Whisky producers turn screw on Seoul

THE Scotch Whisky Association will this week call on the European Union to step up the pressure on South Korea to lower its punitive 20% import tariffs in a groundbreaking free trade agreement that will help unlock the fifth largest whisky market in the world.

Delegates from the EU are due to fly to Seoul next month to thrash out a deal that aims to eliminate the tariff.

Negotiators are also considering a clause that would provide legal protection in Korea for "geographical indications" such as Scotch whisky, helping to tackle imitation products. Korea is Scotch whisky's fifth largest export market, with shipments valued at 139m in 2007.

Martin Bell, the SWA's international affairs manager, will tell theEUthat it needs to make the issue of a level playing field for Scotch a top priority.Hewill say:"The elimination of Korea's whisky tariff and better protection of intellectual property rights are high priorities for the association and would be a timely boost to exports in what is a major market for Scotch.

"Securing a deal is all the more important because the economic slowdown could have an adverse effect on EU Korea trade, including of luxury products. Both sides need to make a determined push to reach an agreement during the next round of talks in Seoul."

Last year Scotch whisky exports hit a record 2.8bn with 800m contributed in taxes, while it accounted for 58% of total Scottish manufactured exports to Korea in 2007.

Korea is the 15th largest market for all Scottish manufactured exports.

Whisky analyst John Wakely said: "TheKorean spiritmarket is enormous. What makes it so interesting is that it is a high alcohol-consuming society and that is mainly spirits.

"If Scotch could get parity with the locally produced spirit then it would make a huge impact on sales."

Meanwhile, Diageo could be hit with a 100m bill in South Korea after customs officials accused the company of underreporting the value of spirits it imported into the country.

The drinks multinational has said the bill, which relates to allegedly unpaid Scotch whisky import duties, was only a preliminary audit and that it had appealed the assessment. The audit relates to duties paid between February 2004 and June 2007 under a tax agreement previously agreed with Korean customs.

The drinks company is co-operating with the audit, which began in January last year.

A spokesman said: "We are robustly defending the current position, which has been in place since 2004 and had previously been accepted by the Seoul Customs Office."

Diageo's Johnnie Walker is the most popular whisky in Asia and has the biggest share of the Korean market.

The world's top 10 whisky markets are the US, Spain, France, Singapore, SouthKorea, Venezuela, Greece, Germany, South Africa and Taiwan. But China, India, Brazil and Russia look set to be the future for an industry that supports more than 40,000 Scottish jobs.