The Hindu Business Line : Dispute uncorked

When early in March Washington lodged a formal complaint at the World Trade Organisation against the Indian import duty rates on wines and spirits, it was widely assumed that there was some sort of convergence in the policies adopted by Brussels and Washington on the issue, and that it was only a matter of time before substantive moves were made in Geneva by both the US and the EU through the WTO disputes settlement mechanism. Last week, the strategy was given teeth when, responding to an end-March request by Brussels (which had lodged an initial complaint late last year) to set up a disputes resolution panel, the WTO gave formal notice of agreeing to do so. It is to be expected that Washington will act soon, thus leading to a joint panel being set up on the issue as per WTO dispute settlement guidelines.

New Delhi, which must be aware of this strategy, has argued that Brussels should have "chosen to pursue the matter further" especially in the light of the assurances given by the Indian side following "constructive, fruitful consultations" that it would consider cutting the duties to avoid deepening the dispute. In fact, the hope has even been expressed that the panel "will find the measures (to be) consistent with India's WTO obligations." As matters stand now — with effective import duties on wines and spirits far in excess of the 150 per cent bound rate allowed for India — this hope is a bit far-fetched. But, then, as one school of thought would argue, all is not lost because, till the panel completes its investigations (which should take around 10 months), there is enough time for New Delhi to introduce legislation that would enable States levy imposts on wine and spirit imports at par with taxes levied on domestic brands, thus meeting the WTO criteria of meting out "national treatment" to foreign products as well as keeping bound rates on the items concerned at the basic Central Customs-duty level.

It is safe to assume that Washington and Brussels have taken into account such a stratagem while going ahead with the dispute-resolution initiative, their argument probably being that disaggregation of the various rates was not countenanced when the bound rates were conceptualised and fixed for each WTO member. Clearly, since the bound rates must be honoured as `effective' rates if the WTO structure of permissible import duties is to be practicable, New Delhi would do well to lower the offending imposts over the next few months. After all, the domestic liquor industry is not exactly starved of profits; neither is it an exclusive industry for which New Delhi can justifiably seek protection while arguing its case in Geneva.

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