Supplementary memorandum submitted by
the Scotch Whisky Association
1. INTRODUCTION
1.1 In October 2007, the Scotch Whisky Association
sent a submission to the Select Committee's Inquiry. There have
since been a number of developments which the Committee may find
interesting. For ease of comparison, we have set these out in
the same format as the initial submission.
2. THE TURKISH
SPIRITS MARKET
2.1 Provisional estimates for 2007 show
growth of around 1.5% in volume. The locally produced aniseed
spirit, raki, continued to dominate with a market share of around
75%. Whisky, all of which is imported, held a market share of
around 6%. There is a trend toward "premiumisation"
in the spirits market, partly a consequence of increasing wealth
and also due to changes in consumer behaviour.
2.2 The Scotch Whisky industry continues
to believe that Turkey offers considerable potential as an export
destination if the serious problems from restricted market access
and excise tax discrimination can be overcome.
3. MARKET ACCESS
FOR SCOTCH
WHISKY
3.1 In February 2008, Turkey's Tobacco and
Alcohol Board removed the requirment for traders to obtain the
second import permit, replacing this with a notification regime.
Importers continue to provide all the same papers as hitherto
but now advise the Board, rather than seeking its permission,
that they are trading in the named spirits.
3.2 While the TAB move is welcome, and will
speed up import arrangements, the most onerous part of the administrative
requirements, namely the Ministry of Agriculture's "control
certificate", remains in place. We are not aware of any work
being undertaken to lessen the far greater burden this requirement
imposes.
3.3 Scotch Whisky exports to Turkey grew
to £25 million in 2007, from £16 million the previous
year, partly a consequence of "premiumisation". Exports
remain well below their pre-Customs Union level of £34 million.
3.4 While precise comparisons are impossible,
before their EU accession both Greece and Spain applied similar
measures to protect domestic producers. The removal of these barriers
allowed Scotch Whisky exports to grow substantially. Before Greece's
1981 accession, our exports never exceeded £6 million; in
2007 they were worth £103 million. In the years before Spain's
1986 accession, exports never exceeded £30 million; in 2007,
they were over £307 million, our second largest export market.
4. EXCISE TAX
4.1 There has been no progress in removing
the excise discrimination facing Scotch Whisky in Turkey. In a
visit to Turkey in early May Finance Ministry officials advised
they are working on the excise tax law, albeit without providing
any indication of their intentions or timetable.
4.2 Officials nonetheless agreed that the
current exise structure, involving an ad valorem and an
alcohol specific element, was both complicated and responsible
for the longstanding valuation dispute between importers and the
Customs Ministry, and which has resulted in hundreds of legal
cases being opened.
5. OTHER AREAS
OF CONCERN
5.1 The valuation dispute referred to above,
and which was the subject of the Association's 30 October letter
to the Committee, continues to cause serious concern; recent rulings
by Turkey's Supreme Court have gone against importers. We continue
to press for an amicable resolution to the dispute.
5.2 The Association is also investigating
reports that local producers may also have valued their goods
the same way as importers, albeit that this has never been challenged.
If confirmation is received, it is probable that the discriminatory
treatment of importers will be incorporated into the Trade Barrier
Regulation complaint.
6. EU TRADE BARRIER
REGULATION COMPLAINT
6.1 The scope of the Trade Barrier Regulation
was broadened in early 2008 to allow EU traders to ask the Commission
to investigate breaches by a third country of its bilateral, as
well as multilateral (WTO) trade commitments. This will allow
the spirits industry's TBR complaint to include Turkey's failure
to meet its commitments under the 1995 EU-Turkey Customs Union
Agreement (CUA).
6.2 While the wider scope of the Regulation
may be useful, Turkey's treatment of imported spirits contravenes
WTO commitments and if, as is possible, the problems are referred
for WTO dispute settlement panel, it is multilateral rather than
bilateral commitments that are taken into consideration. Furthermore,
as recognised by EU officials, the CUA dispute settlement provisions
have been ineffective. The EU spirits sector would not wish its
TBR to focus unduly on CUA breaches lest this result in a request
to try to resolve the matter through the latter's dispute settlement
provisions.
6.3 In meetings with senior officials and
Ministers in early May, it was clear that Turkey does not welcome
the prospect of a TBR complaint. However, no-one provided any
evidence that steps are planned to remove the problems the TBR
seeks to address.
CONCLUSION
7.1 Since the October 2007 submission, there
have been a number of developments in Turkey of relevance to imported
spirits but the major areas of concern continue to give rise to
significant difficulties.
7.2 On behalf of the European Spirits Organisation—CEPS,
work on the Trade Barrier Regulation complaint continues and,
provided there are no unexpected further delays or complications,
it is hoped this can be submitted before the summer.
May 2008
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