Reports about the death of duty-free shopping may have been exaggerated. Last night's decision by Germany to back French demands to delay the proposed abolition for a further five years, will encourage those who believe that the battle is not yet lost. The EU Commission and several EU states remain firmly committed to the abolition of (intra-EU) duty-free sales from July next, as already agreed by EU Finance ministers in 1991.
But, with Germany poised to push the case for a lengthy delay during its forthcoming EU presidency, the situation has dramatically changed. In truth, a battle has been won, but the war could still be lost. Any agreement to overturn the 1991 decision to abolish duty-free would require the unanimous approval of all other EU states and this is not forthcoming at present. For all that, the Government, which has worked valiantly to reopen the duty-free debate, will be encouraged by yesterday's development. Aer Rianta estimates that some £70 million of business and some 4,000 jobs are threatened by the proposed abolition. Yesterday's decision also represents a significant victory for the duty-free supporters who have run one of the most professional lobbying campaigns ever seen in Brussels.
The recent revelation that European commissioners will continue to enjoy their huge tax-free allowances when duty-free shopping is abolished, was a public relations bonanza. The duty-free lobby will be particularly encouraged by Britain's decision to support, for the first time, an extended time-frame for abolition.
But the case advanced by the Commission for the abolition of duty-free has much to recommend it. Duty-free shopping represents a highly questionable subsidy to the travelling public and to duty-free retailers and the very concept of duty-free shopping is out of kilter with a border-free, single market Europe where tax and excise duties are harmonised. The problem is that the reality of today's EU has still to match this lofty ideal. As a result, duty-free shopping remains very popular with travellers, notwithstanding the profiteering evident at some airports and ferry terminals.
Travellers between this State and Britain or between Finland, Denmark and Sweden clearly believe that duty-free shopping delivers cheaper prices. It may be that the fears of the duty-free lobby are overstated. Experience in the US and elsewhere suggests that travellers will continue to spend heavily in glossy shopping malls at airport terminals and the like - even without the incentive of duty-free purchases. There is also undoubted potential for increased sales for duty-paid items like perfume and cosmetics. But few fair-minded people would dispute the view that abolition could lead to heavy job losses across the EU - by some estimates over 140,000. In these circumstances, it is right that EU ministers should pause and reflect on the potential consequences. The French finance minister, Mr Dominque Strauss-Kahn went to the kernel of the issue yesterday. The case for the abolition of duty-free has been successfully made, but more time is needed, he said, to consider the practical consequences for European citizens and for employment.