Indian spirits tax holds up free trade talks - EU industry

A wide-ranging EU-India trade agreement was supposed to be sealed by year-end, but EU officials now say negotiations will continue into 2011.

"We would rather see the EU take its time and get it right," said Jamie Fortescue, director-general of the European Spirits Organisation, on the sidelines of a conference on the industry's export prospects.

India is resisting dismantling its 150 percent tariffs on EU-made spirits, a factor producers of whisky and vodka say has kept the EU's market share at 1 percent in India, even though the country is the single biggest consumer of whisky.

Another major hurdle in the talks is disagreement about how freely Indian professionals can travel and work in the EU.

"Once a deal is done we are expecting double-digit year-on- year growth in India," said Pierre Pringuet, Chief Executive Officer of French drinks group Pernod Ricard.

A free trade deal with South Korea -- agreed last month and expected to launch in July 2011 -- will help EU industry "catch up" with Chilean exporters, who dominate South Korea's wine market, Pringuet said.

Europe's chief trade negotiator, Karel De Gucht, told executives on Tuesday Europe will fight for more access to foreign markets, particularly in the booming South Asian region.

A global trade pact at the World Trade Organization is struggling to gain the political momentum needed for its completion next year because of U.S. doubts about the value of a deal, De Gucht said.

Yet the United States is among several countries backing a plan by De Gucht to convene a meeting of "major stakeholders next year," the EU trade chief said, declining to give details.

Country-by-country trade accords may be more constructive than negotiations with sprawling regions such as Latin America's Mercosur, whose reach includes Brazil and Argentina along with other countries, said Martin Bell, of the Scotch Whisky Association.

Recently revived, those talks are in trouble again, making a direct deal with Brazil increasingly attractive to impatient EU exporters.

"Perhaps it would make sense with Mercosur to say it's a very difficult negotiation, so let's just go with Brazil first. If the Commission were to suggest that, we would support it," Bell said.
 European sales of spirits reached 58 billion euros in 2009, according to an Ernst & Young study. With exports worth 5.7 billion euros in 2009, the industry is the largest exporter in the EU's agro-food industry, the report says.

So high are expectations for other market openings as a result of upcoming pacts with the EU that investors in Britain have poured 800 million pounds into whisky distilleries since 2006, according to the Scotch Whisky Association.

"We are hoping for the Asian decade," Bell said.