Originally published on 03/09/2007
This week the US formally raised objections at the WTO to the high levels of protection offered to Indian wine and spirits manufacturers. This follows a similar complaint lodged by the EU last November.
“India’s basic import duties on wine and spirits — at 100 percent and 150
percent, respectively — are within WTO limits, but federal surcharges and state-
level taxes take the tariff protection much higher in some cases. A
European Commission report issued last year found that a combination of duties
and taxes in some states was as high as 550 percent on imported spirits and 264
percent on wines.” [Source]
The news reports are not very good at explaining the real nature of the dispute. The dispute is clearly not about the high import duties that are in place. [These are “within WTO limits”] The 100% and 150% rates are at or below the levels India has bound them in the WTO agreement. Instead the dispute appears to be about discriminatory taxes implemented by different states within India. WTO countries agree to apply national treatment, which means that imported goods, after clearing customs and paying dutes, will not be taxed differently than domestic goods. India is being charged with discrimination – because states are treating foreign goods differently than domestic goods – not with setting high tariffs.
The tone of the WTO articles often make it sound as if a country (India in this case) is violating “WTO rules.” A more accurate way to say this is that a country is violating a promise, or commitment, it made to the others in the WTO. Since all countries do not make the same promises, it is misleading to say they are violating WTO rules. To me, saying “WTO rules” makes it sound as if the source of the rule is the WTO, when in fact the source of the “promise” is the country itself.
