The European Union has temporarily suspended its World Trade Organisation (WTO) complaint against India over the latterâ€™s duties levied against European wine and spirit imports.
The EU welcomes the Indian decision to respond to EU pressure by repealing these discriminatory duties, Peter Power, spokesman for EU Trade Commissioner Peter Mandelson, said on Monday, announcing the panel suspension.
EU wines and spirits exporters deserve a level playing field in India. This decision brings us closer to that goal, the spokesman said.
The EU move to drop the WTO complaint comes two weeks after India announced that it was revoking the additional duties it charged on wine and spirits, up to 550 percent in some cases. The United States and EU had brought the claims to the Geneva-based trade referee.
EU officials, however, said it regretted that India was raising its basic duty on wines to 150 percent from 100 percent, which is still within the country's WTO limits. India's import duty on liquors, which also reaches as high as 150 percent, remains unchanged.
It said it would continue to monitor the situation in case new forms of illegal discrimination are introduced.
India is one of the world's largest markets for alcohol with a huge potential for growth, but imports account for a meager share of total consumption. Brussels and Washington complained that the tariffs represented unfair trade barriers keeping foreign countries from competing in India's market.
Meanwhile, the United States said it was continuing with its separate WTO probe.
India's scrapping of the additional duties was a positive step, said Stephen Norton, a spokesman for the Office of the U.S. Trade Representative. But he said Washington would continue its case against India until the concerns raised in the dispute are resolved.
The U.S. said wine sales in India through special duty-free rules, such as at airports and luxury hotels, grew by 350 percent between 2000 and 2005. The growth was 200 percent for American liquors.
However the total volume of U.S. exports remained low because of the high import duties, Washington said. The Distilled Spirits Council of the United States estimates that all foreign liquors together account for less than 1 percent of the Indian market.
India bought 9.3 million euros ($12.8 million) worth of Burgundy, Chianti, Rioja and other European wines and 43.3 million euros worth of European spirits in 2006, from French cognac to Finnish vodka.
India's 1.1 billion strong population and fast-growing middle class represent a potentially huge market for wine and spirits exporters.