute constituency and, indeed, across the economically fragile, rural parts of Scotland.

The Minister listed a number of conversations that have been had, but I would like him to clarify what conversations have taken place since Thursday with both the EU and the United States? Is it not the case that a post-Brexit, isolated UK would have much less negotiating power than it currently has as part of one of the world’s largest trade blocs when it comes to fending off someone like Donald Trump?

I am going to resist the temptation to launch on the last point. Tempting as it is, I would rather try to keep a degree of consensus on the issue, but I would say this to the hon. Gentleman. He opened by saying that it is quality, not quantity, that counts. I think that has been the cry of many down the generations. A trade war would be in no one’s interests: there will be no winners in a trade war. The thing that I think agitates and upsets us most about this, as I said earlier, is that those who have done absolutely nothing in the Airbus-Boeing dispute, with the rights and wrongs on both sides, and people who have had absolutely nothing to do with that, going back so many years, will now be hurt and harmed if these tariffs come into play. We will continue to use every opportunity to convey to our friends in the United States that this is—

Since Thursday?

I am not sure that it is helpful to have a running commentary on everything that is being said. I think those who are employed in distilleries in the hon. Gentleman’s constituency would be much more interested in what the Government are trying to do to get a successful outcome. I have told the hon. Gentleman and the House the exchanges and the conversations there have been, and those will continue. We are determined to use the next 10 days to try to persuade our friends in the United States that this is the wrong way to go.

The decision by the US affects other iconic Scottish industries, such as cashmere and textiles. We have a long tradition in my constituency in the borders, and both Hawico and Johnstons in Hawick have been in touch with me in recent days, expressing severe concerns about the impact that these tariffs are going to have on their American business. Can the Minister assure me that textiles and cashmere are on his radar, and that he will be trying to find a solution for those sectors too? If no solution can be found by 18 October, will the Government consider compensating those businesses for the duties and tariffs they are going to have to pay out?