Newsnet economics brief: More than whisky needed to drive Scottish exports

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ONE result of the austerity drive in Greece is that they are drinking less Scotch whisky. Greek taxes on spirits went up three times last year as part of the government’s austerity drive. As a result, whisky sales have plummeted.

However, there was good news for the whisky industry this week with the signing of a radical free trade deal between South Korea and the EU. South Korea’s 20 per cent import duty on spirits is being phased out, along with devious rules about labelling aimed deliberately at making life difficult for importers.

The EU Trade Commissioner Karel de Gucht welcomed the potential for the Scotch whisky industry, saying an impact assessment points to a doubling of exports.

“This will make the product 20 per cent less expensive, and it will make it much more competitive with the local brands, which represent the larger part of the market,” he said.

The importance of this EU trade deal is that one of the emerging economies in Asia – which are driving global growth – is willing for the first time to open its markets to western imports.

Where whisky leads so should our high value engineering exports.

However, that may not be as easy as it sounds. In 2010, Scottish manufactured exports grew by only 1.6 per cent, in real terms, compared with 2009. That is not enough to offset the huge dent in domestic consumption following the 2008 recession.

Worse: while Scottish exports grew in most product lines in 2010, there was actually a drop of 4.2 per cent in engineering sales.

Compare that with whisky exports, which hit a record £3.45bn in 2010 – 10 per cent up on the previous year.Compare this with South Korea, where carmakers Hyundai Motor and Kia Motors have just announced double-digit annual sales growth, driven by exports of new models.

Most people have forgotten that South Korea began its industrialisation by buying redundant machine tools from bankrupt Clyde shipbuilders, back in the 1970s. Or that the technology from the old car Linwood car factory in Renfrew helped start the South Korean car industry.

EXPORT PLAN

In April, John Swinney, Cabinet Secretary for Sustainable Growth, set an ambitious new target to increase Scottish exports by 50 per cent over the next six years.

Swinney said that expanding Scotland’s food and drink industry would be central to this ambition. He said, “a re-elected SNP Government will support key industries in growth sectors expanding into growth markets.

With the right support, the SNP believe that Scottish business can deliver a 50 per cent increase in exports over the next 6 years. Our food and drink industry will play a key role in meeting that target. A re-elected SNP Government will invest in support and advice for those companies looking to export for the first time or expand into overseas markets.

He added, “we will work with existing export companies to deliver business-to-business mentoring service for small and medium-sized firms, boosting our economy and creating jobs. Growing our export market is the next step on the road to recovery. With the full backing of a re-elected SNP Government, we are determined to support Scottish companies as they seek to expand their markets overseas.”

HIDDEN EXPORTS

Earlier this year it was revealed that Scotland has become a net exporter of cannabis, thanks to a surge in illegal local production.

Traditionally, most cannabis came into Scotland from countries such as Holland and Jamaica.

But documents relating to a Proceeds of Crime case against William Wan, a convicted criminal suspected of being a Triad gang membe, state:

“Cannabis cultivation in Scotland is now established to the extent that Scotland is believed to be a net exporter of the drug to other parts of the UK and beyond.”

Indoor cannabis farms in Scotland are flourishing. Figures from the Scottish Crime and Drug Enforcement Agency show police have seized £41m worth of cannabis plants since 2006 and arrested 319 people.
The biggest factory spanned three floors in a quiet street in Ayr and had more than 3000 high-grade plants. But did they qualify for a Scottish Enterprise grant?