WIREDGOV

The EU yesterday requested the establishment of a WTO panel to rule on a dispute concerning Colombia's discriminatory treatment of imported spirits.

The EU and Colombia held consultations earlier in the year (8-9 March 2016), however consultations failed to reach a solution to the dispute. While the EU recognizes Colombia's efforts to bring about reform in the spirits' regime since the initiation of the dispute, EU spirits continue to be discriminated in the Colombian market.

The EU's concerns about discrimination of EU spirits in the Colombian market are longstanding. EU spirits are subject to higher taxes and local charges than those applied to local brands. In addition, market restrictions apply in the departments or local subdivisions of Colombia. The departments impose market-access restrictions that distort the competitive conditions in the market to the detriment of EU spirits. This is in contravention of Colombia's non-discrimination obligations under WTO rules.

Under the bilateral Trade Agreement with the European Union, Colombia committed itself to ending the discrimination by 1 August last year. The EU has raised the issue with Colombia on numerous occasions, including in bilateral meetings, WTO meetings and OECD membership discussions. The European Union continues to support Colombia's efforts to bring about reform in this sector.

Background

Trade facts and figures

The EU is the number one exporter of spirits to the Colombian market and, as a result, the trading partner most affected by these measures (followed by Mexico, Costa Rica and the United States). In 2014, EU exports of spirits to Colombia – valued at €43 million – represented approximately 14% of total agricultural exports to Colombia and 77% of total Colombian imports of spirits.  Within the different spirits exported by the EU to Colombia, whiskies represent the highest shared (€36 million) followed by liqueurs and cordials (€4 million). Colombia produces mainly rums and aguardientes, which account for 83% of spirits consumption in Colombia in 2013 figures (10.8 million 9LC[1], in comparison with 2.3 million cases of imported spirits).

The national consumption tax on spirits was split in two tax brackets in 1995 and has been ‘specific’ since 2002 (Law no 788 of 27 December 2002), meaning that the tax is calculated by percentage point of alcohol content per unit of 0.75 litres. An artificial breakup point is established at 35% of alcoholic content, with the result that most imported products fall into the higher taxation bracket, whereas most locally produced spirits fall into the lower taxation bracket.  The situation is similar in the departments (departamentos) – administrative sub-divisions of Colombia – where a local charge is levied instead of the national consumption tax.

Moreover, in Colombia a number of departments exercise the so-called fiscal monopoly over the introduction and commercialisation of spirits. As a result, the entry of imported spirits is subject to the conclusion of ‘introduction contracts’ with the department that contain trade restrictive clauses, impose maximum values and minimum selling prices, and requiring traders to secure the payment of the amount of a future fiscal debt, etc.  In addition, the departments enjoy great discretion to arbitrarily deny access to imported brands.

The European Union requested consultations with Colombia under the WTO on 13 January 2016 in DS 502, Colombia- Measures Concerning Imported Spirits; consultations were held on 8-9 March 2016 but failed to find a positive solution to the dispute.

Next steps in WTO dispute settlement procedures

The EU's request for the establishment of a WTO panel will be discussed at the meeting of the WTO Dispute Settlement Body (DSB) of 2 September. If Colombia does not agree to the establishment of a panel at that meeting, the EU may table a second request at the following DSB meeting which, according to WTO rules, Colombia cannot block.

At any stage of dispute settlement procedures, Colombia can reform the spirits' regime in Colombia and eliminate the discrimination of imported spirits, thereby prompting that a solution is found without necessarily waiting for adjudication by a WTO panel.

Further information

WTO dispute settlement in a nutshell:

http://ec.europa.eu/trade/policy/accessing-markets/dispute-settlement/

EU-Colombia relations:

http://ec.europa.eu/trade/policy/countries-and-regions/regions/andean-community/

[1] 9 litre case or a case with 12 bottles of 75cl.

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