Geneva, Feb. 7 - The World Trade Organization has rejected a U.S. complaint that Indian import duties unfairly discriminate against products such as Napa Valley wine and Jack Daniel's whisky, officials said Wednesday.
But the decision isn't a massive loss for the U.S. because the Indian government already lifted some of the massive taxes it imposes on foreign wine and spirits last year, bending to heavy pressure from the U.S. and Europe.
While Brussels dropped its WTO complaint as a result, Washington continued to press its case.
A WTO investigative panel ruled this week India hadn't acted inconsistently with its WTO obligations, trade officials said.
The U.S. and the 27-nation European Union brought their complaints to the global trade referee last year, demanding a level playing field for their exports.
India's basic import duties on wine were 100%, while the tariff on spirits was 150%, both within WTO limits. However, various government surcharges took the tariffs up to levels reaching as high as 550%, depending on the Indian state. The state of Tamil Nadu went furthest, shutting out foreign alcohol and allowing shops to sell only Indian-made spirits and wines.
In July, India said it would revoke the additional duties it charged on wine and spirits, winning praise from the E.U. but a more measured response from Washington. At the same, Delhi said it would raise its basic duty on wines to 150% from 100%, which was still within the country's WTO limits.
India is one of the world's largest markets for alcohol with a huge potential to grow, but imports account for a meager share in total consumption. Brussels and Washington argued the tariffs represented unfair trade barriers keeping foreign countries from competing in India's market.
The U.S., the E.U. and Japan, by contrast, allow nearly all spirits to enter their markets duty-free. China tacks only a 10% charge on foreign liquor.
The U.S. says wine sales in India through special duty-free rules, such as at airports and luxury hotels, grew by 350% between 2000 and 2005. The growth was 200% for U.S. liquors.
But the total volume of U.S. exports remained low because of the high import duties. The Distilled Spirits Council of the United States estimates all foreign liquors together account for less than 1% of the Indian market.