SWA + EU + WTO vs. India

I applaud the Scotch Whisky Association for continuing to prosecute India in the world arena for India's continued discrimination against European spirits & wine.

The SWA has successfully helped to bring the issue before the European Commission. The next step is to take the issue before the World Trade Organization (WTO).

I've written about the issue several times in the last few months:

Just because you keep saying it, it doesn't make it true... & The issue with Tariffs

The issues, in a nutshell:

• Discriminatory tariffs against imported spirits and wine:
  • up to 550% on Scotch whisky
• Unfair trade balance as a result of the above:
  • India is an important emerging market for Scotch whisky, buying exports worth £25.9m ($49.4m, €38.4m) last year, but this was less than 1 per cent of India’s spirits market.
  • In contrast, all Indian spirit drinks are imported into the EU tariff free.
• Misleading branding & labeling of Indian spirits to appear as though they may be from Scotland
• The continued attempt by Indian producers to label sugar cane/molasses based spirits as "whisky"

According to an article in the Monday August 7 2006 Financial Times:

The Commission said the size of the Indian market for spirits in 2004 was estimated at 87m nine-litre cases, making it a big international market for spirits and the world’s largest market for whisky.

I strongly disagree with the conclusion of this statement. These sugar cane/molasses based spirits are in effect Rum** and not Whisky*.

I can assure you that Indian molasses-based "whisky" bears little resemblence to the grain-based whiskies of Scotland. As such, you can't assume, even at a parity price, that the citizens of Indian would immediately have a taste for what we think of as whisky.

Just as tequila, rum and Scotch, while are all alcoholic beverages, have significantly different taste profiles, such it is with Indian "whisky" and Scotch.

But hopefully the WTO will allow the Indian consumer to make the decision, by removing the barriers and letting Scotch compete on flavor.

And now the full text of the Financial Times article:

---

EU threatens India over whisky tariffs

By Andrew Bolger

India will be referred to the World Trade Organisation unless it ceases to discriminate against European spirits and wines, the European Commission has warned.

The eight-month investigation by the European Commission confirmed that India’s duty system amounted to “blatant violations” of WTO rules and unfairly distorted competition by subjecting imported bottled spirits to a much higher tax burden – up to 550 per cent on Scotch whisky – than faced by Indian distillers, with the effect that “the Indian market has remained essentially closed for imported wines and spirits”.

In a strongly worded report, the Commission noted the refusal of India to co-operate with the investigation and recommended that unless it moved to “rapidly abolish” its discriminatory duty arrangements for whisky and other imported spirits, the EU should start WTO dispute settlement proceedings in Geneva.

The Commission said the size of the Indian market for spirits in 2004 was estimated at 87m nine-litre cases, making it a big international market for spirits and the world’s largest market for whisky.

India is an important emerging market for Scotch whisky, buying exports worth £25.9m ($49.4m, €38.4m) last year, but this was less than 1 per cent of India’s spirits market. In contrast, all Indian spirit drinks are imported into the EU tariff free.

Gavin Hewitt, chief executive of the Scotch Whisky Association, said: “We hope that India will now swiftly bring its fiscal regime into line with international trade rules without the need to resort to a WTO panel hearing in Geneva. However, if no early change is made, we support the recommendation that the issue should be referred to the WTO.

“Scotch whisky producers have campaigned for years for fair market access to India. A non-discriminatory duty regime would offer Indian consumers more choice at a reasonable price, boost Indian government revenue and introduce a fair, level playing field for international producers.”

The report said the Indian market for wine was small in comparison with spirits, being about 667,000 nine-litre cases per year. But the market was regarded as having considerable potential.

---

From the US Code of Federal Regulations Title 27, Part 5, §5.22 - The standards of identity:

* (b) Class 2; whisky. “Whisky” is an alcoholic distillate from a fermented mash of grain produced at less than 190° proof in such manner that the distillate possesses the taste, aroma, and characteristics generally attributed to whisky, stored in oak containers (except that corn whisky need not be so stored), and bottled at not less than 80° proof, and also includes mixtures of such distillates for which no specific standards of identity are prescribed.

** (f) Class 6; rum. “Rum” is an alcoholic distillate from the fermented juice of sugar cane, sugar cane syrup, sugar cane molasses, or other sugar cane by-products, produced at less than 190° proof in such manner that the distillate possesses the taste, aroma and characteristics generally attributed to rum, and bottled at not less than 80° proof; and also includes mixtures solely of such distillates.