Chinese Mandarin - EU to challenge high India tariffs

WORLD / Wall Street Journal Exclusive

EU to challenge high India tariffs

By PETER WONACOTT,JOHN W. MILLER
Updated: 2006-11-10 16:17

http://online.wsj.com/public/article/SB116310727079418953-x1L7NI4MDN4FBLitn
rkAxUKmeqY_20061116.html

The European Union is set to launch a formal complaint against India at
the World Trade Organization over high import tariffs on wine and
spirits, a move that would mark the first time the EU has taken on
India's tariff barriers at the WTO.

The EU move follows the collapse this summer of global trade talks and
shows how the EU and the US appear ready to challenge India's high import
tariffs on their own -- even at the risk of pushing the countries into a
more confrontational era of trade. The US already is pressing India on a
number of trade issues, including barriers to retail investment and
quirky health and environmental standards that effectively block certain
imports, such as big-engine Harley Davidson motorcycles.

The complaint would be the EU's first case of any kind filed against
India at the Geneva trading arbiter since 2003. Yesterday, EU and WTO
officials described a filing date as "very close," perhaps within days,
but wouldn't offer further specifics. If India is found to have violated
trade rules, the WTO can order it to cut its tariffs.

With global trade talks suspended, the EU's biggest trade goal now is
prying open rapidly growing emerging markets like India, China and
Brazil. EU Trade Commissioner Peter Mandelson is in China this week
lobbying for the Asian giant to open up more markets for EU companies,
especially in high-value sectors such as banking and cars. The EU also is
negotiating a trade deal with a group of Latin American countries that
includes Brazil.

Decades of socialism have shouldered India with a difficult business
environment, leaving it a laggard in world trade. India's relatively
closed markets have, for years, deterred foreign investors, while
bureaucracy and pervasive corruption have stymied those companies that do
come. India drew just $6 billion in foreign direct investment last year,
or about one-tenth what China attracted. In September, the World Bank
ranked India 134th out of 175 locales in difficulty of setting up or
operating a business.

The EU's trade with India amounted to ��0 billion ($51 billion) of goods
and services last year, with exports to India accounting for less than 2%
of the EU total. By comparison, trade between the 25-nation bloc and
China totaled ��09.7 billion last year. India and the EU agreed at a
summit in Helsinki last month to try for a bilateral trade treaty by
early 2009. Mr. Mandelson is traveling to India next week.

He will again bring up wine. India ranks second in world population, at
one billion, but 89th in buying bottled wine from the EU, at ��.4 million
last year, a mere drop in the EU's overall ��1.5 billion in total
bottled-wine exports, according to Global Trade Information Services.

India bought ��8.6 million of Scotch whiskey in 2005, says David
Williamson of the Scotch Whiskey Association, based in Edinburgh,
Scotland. "That's less than 1% of a 100 million-case spirit market [in
India], so you can see a huge potential," Mr. Williamson said.
Scotch-whisky exports to China totaled ��8.3 million in 2005.

"We've been lobbying for years, but India has remained essentially
closed," says Lisa McCooey of the European Spirits Organization. The
organization asked the European Commission, the EU's executive arm, to
investigate the Indian market in July 2005.

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