1. Minimum Pricing A Scottish proposal

2. The Context - 1 Scottish Government Bill (Nov 2009) proposes inter alia enabling law for minimum price per unit of alcohol: (www.scottish.parliament.uk/s3/bills/34-AlcoholEtc/index.htm)www.scottish.parliament.uk/s3/bills/34-AlcoholEtc/index.htm Proposal relies on ‘Sheffield Study’ of effect of minimum pricing and off-trade discount ban on moderate, harmful and hazardous drinkers and impact on health, crime and employment: (www.scotland.gov.uk/Publications/2009/09/24131201/29)

3. The Context - 2 Scottish devolution settlement conveys no excise duty powers Cannot use UK duty structure to vary price of alcohol 92% of Scotch Whisky sales are exports to 200 markets with value of $4.7 billion Global success of Scotch secured by challenging trade barriers through European Commission and WTO. Significant wins in Japan, Korea, Chile, India and Thailand EU trade issues are competence of European Commission, not national governments

4. Legal Position – European Law ECJ rejected minimum prices for spirits in 1978 Court found that minimum prices - even where applied without distinction between domestic and imported products – have negative effect on imports Art. 28: ‘quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following provisions, be prohibited between Member States’ European Commission has confirmed this interpretation of EU law: ‘the necessity and proportionality of a discriminatory minimum price regime for alcoholic beverages could be questioned’ Member States can pursue public health aims, but measures over-riding trade law have to be necessary and proportionate. Need to pass the ‘least trade restrictive test’ Commission has taken several Member States to ECJ over minimum pricing.

5. Legal Position – International Trade Law General Agreement on Tariffs and Trade (GATT) – Art. III.4 and XX 1992 GATT panel suggested minimum prices were a trade barrier. Where minimum price stops importer from selling below domestic producer less favourable treatment is accorded to the importer Scottish Government could seek exception to GATT rules, but test is tough. Burden of proof falls on WTO Member State (or Commission in case of EU Member State) Need to show measure (min pricing) necessary to protect ‘public health’ with no alternative, less trade restrictive measures available

6. Consequences for Scotch Whisky (If min price at 50p/75c per unit) Domestic market Own label and value brands (average price $16 per 70cl bottle) represent 30% of market. Minimum pricing would raise retail price to $21 Value brands would disappear as minimum price close to selling price of leading brands Loss of jobs and threat to viability of companies with value/own label brand business model Penalises less well off moderate drinkers Increased cross-border trade

7. Consequences for Scotch Whisky (If min price is set at 50p/75c per unit) Overseas Risk to 20% of Scotch Whisky exports ($900m) Scottish Government precedent would encourage copy-cat measures overseas Scottish system need not be replicated; precedent would have domino effect of (spurious) “health based” restrictions Korea, Thailand, Venezuela and France are possible examples Trade restriction on Scotch in Scotland undermines case when challenging trade barriers elsewhere, such as India

8. Conclusions Illegal under EU and WTO rules Minimum pricing does not work. ‘Sheffield Study’ author admitted model is no better than a “weather forecast” Does not target alcohol misuse; affects all drinkers ‘Cost’ to harmful drinkers maintaining consumption just one pint of beer a week Penalises moderate drinker Increased margin boosts retailer profits (not Exchequer or producer); no extra revenue for tackling alcohol misuse Financial “return” to Scottish society over ten years is less than loss of Scotch Whisky exports in one year Unintended consequences of minimum pricing outweigh any benefits