The European Union (EU) said Wednesday that it requested consultations with the Philippines at the World Trade Organization (WTO) over excise taxes on distilled spirits, which the EU considers to be discriminatory and against international trade rules.

"Imported spirits including Spanish brandy and Scotch whisky can face taxes 10 to 50 times higher than those on domestic products, and exports to the Philippines have fallen significantly as a result," the EU's executive Commission said in a statement.

EU spirits sold in the Philippines are mainly Spanish brandy and Scotch whisky.

"This long-running problem has prevented EU exporters from competing fairly in the Philippine market, and has led to a sharp decrease in imports of European spirits," EU Trade Commissioner Catherine Ashton said, adding that she hoped to find an amicable solution to this issue through the consultation process.

European industry complained about the Philippine excise tax regime for a number of years.

They say that spirits produced from certain raw materials typically used domestically in the Philippines are taxed at a specific flat rate while other spirits, including most imported products, face a much higher tax, according to the Commission.

Under a 1996 legislation adopted by the Philippines, one of the largest spirits markets in the Asia-Pacific region, locally produced spirits from sugar or syrup of cane enjoy a lower flat rate of excise tax.

This taxation regime has prevented EU exporters from fully participating in the Philippine market for alcoholic beverages, which has seen steady growth in recent years.

From 2004 to 2007, EU exports of spirits to the Philippines fell from around 37 million euros (about 51.8 million U.S. dollars) to 18 million euros (about 25.2 million dollars), said the Commission.

The Commission cited the International Wine & Spirits Record as saying that consumption of spirits in the Philippines in 2007 was at about 47 million cases, but only 1 million cases were imported from abroad.

The EU considers that "the discriminatory measures are in clear violation of Article III: 2 of the General Agreement on Trade and Tariffs (GATT)."

The request for consultations formally initiates a dispute under the WTO dispute settlement rules. Bilateral consultations give WTO members the opportunity to discuss the matter and to find a satisfactory solution without resorting to litigation.

If these consultations fail to reach a satisfactory solution within 60 days after the receipt of the request for consultations, the complaining party may request the establishment of a WTO panel.

Source: Xinhua