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EU steps up fight against India's spirit tax

By Chris Mercer, 27-Mar-2007

Related topics: Financial

The European Union this week escalated its dispute with India over the country's import tariffs for wine and spirits, calling on the World Trade Organisation to intervene.

The move follows more than two months of faltering talks between the two sides, and will now require the World Trade Organisation (WTO) to rule on the legality of India's import tariffs.

 

 

 

Wine and spirit producers from Europe and elsewhere have become increasingly frustrated at import tariffs in India, which they see as a lucrative emerging market.

 

 

 

European Commission officials have already branded India's tariffs a "blatant violation" of WTO rules, following a Commission report on the subject published last summer.

 

 

 

It opened a consultation period with India at the WTO late last year, but said this week it now wanted the dispute to be considered by the WTO Dispute Settlement Body when it meets on 11 April.

 

 

 

"As we could not resolve our dispute in consultations, the EU sees no other way than to request the establishment of a WTO panel. We are of course not closing the door to an amicable solution - but the ball is now in India's court," said trade commissioner Peter Mandelson.

 

 

 

Earlier this month, the US also complained about India to the WTO, opening its own consultation period.

 

 

 

It said exports to India remained low because drinks firms must pay duty tax in imports at rates ranging from 150 to 550 per cent.

 

 

 

Drinks firms from both the EU and US have supported and pushed for WTO action to open up the Indian market.

 

 

 

Scotch Whisky makers have been some of the most vociferous opponents of India's tariffs in Europe, and have publicly called for a WTO ruling in recent weeks.

 

 

 

Exports of Scotch Whisky to India have been growing in high double figures even with the tariff barriers, but only made up one per cent of the country's 100m-case whisky market in 2005.

 

 

 

Wine firms could also profit from lower tariffs in India, although the country's wine market remains very small.

 

 

 

"Alongside China, India has the potential to become the world's largest wine consumer, even beating the US, within the next 10 years," a European Commission spokesperson told BeverageDaily.com.

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