Geneva: The World Trade Organization established a panel on 25 April to examine India’s import duties on European wines and spirits, formally starting an investigation that could soon involve the United States.
The panel will examine whether wine and liquor restrictions in a number of Indian states comply with international trade rules.
“This is a long-standing issue and of very serious concern,” EU trade negotiator Raimund Raith told the WTO’s dispute settlement body.
India’s basic import duties 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 540%, depending on the Indian state they are being sold in.
The state of Tamil Nadu goes further still, shutting out foreign alcohol and allowing shops to sell only Indian-made spirits and wines.
India, which had previously indicated it would consider cutting duties to avoid deepening the dispute, said it was “disappointed that (the EU) has chosen to pursue the matter further.”
The two governments had “constructive, fruitful consultations” in the hope of reaching a settlement, India told the WTO. However, it added that it was “confident that the panel will find that measures are consistent with India’s WTO obligations.”
India blocked the EU’s first request for a WTO investigation earlier this month, but could not delay the panel’s establishment at the second time under the commerce body’s rules. A WTO case can result in punitive sanctions being authorized, but panels take many months and sometimes years, to reach a decision.
The US is still in consultation with India, but can ask for its own formal investigation next month if the two sides are still at odds over the surcharges. It could also seek to join in the EU-India dispute as a co-complainant.
Washington told the Geneva-based trade referee two weeks ago that the extra duties appeared to violate international trade regulations.
India is one of the largest markets for alcohol in the world, according to the EU, with huge potential for growth.