Let me put it this way: it was an interesting journey.
I will contextualise what TTIP means for our industry and where our industry sits with regard to the United States. Altogether, our industry directly employs just short of 10,000 people. That figure does not include those who are indirectly employed in ancillary industries. We have a combined turnover of about £1 billion, producing gross value added of about £350 million. About £375 million of that turnover comes from exporting. The industry has in place a strategy that takes us beyond 2015, and we are working on a new strategy. We expect the impetus for growth to come through export markets.
Our industry has reached a stage in its evolution at which it is very much at the high added value end of the spectrum. We produce top-quality fabrics, garments, apparel and so on. Typically, our customers are some of the major global brands such as Louis Vuitton and Hermes. Our products go to those customers and are then exported to markets all over the world, primarily from France.
In Scotland, we are very much developing our own brand identity, which will be central to our growth. When we look at certain markets, it is clear where the potential for that growth lies: the far east. Japan, in particular, despite its economic problems, is still a hugely important market for us. Everyone talks about China, which is potentially a huge market, but there is a long way to go in development terms. The United States is the obvious market—it is the biggest luxury goods market in the world by some distance, so it is hugely important to us. There are all sorts of reasons why the US is an attractive market to approach. For example, we have a reasonably common language and there is a long history of understanding what Scottish luxury textile products are about. The made in Scotland brand is hugely important—I will come to that later.
Serious barriers to growth are currently in place, and we hope that an agreement comes. We are very much behind the need for such a transatlantic trade agreement. We are looking at tariffs, in particular. Unfortunately, tariffs are a huge issue for us, unlike for the whisky trade, not least because of the weird and wonderful discrepancies that exist. My colleague Benny Hartop will give details of that later.
The situation is really confused. Some products attract one level of tariff and others attract a much higher or lower level of tariff, which is extremely confusing. Furthermore, there is not a level playing field, because there are countries outwith the EU that have zero tariffs on their goods that go to the United States. We are competing directly with them, but we are competing very much at a disadvantage because those goods usually come from low-cost countries, the tariff rate is zero and we pay perhaps 14 per cent or more on some goods. That is a serious issue for us.
I mentioned the made in Scotland brand. There is some confusion about that at the moment. I confess that I am not quite clear about how the issue is developing, but there has been a suggestion that, in the negotiations, the American side is insisting on a definition for a country of origin label. For example, it is insisting that, for a made in Scotland label, at least three processes—I think—have to be carried out in Scotland.
On the face of it, that may sound quite sensible, but the reality in textiles is that we purchase a lot of our raw material from outwith the UK and from outwith the EU in some instances—it could be Australian or New Zealand wool—and that has traditionally been the case. We do not have the level of wool production in the UK to meet that demand, and other fibres such as cashmere come from outwith our shores because, despite the weather today, we do not have the extremes of climate for them. A very hot to very cold spectrum of climate is needed to produce cashmere, and we do not have that. Therefore, we often purchase our fibres from outside this country.
If the Americans are going to insist on the three-processes rule, that will perhaps mean that we cannot put a made in Scotland label on our products despite the fact that the entire process other than the purchase of the raw materials has been carried out here. However, we are not sure about that. If anyone is able to clarify the matter for us, that would be hugely useful.
There are other technical barriers, which Allan Hogarth has alluded to and which are serious matters for the industry. Having to employ a broker to ensure that goods are taken through customs in the United States adds a huge cost—it can add around 20 per cent to the cost of products. That comes about because the United States is—it seems to us from the outside—an incredibly bureaucratic country in many ways. That is certainly the case when it comes to customs regulations. Getting our goods into the United States can be a headache.
There are also other issues. Allan Hogarth alluded to testing standards, which are extremely important in textiles. They, too, can be very confusing and costly, and they duplicate what is going on elsewhere. That is a serious issue. Manufacturing and identification codes are another issue. The Americans have one system and we in Europe have another system. We need a degree of harmonisation so that we know that we are talking about the same sort of thing.
Those are the key barriers. They are technical barriers, but they are barriers nonetheless. We have the product and we have the service to go along with it. The United States presents a fantastic opportunity for us to grow our business there, but we need a level playing field. We should not be competing against low-cost countries that have very favourable tariff rates, which is not helping us at all. We also need to have other technical barriers removed or, at the very least, harmonised. Overall, that is our position.
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