the revealing case of Scotch Whisky

From stewartb – a long read!

Campaigners against Scotland’s independence make much of statements by ‘important’ business organisations when useful to induce anxiety or fear to bolster their case. And of course the corporate media and the BBC aggregate and amplify the statements, typically uncritically. Such negative campaign tactics are a given.

In this context it is instructive to look at prior statements designed to influence big democratic decisions and reflect on how matters turned out. It’s important to assess what credence should be given in future to business interventions. I’m not concerned here with lobbying in what are recurring election campaigns but in the much more important matter of a democratic event to decide a nation’s long term future. Do predictions of stark consequences – usually made with absolute certainty – occur as claimed at the time? Does the ‘sky fall in’ or do businesses adjust, mitigate and cope with change?

A case study

What follows is a case study based on the Scotch Whisky Association (SWA) and features its former CEO, David (now Baron aka Lord) Frost. (By the way, I suspect one would gain similar insights from a study of the Scottish Fishermen’s Federation!) Frost of course was until recently Minister of State at the Cabinet Office and the unelected lead for the Westminster government on all things Brexit-related in negotiations with the European Union. (His role is now being performed by Liz Truss who also crops up later in this piece!)

Readers may struggle to decide whether to laugh or cry at the twists and turns revealed below!

Prior to IndyRef1

13 May 2014: ‘Scotch Whisky Association Fears Independence Impact On Exports’ (https://dev.whiskycast.com/scotch-whisky-association-fears-independence-impact-on-exports/ )

‘In the SWA’s report, Frost called EU membership fundamental to Scotch whisky’s success: “We are able to export tariff-free across the single market, use EU to eliminate market access problems, and benefit from the EU’s clout in trade negotiations. … even a temporary interruption of EU involving exclusion from the single market or the customs union, if this were a consequence of independence, would be damaging and difficult to manage.” (with my emphasis)

16 September 2014: ’Scotch on the rocks: whisky makers warned of independence risks’ (https://www.theguardian.com/business/2014/sep/16/scotch-whisky-scottish-independence)

‘Scotch whisky makers could lose out if Scotland votes yes in Thursday’s referendum, according to the Dutch bank Rabobank. Whisky is Scotland’s second-largest export behind oil and gas and is worth £4.3bn a year to the local economy, but sales could be hit if the country loses access to the EU’s free trade area and to markets in the rest of the world where Brussels has forged trade deals.

‘… Rabobank estimates a newly independent Scotland could be shut out of the EU for at least two years after a formal split from the rest of the UK in March 2016.’ The article adds: this “… also raises the prospect of higher barley costs after the loss of EU farm subsidies.’

The writer of the Guardian article (naturally!) sought the wisdom of the SWA to support the Dutch bank’s argument: ‘The Scotch Whisky Association has previously voiced concerns about independence, highlighting the damage to exports that would come from a temporary suspension of EU membership, …’

Some within the Scotch Whisky industry were even more partisan in efforts to thwart Scotland achieving self determination:

6 July 2014: Scottish independence: Distiller William Grant and Sons donates to Better Together (https://www.bbc.co.uk/news/uk-scotland-scotland-politics-28183123 )

‘It is understood to have given in the region of £100,000 to Better Together.’ And: ’The company is said to have also donated smaller sums of money to other groups who are campaigning for a “No” vote ahead of the independence referendum,..’

‘In a statement, William Grant and Sons Holdings Limited said: “We support the stance of the SWA over independence and would refer you to their recent statement that the Scotch whisky industry enjoys substantial support from the UK government and its worldwide embassy network and from lack of trade barriers within the EU.” 

Prior to the EU referendum

9 May2016: ‘Leaving the EU could put scotch whisky exports on the rocks –  Environment Secretary Elizabeth Truss meets Scotch whisky industry leaders on the importance of EU membership for Britain’s biggest food and drink export.’ (https://www.gov.uk/government/news/leaving-the-eu-could-put-scotch-whisky-exports-on-the-rocks )

‘David Frost, Scotch Whisky Association Chief Executive, highlighted the importance of the European market for the iconic British drink, saying: “This is an excellent opportunity .. to explain more about the huge significance of the industry to the UK economy, and to discuss the benefits we reap from the UK being part of the European Union.

“EU membership has many advantages for Scotch. The single market, including its regulation of food and drink, and its single trade policy are central to the success of Scotch. It lets us trade across the EU simply and easily and helps give us fairer access to other overseas markets.”

Speaking ahead of her visit, Truss said: “Europe has a taste for Scotch and the industry will do better if we remain in the EU because whisky producers have hassle free, easy access to the Single Market of 500 million people.’ She added: “The Scotch whisky industry has strong global trade links beyond Europe in America and Asia, and their business leaders are clear that the EU single market provides the best conditions to reach even greater heights.”

