Potsdam: The World Trade Organization decided on 20 June to examine US claims that Indian import duties unfairly discriminate against American wines and spirits.
The WTO launched its investigation after the United States made a second request for the Geneva-based trade referee to rule on the Indian fees applied to products such as Napa Valley wine and Jack Daniel’s whisky, trade officials said.
Under WTO rules, the establishment of an investigative panel can only be delayed once. India blocked Washington’s first request at the WTO’s dispute body earlier this month.
Top US and Indian trade officials meeting in Potsdam, Germany, for global commerce liberalization talks were unavailable for comment.
The basic import duties in India on wine are 100%, while the tariff on spirits is 150% , both within WTO limits. However, various government surcharges take the tariffs up to levels reaching as high as 550%, depending on the Indian state.
The state of Tamil Nadu goes further still, shutting out foreign alcohol and allowing shops to sell only Indian-made spirits and wines.
The United States, the European Union and Japan, by contrast, allow nearly all spirits to enter their markets duty-free. China tacks on only a 10% charge on foreign liquor.
The WTO is already reviewing a European legal challenge of wine and liquor restrictions in a number of Indian states. A WTO case can result in punitive sanctions being authorized, but panels take many months, and sometimes years, to reach a decision.
India is one of the largest markets for alcohol in the world and has huge potential for growth.
The US says wine sales in India through special duty-free rules, such as at airports and luxury hotels, grew by 350% between 2000 and 2005. The growth was 200% for American liquors.
But high import duties imposed on the vast majority of American wines and spirits means total exports remain low, the US says. The Distilled Spirits Council of the United States estimates that all foreign liquors together account for less than 1% of the Indian market.
The 27-nation EU, in making its complaint, said India bought 23.3 million euros (US$31.3 million) worth of European spirits in 2004 _ from French cognac to Finnish vodka _ and 4 million euros (US$5.4 million) worth of Bordeaux, Chianti, Rioja and other European wines.
That compares with global European spirits exports amounting to 5 billion euros (US$6.7 billion) and wine exports of euro 4.5 billion (US$6.1 billion) each year.
It is unclear if the US and the EU will seek to become co-complainants by combining their separate WTO cases.