What Scottish independence would mean for Scotch whisky

Today, the people of Scotland are headed to the polls to determine 
whether they're going to remain in the United Kingdom or forge 
ahead as an independent Scotland. 
Vox's Amanda Taub has already explained why 
Scotland should stick with the UK. 
But she left out the most important reason Americans should care about 
the question of Scottish independence: what would it do 
to the production of Scotch whisky?....

The whisky industry doesn't want independence

This isn't a totally frivolous question, because in Scotland, 
distilling isn't just a livelihood 
— it's an industry. In fact, if Scotland were already an independent country, 
whisky would be its third-biggest business, after oil and banking. 
Since independence might shake up the banking industry  
— the Royal Bank of Scotland is threatening to relocate its corporate 
headquarters (though not jobs) to England if it has to 
— Scotch could be an even more important industry to an independent Scotland.

Like any other industry, the Scottish whisky distillers dislike economic uncertainty. 
And between questions about what currency an independent Scotland would use and 
the will-they-or-won't-they of whether the European Union would let Scotland join, 
Scottish independence would bring about a lot of uncertainty. 
So it makes sense that the distilling industry would be wary of breaking away.

The Scotch Whisky Association isn't officially opposing independence, 
but its spokesperson told CNBC that "the consensus within the Scotch industry is 
that the potential risks outweigh the advantages." In particular, the whisky distillers 
are worried about the shrunken banking industry and what that would mean 
for access to credit.

But they're also concerned about whether independence would affect trade policy, 
making it harder, or more expensive, to ship Scotch abroad to markets like (ahem) 
the United States.

The global regulations behind the Scotch market

Ninety percent of all Scotch gets shipped out of the UK. 
The United States is the biggest individual market: 
Americans consumed $1.3 billion in imported Scotch in 2013. 
But the European Union countries, combined, drink more Scotch than the US does.
 And the Scotch industry sees that as a big risk.

Right now, there aren't legal restrictions on exporting Scotch to other EU countries, 
because Scotland is in the UK and the UK is in the EU. If Scotland were to break off, 
it would want to join the EU on its own — but other countries might vote against it. 
And if Scotland were left out of the EU, Scotch exporters would have to deal with 
tariffs and trade barriers.

But the exporters' problems wouldn't end with the EU. Right now, most countries' 
laws recognize that "Scotch" can only be used to refer to whisky that was distilled 
and aged in Scotland. That's because the UK, in negotiating trade agreements, 
requires other countries to abide by the British law regulating Scotch production. 
If Scotland left the UK, it might have to renegotiate those trade agreements. 
Not only would other countries have the opportunity to make it harder or more 
expensive to export Scotch, but they might not even agree to keep the legal definition
 that requires whisky called Scotch to be made in Scotland.

The Scotch industry is worried that their government wouldn't have the diplomatic 
connections to keep Scotch exports smooth. One Scotch distiller told CNBC that 
the Scottish government would only have half as many embassies around 
the world as the UK does now — and he sees that as a very bad sign.

A silver lining — a decade or two from now

What's bad for the Scotch distilling industry isn't necessarily bad for consumers. 
If Scottish currency is a lot weaker than the British pound is today, for example, 
whisky could get cheaper. But the difficulties Scotland would have if it left the EU 
would probably be enough of a problem for American Scotch drinkers to 
outweigh the potential benefits.

The most important question for an independent Scotland might not be its trade 
relationship with the US, but with another former British possession: India. 
India consumes half of the world's whiskey and totally distorts the global liquor market. 
That's another factor that makes it impossible to predict what Scottish independence 
would mean for Scotch.

But even if the short-term outlook for Scotch drinkers is disastrous — if, say, 
distillers have to shut down or go out of business because they can no longer 
cover their costs — that could be good news to American Scotch drinkers twenty 
or so years from now. A New Yorker article from 2013 on the global business 
of Scotch explains that slumps in the global market now can mean well-aged premium 
Scotch stashes later:

Even cheap whisky needs time to mature: by law, whisky can't be sold in the 
United Kingdom until it has been aged for three years. 
This means that distilleries often find themselves selling spirit in circumstances 
that have changed since the spirit was distilled. In the British recession of the 
mid-nineteen-seventies, a number of distilleries were mothballed; 
there was a similar slump a decade later. 
As a result, a lot of great whisky was orphaned, and scrappy companies known 
as independent bottlers bought some of it, to resell to connoisseurs, 
usually in small editions and at high prices....
[....]  vox.com