Frost is also quoted by the same source saying: “Continued EU membership will also help to support Scotch whisky exports to the single market and would leave Scotch well-placed to benefit from the lower tariffs and fairer market access that the EU has been able to secure through its negotiation of free trade agreements with countries around the world.”

22 April, 2016: ‘Brexit risks Scotch’s protection, says PM’ (https://www.thedrinksbusiness.com/2016/04/brexit-risks-scotchs-protected-status-says-pm/) – the ‘PM’ here is David Cameron.

‘David Frost, chief executive of the Scotch Whisky Association, told Scotland’s Herald newspaper: “The EU is a big help in protecting the geographical indication Scotch Whisky. And added: “The EU sets the rules for the legal protection of Scotch Whisky within Europe and seeks to have it recognised in trade agreements with other countries. This would be put at risk if Britain were to leave the EU.”

‘In February, the SWA released its official view on the referendum, saying it was backing the ‘Remain’ campaign due the EU’s free trade policy which it said was “central to Scotch whisky’s success”.

26 May 2016: Does EU membership benefit Scotch whisky? (https://scotchwhisky.com/magazine/in-depth/9392/does-eu-membership-benefit-scotch-whisky/ )

“SWA members are clear just how important it is for the UK to remain part of the European Union”, says SWA public affairs director David Williamson, .. “The EU’s single market, including its regulation of food and drink, and its single trade policy, are central to Scotch whisky’s success. The single market lets us trade across the EU simply and easily.”

The SWA director added: “The EU’s weight and expertise in international trade helps give us fair access to overseas markets through the agreements it is able to negotiate with third countries.”

The same trade magazine article includes the counter argument from the Vote Leave campaign: “these arguments (from the SWA) are based on a fundamental misunderstanding of the reasons for Scotch whisky’s long-term export success. … Pro-EU campaigners are unable to comprehend that our leading exports and industries have prospered because of hard work at home, not because of EU membership”, says Robert Oxley, a spokesman for Vote Leave.’

Can anyone recall Unionists claiming similar ‘misunderstanding’ in 2014?

Revising the message

We learn something else about David Frost’s views in the same 2016 article referenced above.

“The existence of the [Scotch whisky] industry does not depend on the EU” David Frost told the Crichton Conversations event in Dumfries last October. ‘It depends on our ability to make a great product, at acceptable cost, and to beat the competition. Over the last 100 years we have always done that, and I am confident we will carry on doing so in the future.’

We are then told in the same article that: ‘Those remarks were seized upon with some glee by Vote Leave, which claimed it was therefore ‘absurd’ for Frost to claim later that the single market was ‘central to the success of Scotch’.  Indeed!

The SWA and its ‘easy trade solution’

11 November, 2020: ‘Brexit: there was a solution’ by Richard North (http://www.eureferendum.com/blogview.aspx?blogno=87795‘

Matters become even murkier. At the above link the blogger writes: ‘The Financial Times has been having great fun with its rediscovery of a largely forgotten pamphlet published in June 2016, just before the (EU) referendum, featuring a piece by David Frost, then CEO of the Scotch Whisky Association and now the UK’s lead negotiator in the current EU talks.

‘What (the FT) doesn’t do though is mention a trenchant section in the pamphlet from Frost where he offers his recommendations if he were “a UK negotiator”, suggesting that we “think hard about a transition via a Norway-type arrangement, if only as a staging post”.

“Exit from the EU to a Norway model“, Frost says, “is probably the easiest thing to negotiate, because the model already exists, it would be hard to refuse us, and Britain would keep access to the single market and apply single market legislation”. “It could”, he continues, “plausibly be done within two years”. 

The ‘easiest thing to negotiate’ and therefore keep single market access?  Did anyone hear the SWA or Frost suggesting that an independent Scotland had such an acceptable, even attractive option to remain within the single market after independence if EU membership ended, if only temporarily?

North adds: ‘what I missed at the time – and so evidently did (the FT) – is a piece Frost wrote just after the referendum, on 30 June, which goes even further. This, interestingly, is in the Telegraph, with the headline: “Don’t panic, here’s how Brexit can make Britain can be (sic) a great trading nation”. The solution, he writes: ‘It is to go for Norway status for now, but explicitly as a transitional arrangement. We should say that we intend, after exit, to retain this status for say five years and to use that period to reflect and if necessary negotiate a Free Trade Agreement … if that is what we want to do, or to keep Norway status if we don’t.’

Frost is also reported as adding: ’The advantages are that it’s an off the shelf option with a largely pre-written Treaty, so politically can hardly be refused to us. It keeps us part of the single market for at least a transitional period and so avoids huge disruption for business. It allows government to sequence negotiations, …’

And he goes on: “Remainers and Leavers should also be able to unite around this as a transitional arrangement. …  and gives us at least the protection of the EEA safeguard clause for free movement. And if we want to go further, we always have that option.” So he is proposing a solution not just for trade but also for keeping free movement as well?

