India blocked a WTO investigation of its import duties on US wine and spirits yesterday, temporarily delaying a US government complaint over allegations that Indian rules discriminate against products such as Napa Valley wine and Jack Daniel's whiskey.
The Geneva-based trade referee was already reviewing a European legal challenge of wine and liquor restrictions in a number of Indian states. A second investigative panel examining Washington's arguments will almost certainly be established at a meeting later this month of the WTO's dispute settlement body.
"The layers of customs duties India applies to US products, in particular to wine and distilled spirits, are not in line with its WTO commitments," US Trade Representative Susan Schwab said last month in announcing plans to seek litigation. "We must ensure a level playing field for US products around the world."
India's basic import duties on wine are 100 percent, while the tariff on spirits is 150 percent, both within WTO limits. However, various government surcharges take the tariffs up to levels reaching as high as 550 percent, 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 US, the EU and Japan, by contrast, allow nearly all spirits to enter their markets duty-free. China tacks on only a 10 percent charge on foreign liquor.
Under WTO rules, a second request for a formal investigation is automatically approved. A 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 said wine sales in India through special duty-free rules, such as at airports and luxury hotels, grew 350 percent between 2000 and 2005. The growth was 200 percent for US liquors.
But high import duties imposed on the vast majority of US wines and spirits meant total exports remained low, the US said. The Distilled Spirits Council of the United States estimated that all foreign liquors accounted for less than 1 percent of the Indian market.
The 27-country EU, in making its complaint, said India bought 23.3 million euros (US$31.3 million) in European spirits in 2004 -- from French cognac to Finnish vodka -- and 4 million euros in Bordeaux, Chianti, Rioja and other European wines.
This compared with global European spirits exports amounting to 5 billion euros and wine exports of 4.5 billion euros each year.
It was unclear if the US and the EU would seek to become co-complainants by combining their separate WTO cases.
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