Duty free lobby’s message in a bottle

Date: 31/07/1997

By Chris Johnstone

ON THE ferry at the port of Dover, a spotty youth distractedly hands out leaflets to passengers keener to head for the toilets, bar, duty free and, finally, the Continent than to stop and read the contents.

Those who could be bothered to do so would learn that future detours to the duty-free shop are threatened by an EU death sentence in 1999. Protest to your local MEP or MP, contact your newspaper and local radio station, shout from the rooftops, exhorts the leaflet as it rails against the threat to the travellers' harmless perk.

In truth, the voice of Europe's travelling masses is currently a side-show to a more subtle Brussels-centred campaign as the drinks industry, ferries, perfume companies, airports and airlines campaign to save a large slice of their multi-million ecu duty-free sales under threat from the planned ban.

But the masses may yet be unleashed and cash spent on an expensive publicity campaign if the former strategy does not appear to be paying off.

There are already some in the duty free lobby who are becoming increasingly edgy at the low-key approach to the present campaign. So far, their desire to launch a full frontal attack on the European Commission, using all the marketing know-how the industry undoubtedly has at its fingertips, has been muzzled. That might change as the clock ticks away towards the deadline without any sign of a reprieve.

The campaign - battle is not a word the duty free lobby wants to use just yet for fear of appearing too confrontational - will take a decisive turn in the autumn.

Then, the industry is hoping to see some return for its more subtle attempts to attract a ground swell of support for the Commission to carry out a long-promised study into the effects of abolition before it takes an alleged leap into the dark.

That report occupies the thoughts and minds of the small group coordinating the industry's campaign from its office in Brussels which conveniently, but perhaps uncomfortably, faces the Commission's own headquarters in the city.

All the attention of the International Duty Free Confederation (IDFC) is focused on the last meeting this year of the EU's economics and finance ministers. It is hoping that ministers will be possessed by pre-Christmas goodwill and call for the Commission to carry out a study into the social and economic effects of abolition.

So far, the Commission has resisted the move. It says, in short, that there is no point in carrying out a study which, it predicts, will confirm its own arguments that this single market anomaly should disappear. However, the IDFC hopes the European Parliament and some governments may be won around and insist that the research be done.

A positive study - one that confirmed the lobby's cataclysmic scenario of thousands of job losses, ferry closures and more expensive airline travel - could provide the diplomatic cover for Internal Market Commissioner Mario Monti to soften his current refusal to even countenance any reprieve for duty free.

In a less likely scenario, it could also provide the argument for national finance ministers to force Monti to rethink his line if he does not appear willing to do so voluntarily.

Those hoping to be the saviours of duty free see more chance of success in the European Parliament, given that its economic and monetary affairs committee has already called on the Commission to come up with the report, which was first promised to MEPs in 1991.

Such champions of the single market as the committee's chairman, German Christian Democrat Karl von Wogau, are described by close advisers as keen for the study to be carried out, but ambivalent - ahead of seeing its results - about whether duty free should stay or go. “There is broad-based political support for that position. Many are backing a report but reserving their final position,” said Chris Scott-Wilson, head of European affairs for beer and spirits producer Guinness and a close follower of the issue.

The Parliament could, if pushed, take the step of voting at a full plenary session to put extra pressure on the Commission and ministers to reopen the dossier, he adds.

An informal group of MEPs from all countries and political colours has also been established to look at the issue. “We feel that was a great success. Some 80 MEPs joined the intergroup, which is an almost unheard of total,” said IDFC public relations manager John Hume.

The Parliament is already planning a hearing on the social and economic consequences of abolition on 29 October at which all interested parties will be invited to speak.

The stance of national governments appears much harder to call, even though they are the key to the whole question.

Ministers decided duty free should end in June 1999, after giving it a seven-year stay of execution, and they could decide once again to give it more time or even an indefinite reprieve.

Last time the issue was raised by the Irish presidency at the tail-end of last year, the then Irish Finance Minister Ruairi Quinn received a blunt rebuff from his colleagues when he suggested that they rethink the ban. To Quinn's surprise, the ex-UK Finance Minister Kenneth Clarke was in the front line of the attack.

But the new British Labour government has signalled that its position might be different.

Since taking office, Dawn Primarolo, financial secretary to the treasury, has said that the government is not opposed to a study on the effects of abolishing duty free and the UK's transport minister took the same stance when Finland raised the question at a mid-June meeting of EU ministers.

Germany, too, is changing its position. Bonn's transport minister backed the Finns in June, with the economics ministry also supporting a study. “Only the finance ministry appears riven by internal divisions,” said Thorsten Haeberlin, assistant board manager of the German Duty Free Association.

He added that rising unemployment in northern Germany, where shipyards are closing down and the tourists have departed for sunnier destinations, makes the possible loss of a further 3,000 jobs through the abolition of duty free a sensitive issue.

In the constant flux, the Netherlands, Denmark and Sweden are singled out by some in the duty free lobby as the biggest opponents of a report and review of abolition.

Ironically, Swedish ferries are pinpointed by the Swedish Board of Shipping as likely to be among the worst sufferers from the disappearance of duty free, with average passenger income down by between 40&percent; and 50&percent;.

“In each country there is a measure of tension between some departments such as transport, which are worried about the consequences of abolition, and fiscal ministries,” said Scott-Wilson.

Luxembourg, the current holder of the EU presidency, is seen as sympathetic to the duty free lobby, but wary of showing its support too openly.

“It is worried that the abolition of duty free might be the start of an attack on some of its particular tax regimes,” said one observer.