EU Opens Tariff Suit Against India - Truth About Trade and Technology

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Tuesday, 23 September 2008 07:37

The Wall Street Journal
John W. Miller
Original Publish Date: September 22, 2008

Brussels - The European Union opened a new complaint Monday against India at the World Trade Organization over high import tariffs on wine and spirits levied by some Indian states.

The EU suspended a previous suit against federal Indian tariffs in July 2007 after New Delhi agreed to reduce some of those duties. But after those changes failed to increase EU exports to India, Brussels decided to resume litigation Monday.

"[New Delhi] took actions at federal level, but some of the states still have prohibitively high tariffs," said EU spokesman Peter Power. Maharashtra, one of India's 28 states, levies a 200% tax on imported wines, while the state of Goa adds a "label-recording" fee to imported wines and spirits, according to the Brussels-based European Spirits Organization.

At stake is access to one of the world's biggest alcohol markets. The Indian market for whiskey, gin and other spirits in 2007 was equivalent to 130 million 12-bottle cases, the EU said.

Last year, the EU shipped only $107 million worth of wine and spirits to India. That was up from $74 million in 2006 but still less than the EU sold last year in Ukraine, a country with less than 5% of India's population. Overall, the EU exported $56.7 billion worth of alcohol in 2007.

Should the EU win its WTO case, India must change its tariff laws or face the threat of the EU putting retaliatory tariffs on Indian goods it imports such as fruits and nuts, steel and textiles.

Indian trade officials didn't return calls seeking comment.

As its manufacturing base has declined, the EU increasingly has staked its exporting success on services and high-value consumer goods like cars, drugs, and wine and spirits, in addition to mainly German capital goods. European companies such as Pernod Ricard SA and luxury goods maker Louis Vuitton SA, which owns the Moet & Chandon champagne and Hennessy brandy brands, well as big winemakers have been lobbying the EU to fight on their behalf, according to EU officials.