THE UK Government is using Scotch whisky as a bargaining chip to get a better deal with the EU, sources close to the negotiations have indicated.

Michel Barnier, the European Commission’s chief Brexit negotiator, wants the terms of the withdrawal agreement settled at a crucial summit next week to avoid the UK crashing out without a deal in March. Considerable attention has been given to the impasse over the Irish border, but there is also deadlock on the issue of “geographical indicators”.

These are labels which give legal protection to food and drinks from particular areas in the EU to stop them being imitated and sold cheaply by rival producers elsewhere.

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Scotch whisky is among the items protected, along with many others including Arbroath smokies, Scotch beef, Edam cheese, Champagne and Parma ham.

The European Commission has offered the UK Government a deal that would have protected all UK geographical indicators in Europe post-Brexit, but the UK refused to accept, failing to agree reciprocal protection for EU goods in the UK.

One of the most valuable GIs in the whole of Europe is Scotch whisky and The National has been told by a source close to the negotiations that there is a growing sense in Brussels that the reason an agreement in this area has stalled is because the UK has identified the industry as a potential “chip” in the Brexit talks.

Barnier made clear in his speech updating MEPs on Wednesday that a way forward on the subject had not been agreed.

He said: “Since the beginning of this negotiation, we have made good progress. In fact, as you can see in this copy of the draft treaty, 80 to 85 % of the withdrawal agreement has now been agreed with the UK.

“However, some difficult issues have been left until the end. We must agree on the governance of the withdrawal agreement and on geographical indications that are currently protected in the 28 EU member states. Above all, we need to agree on how to avoid a hard border between Ireland and Northern Ireland for political, human, and economic reasons.”

Scotch whisky was worth £4.4 billion last year to the economy north of the Border and is sold in around 200 markets across the world. It accounts for more than 20% of all UK food and drink exports, with the value of exports set to grow.

GIs were introduced by the EU in 1992, setting down measures to protect products and goods based on three categories: Protected Designation of Origin, Protected Geographical Indication and Traditional Speciality Guaranteed.

The UK which has 86 protected food names including 15 Scottish products.

Securing a GI for a product is likely to give that product a competitive advantage over rivals and add value to it. This is because a GI designation is seen as a guarantee of authenticity and quality and enhances the reputation of the product.

In addition, GI status ensures imitation products cannot easily enter the EU market.

In Brussels it is feared that if there is no future agreement on GIs, products such as Scotch whisky will not be protected and could face a threat from cheaper imitations.

Post-Brexit, the UK is keen to get a trade deal with countries such as USA and Australia, which do not have a GIs protections but operate a trademark system.

A spokesman for the Scotch Whisky Association said: “Scotch whisky’s protected status as a Geographical Indication is important to the success and value of our industry.

“The GI system provides robust legal protection for Scotch whisky, which helps us to defend it in our 180 export markets against fakes and anyone trying to sell products which claim to be Scotch but are not.

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“This means that when consumers in the UK and all around the world buy a bottle of Scotch whisky they can do so with confidence, knowing that what is in the bottle is Scotch and not a counterfeit product.

“It also helps the industry to generate higher and more stable export earnings. Scotch Whisky has been protected as a GI in the EU since 1989 and we fully expect this to continue post-Brexit.”

The Scottish Government said: “Scotch whisky producers and those behind our other iconic food and drink products need and deserve urgent clarity on this key issue.

“It is vitally important that we maintain our existing protected food names and other Geographical Indications following Brexit.

“Scottish Ministers will continue to make representations to their UK counterparts on the need to mutually recognise GI products with the EU – failure to do so would be deeply damaging, and this is a key test of whether the UK Government is willing and able to protect Scotland’s interests post-Brexit.”

A UK Government spokesman said: “Negotiations on geographical indications are continuing but we anticipate current UK GIs will continue to be protected by the EU’s GI schemes.”