EU BACKS OFF CHALLENGE TO INDIAN WINE, SPIRITS TARIFFS

The EU has suspended its WTO challenge to India's duties on wine and spirits, following New Delhi's decision earlier this month to eliminate a series of taxes on wine and spirits imports (see BRIDGES Weekly, 4 July 2007).

Prior to the recent change in policy, a series of charges had pushed total taxes on foreign wines and spirits had reached as high as 550 percent, well above the New Delhi's bound ceiling tariff rate at the WTO of 150 percent. After years of complaining that Indian spirits taxes were out of step with WTO rules, the EU and the US both launched separate but similar disputes against New Delhi at the global trade arbiter.

The tax removal marks New Delhi's first measurable response to the challenges. However, the Indian government at the same time raised its basic wine tariff from 100 percent to 150 percent, within its legal WTO limit, a move that displeased the EU.

The EU will put its challenge on hold for up to a year, during which time the 27-member bloc will "continue to monitor the situation on the ground to make sure that no new discriminations appear at state level," according to an official statement from the European Commission. In India, liquor taxes may be imposed at both the state and national levels.

Under WTO rules, the three-member dispute panel that was established in April to investigate the case can stay in place for up to one year (see BRIDGES Weekly, 25 April 2007).

Thanks to the high tariffs, India, the world's largest whiskey market, currently imports only 15 percent of the wine and less than 1 percent of the spirits consumed in the country.

Exports of spirits from the EU to India totalled $32.9 million in 2005; following the recent tariff removal, however, that number is expected to grow dramatically.

It remains unclear whether the US will similarly suspend its WTO challenge to the Indian duties following the recent tariff removal.

"EU halts WTO's India alcohol case," BBC NEWS, 16 July 2007; "EU Drops WTO complaint over India's liquor duties," BLOOMBERG, 16 July 2007; "EU welcomes India's move on wine, spirits trade," REUTERS, 4 July 2007.

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CTE: NO MOVEMENT UNTIL PROGRESS ON AG, NAMA

The Doha Round negotiations on trade and environment saw little movement last week, as Members' attention focused on the potential draft compromise deals tabled by the chairs of the agriculture and industrial market access talks.

The 18 July formal meeting of the special session of the Committee on Trade and Environment (CTE) marked the first under the new chair, Ambassador Mario Matus (Chile).

Members did not discuss the liberalisation of trade in environmental goods and services, part of the Doha mandate on trade and the environment.

On the relationship between WTO rules and specific trade obligations present in multilateral environmental agreements (MEAs), Norway expressed support for a 2006 proposal by the EU submission recognizing no hierarchy between the two (TN/TE/W/68, available at http://docsonline.wto.org). The EU suggested that Members try to find a compromise between this text and a proposal from Australia and Argentina (TN/TE/W/72/Rev.1) for the talks to yield little more than a report summarising discussions in the committee. New Zealand said it also would table a proposal on the issues, pending an outcome in the negotiations on agriculture and industrial market access.

Trade sources said that informal discussions on information exchange and observer status of MEAs at the WTO (mandated by Paragraph 31(ii) of the Doha Declaration) centred on new informal draft language introduced by the chair.

Members broadly agreed on the need to include UNEP in the information exchange sessions, particularly in recognition of the role the programme played in capacity building. Brazil suggested that UNCTAD be granted similar access.

The observership issue was more contentious. The EU, which wants to see observership granted to a number of 'core' MEAs (TN/TE/W/66), stated that the chair's text did not reflect the mandate, questioning the value of its list of questions aimed at determining how to grant observership status (see BRIDGES Weekly, 4 April 2007). Argentina, echoed by many other delegations, called for confining the debate to observership criteria.

Matus emphasised that he did not intend the suggestion to serve as a 'negotiating text', and that further discussions in informal mode would be required to move the issue forward.

The next formal special session of the CTE is scheduled to take place on 1 October.

ICTSD reporting.