The EU asked the World Trade Organization to rule on the legality of India's high duties on imports of wine and spirits on 26 March 2007, arguing that they harm Europe's wine and Scotch-whisky producers.
The Commission's decision to ask the WTO to set up a dispute-settlement panel comes after several months of failed negotiations.
"As we could not resolve our dispute in consultations, the EU sees no other way than to request the establishment of a WTO panel. We are of course not closing the door to an amicable solution – but the ball is now in India's court," said EU Trade Commissioner Peter Mandelson.
The EU had launched formal consultations with India at the WTO last December after a Commission investigation revealed that Indian taxes on imports of spirits and wines were "in violation of WTO obligations".
The taxes, which are imposed on top of ordinary customs tariffs, mean that European spirit and wine exporters face duties as high as 550% if they wish to access India's rapidly-expanding alcohol market.
Currently, India - the world's largest whisky market - buys 1% of the spirits and 15% of the wine it consumes from foreign suppliers. Indian trade officials have said that they are aware of EU concerns but that the issue is difficult to resolve because duties on alcohol are the responsibility of state-level governments in the country.
In a new trade strategy presented last year, Mandelson heralded a tougher approach to trade issues in order to open up new markets for European businesses, especially in India and China (EurActiv 05/10/06).
At the same time, in the context of its wine sector reform, the EU is attempting to increase exports of wine in order to keep the sector alive, as consumption in the EU dwindles and cheaper non-EU wines become increasingly popular in European households. India, with a wine market growing by 5-9% annually, represents a huge – and still largely unexplored – business potential in years to come.
Scotch Whisky Association Chief Executive Gavin Hewitt said: "It is time for India to implement its international commitments and allow fair access for Scotch whisky, just as Indian spirit drinks have free access to the European market."
José-Ramón Fernández, secretary-general of the Comité Européen des Entreprises Vins (CEEV), added: "We hope a speedy solution will be found in Geneva so that consumers in India will benefit from greater choice at more competitive prices."