India, whisky, and barriers to trade

India has announced that it will reduce its 550% tariff on Scottish whisky. The impetus? An Indian tycoon just bought Whyte & Mackay, one of the world’s largest Scotch whisky producers.

Alex Singleton criticizes the soon-to-be-gone tariffs:

Scotch producers are delighted, believing that they could see exports to India increase by a factor of four. Needless to say, this is exactly the opposite of what development campaigners would like to see. After all, whisky is an infant industry for India, and therefore needs “targeted protection”.

Back in the real world, targeted isolationism has had a dismal record over the past fifty years. Such isolationism breeds uncompetitive companies that fail to turn into profitable industries. It is much better for industries to be created that can actually compete in the here and now: they are the ones that really will grow into global players. Whisky is likely to be one such industry for India. Perhaps I haven’t been looking but I haven’t noticed Indian whisky on the supermarket shelves yet. I’m sure we’ll be seeing a lot more of it in the future.

Not so fast. You don’t see Indian whisky in the UK, but the problem isn’t Indian:

The term “western-style spirits” refers to products made in accordance with
internationally accepted industry standards (e.g., EU, WTO etc), which specify raw materials, aging,
level of alcohol by volume (abv), etc. Much of the whisky produced in India, for example, does not
qualify as “whisky” under the EU industry standards. The EU definition specifies that whisky has to
be made from cereals, at least 40% abv and aged for three years or more, whereas Indian whisky is
derived from molasses. [International Center for Alcohol Policies pdf]

I very much doubt that protectionism has hurt the development of the Indian whisky industry, considering the massive domestic market – Indians drink 570 million litres per year, making them by far the largest consumers of whisky.

While the Indian protectionism certainly deserved criticism – poor Kunal Doshi can only afford Scotch when drinking on his parents’ tab – the more relevant question now is whether the EU’s technical barrier to trade is reasonable consumer protection or unjustified nativism.