The Government's strong rearguard action against the proposed abolition of intra-EU duty-free sales appears to have lost much of its momentum after yesterday's critical meeting of EU finance ministers in Brussels. Despite intensive lobbying by the Government, a clear majority of EU ministers were reluctant to revisit the issue.
The Government is hoping that the EU will agree to turn back the clock and rescind the decision made seven years ago to abolish duty free within the Union from July of next year. There was some optimism that ministers would, as a first step, support an EU-wide survey on the economic implications of abolishing duty free. But Ireland failed to muster the support of more than three other states - France, Germany and Spain - despite a virtual tidal wave of publicity about the potentially calamitous effects of abolishing duty free. SIPTU has estimated that the proposed abolition in July 1999 would lead to 9,000 job losses primarily at airports and ferry terminals at Dublin, Rosslare and Cork. It has also been estimated that ferry and air fares could increase by at least £15 per journey as airports and ferry companies move to recoup lost revenue. Other grim scenarios have been spelt out; Aer Rianta says that some £70 million worth of business is at risk and heavy job losses in industry have been predicted.
It may be that these fears are overstated. Experience in the US and elsewhere suggests that travellers with ample time on their hands - and money in their pockets - do not necessarily require the lure of dutyfree goods to spend heavily. In truth, there is scarcely an airport in the US without a lavish shopping mall, testimony to the fact that travellers regard shopping as an integral part of the journey - even without duty free. It might also be noted that the most recent consultants report on the proposed abolition predicted far less serious consequences than were previously feared. The KPMG study for the Department of Finance said that just over 1,100 jobs directly involved in duty-free sales would be at risk. It also pointed to the potential for increased sales of duty-paid goods like perfume and cosmetics.
Objectively, the case for the abolition of duty free is a strong one; the concept is an anachronism within a single market. And it represents a highly questionable subsidy to the travelling public and to duty-free retailers. The duty-free lobby has fought a strong rearguard action to overturn the proposed abolition; it has raised provocative questions about the potential risks to jobs and about the `user-friendly' nature of the EU. But, barring some unforeseen development, it may be that the battle has been lost - and that the industry must now set about preparing a new business strategy.