Ms Patricia Callan:

The Alcohol Beverage Federation of Ireland is also part of IBEC and we represent drinks manufacturers and distributors within the State. Unusually within IBEC, we are an all-Ireland trade body and we also represent member companies in the North of Ireland, with a total of 48 companies. The ABFI comprises five category trade associations looking after category-specific issues, including the Irish Brewers Association and associations for cider, spirits, whiskey and wine.

The Irish drinks industry operates on an integrated all-island basis with a particularly entwined sector in terms of production processes and supply chains. We have three cross-Border geographic indications, which means Irish whiskey, Irish Cream and poteen are protected by the EU in a similar manner to champagne in that they can only be made on the island of Ireland. We had four distilleries in 2014 but, following much investment, we now have 21 operational distilleries with another becoming operational in the coming weeks and a further 26 in planning. That global protection means the investment is much stronger.

We are seeing a rise in fake products being sold in third markets along with the rise of Irish whiskey as the fastest growing spirits category in the world. It was welcome to see in the withdrawal agreement that this protection will be replicated by the UK because we will rely on both jurisdictions to help us enforce that. Members will have received our position paper with the title, Brexit and the Irish drinks industry, in which we focus on future priorities and the future relationship. It is premised on the presumption that we will end up with an agreement rather than a no-deal scenario.

Some €1.6 billion of drinks products were exported from the island of Ireland in 2017, with €1.2 billion coming from this State. According to the Central Statistics Office, the aggregate value of trade in drinks products between the UK and Ireland in 2017 was €364 million, one third of which, €121 million, was the aggregate value of North-South trade. The spirits sector is a very big part of the economy of the North of Ireland.

The integrity of glass is essential for our products from a food safety perspective and more than 130 million glass bottles are imported into the State from the UK every year. In the event of no deal, tariffs would apply to these imports. Businesses are stockpiling, which means there are already shortages in core products. We physically cross the Border with more than 23,000 truck movements annually, over 5,000 of which are alcohol tanker movements with products made in one jurisdiction and bottled in another. The growth brought about by investment in the industry means we are using bottling sites across the country.

We are watching the vote in the House of Commons very closely and we have been liaising directly with the British Government and representatives of our Northern Irish members. While not perfect, the withdrawal agreement represents the best possible approach to Brexit and we are strongly of the view that no deal would be seriously damaging to the Irish and UK economies, including the all-island drinks industry. The potential consequences include the lack of continuity in legal protection for Irish cross-Border geographic indicators in the UK; immediate tariffs on cream, barley, malt, glass bottles, apples, finished cider and other supply chain inputs; and regulatory and custom checks at the Irish Border leading to additional delays and costs, with each one-hour delay for a truck costing €100. There will also be a requirement for upfront VAT payments at point of entry on cross-Border trade, which would have massive cashflow implications for business. We currently have a very sophisticated excise control movement around the EU and if the UK does not replicate that, it poses very serious challenges as we are required to pay excise as we cross borders and face physical checks. We would also see regulatory divergence across a range of standards, from labelling to bottle sizes. The benefit of being in the EU Single Market is that those costs are reduced for businesses.

The adoption of the withdrawal agreement, therefore, represents the surest way to avoid these impacts. The Government and State agencies have done a great job and members in the North have had nowhere near the amount of supports, education, awareness and proactivity that members here have received from the likes of Bord Bia, Enterprise Ireland, the Revenue Commissioners and InterTrade Ireland. With historical listings in the European Investment Bank, distilleries and spirit producers have so far not been able to access the Brexit loan schemes the Government introduced. The application last year was completely prohibited because European investment funding was involved and the spirits category is blacklisted for this purpose. We understand the Government is working very hard to ensure its future growth loan schemes and the scheme announced in this year's budget will be available to members. We look forward to a satisfactory resolution of this issue.

Ireland has benefited greatly from access to EU-backed free trade agreements globally. Scotch whisky is a key element of these agreements because so much is exported and it is very important for putting the drinks sector at the heart of its many agreements. Once outside the agreements, however, Irish whiskey and Irish cream will be the second and third biggest exports in this sector. We need to work very hard to ensure the EU continues to prioritise us in free trade agreements. The recent EU agreement with Canada abolished outstanding tariffs on Irish cream liqueur and Irish gin. All alcohol is bought by the state in Canada and specific tenders have been issued, meaning many of our smaller members, such as in the Irish gin sector, are being listed. It is a fantastic boost to them and it is working really well for us. We are positive about global trade agreements and have been inputting with European colleagues into potential free trade agreements with Australia, New Zealand, Vietnam and the Mercosur bloc, all of which is very positive. We are in 140 markets globally but we want to expand that number.

Free trade agreements, on their own, do not increase exports. We also need to upskill our companies. In our industry, cider has the greatest exposure to the UK, with 85% of all cider exports going to the UK in 2017 according to CSO export volume figures, compared to 71% for beer. They are the two areas on which we need to focus for product diversification into new markets and this needs to be done with direct supports, such as participation in trade shows, and the provision of sales and marketing staff in international markets. Having feet on the ground and having global brand ambassadors are essential for growing brands and we would like to see more investment by the Government in these areas.

We would also like more effective and robust market intelligence, not only in the area of the demographics of countries but into what our competitors are doing and where opportunities may lie. The State can certainly assist us with this. Category promotion, in the form of trade missions, is absolutely vital and a drinks element needs to be built into every trade mission on which a Minister goes.

While free trade is often primarily viewed as a matter of tariffs, the issue of technical barriers to trade is equally important. One of the key areas in the EU where there has been harmonisation is around labelling but, recently, the Government has sought to introduce a barrier to trade and has, indeed, created regulatory divergence on this island, North and South, with country only labels for Ireland under the Public Health (Alcohol) Act 2018. This measure will deter small beer, cider, wine and spirits producers from exporting to Ireland, including the Northern Irish gin producers for whom Ireland is one of their major markets.

The costs will be substantial. It is important to look at that and implement it in as practical a way as possible. We have asked the Minister for Health to establish an implementation group and would welcome the committee's support in that regard. I thank the members for the opportunity to make the submission. We look forward to answering any questions members have.