In short, transitional arrangements were seen as possible, indeed attractive by Frost for the UK after permanent Brexit – but not for Scotland following even temporary loss of EU membership after independence! Why did none of this occur to Frost and the SWA in 2014? Perhaps it did: perhaps they were fully aware of these possibilities but it was something else – their Unionism – that stopped them sharing with Scotland’s electorate such a feasible and attractive path for their industry in an independent Scotland!

North reflects in his 2020 blog post: ‘But, of course, now he (Frost) is Johnson’s man, he’s ditched his previous ideas and is now locked into the very negotiating scenario which he knows will be very difficult to achieve. Believing what he did, it is hard to understand how a man of principle would take the job.’

The SWA pivots?

I was keen to get a sense of the SWA and others’ position post the EU referendum result which went against their favoured position of continuing EU membership. Was it all doom and gloom – was disaster now about to overwhelm this industry?

24 June 2016: ‘Scotch whisky industry digests Brexit shock’ by Richard Woodard (https://scotchwhisky.com/magazine/latest-news/9729/scotch-whisky-industry-digests-brexit-shock/  )

We learn here that the SWA is still warning of a period of ‘significant uncertainty’ after voters decided that the UK should leave the European Union. But the then SWA chief executive David Frost is calling on all parties to ‘get behind the government as it faces the challenges, and the opportunities, this decision brings’. But was EU membership not ‘fundamental’ to the success of the Scotch Whisky industry as recently as 2014? And if Scotland had voted ‘yes’ in 2014 would the SWA have called on all parties to ‘get behind the government’? I strongly suspect pragmatism would indeed have kicked in.

Remember William Grant & Sons, so concerned in 2014 about loss of EU membership that it funded the Better Together campaign? We also learn from the above source that after the 2016 vote to leave the EU ‘.. William Grant & Sons said it too would work with the SWA to understand the long-term implications for the company.’ But: ‘In the short to mid term, William Grant & Sons will not do anything differently from what we do today, as a result of this decision.’ Is that it: is that the impact of leaving the EU and the single market that led this company to finance opposition to Scotland’s self-determination?

And more from the same source: ‘Voters have spoken and decided that the UK should leave the European Union,’ said Frost, adding: ‘The process of leaving the EU will inevitably generate significant uncertainty.’ But adds: ’Of course, we are confident Scotch whisky will remain the pre-eminent international spirit drink.’

Yet another twist

I came across a 2018 speech from the SWA’s then CEO Karen Betts in which the framing is remarkable for providing (arguably) sensible perspective. But when reading this, reflect on whether the SWA offered any similar, sensible ‘perspective’ in 2014? Of course it didn’t!

4 September, 2018: Speech to Scotsman Food & Drink Conference by Karen Betts (https://www.scotch-whisky.org.uk/newsroom/karen-betts-speech-to-scotsman-food-drink-conference/)

Ms Betts states: “Now to Brexit. Well, my view is that the industry needs to look at this in context. We have been exporting successfully for 150 years. In that time, much has changed and we have faced many challenges – notably two World Wars and Prohibition in the US – and dealt with a good deal of change, not least as a result of the UK joining the EU in 1973. And still, the industry has succeeded.”

She goes on: “… lock in the 21 month transition period to the end of 2020, allowing us to plan properly for changes in the way we do business with the EU post-Brexit.”

And: “.. the SWA is advising the industry to look at contingencies and consider how our companies best protect themselves if the UK does leave the EU without a deal. If it comes to it, our industry may well be less affected than some others, given that under WTO rules Scotch whisky would still be exported to Europe at a zero tariff.”

“Tariff and non-tariff barriers in many of our markets have gradually been removed. We are now able to export Scotch to a number of countries with no restrictions at all, and to many more with minimal restrictions. Our ability to sell Scotch without the costs imposed by market access barriers to so many global consumers has seen our businesses thrive and expand, and in turn support thousands of jobs across Scotland.”

“This is a highly collaborative, pragmatic and hard-working industry. Our companies are both ambitious and determined to emerge from Brexit in growth. But it may not be easy.”

What to make of the SWA’s re-positioning after an outcome it didn’t want? Knowing that the UK is leaving the EU permanently and mired in the instability and uncertainty of ongoing negotiations, can this really be the same anti-independence business body we heard from on risks to EU membership and associated trade in the 2014 referendum campaign?

Taking all this into account, what’s to be said? Certainly a fervent hope that voters in Scotland will develop a healthier scepticism when the next opportunity to decide Scotland’s future comes!