EU & Colombia: EU requests consultations over concerns about discriminatory whisky taxes in Colombia

The European Union has requested formal consultations with Colombia under the World Trade Organisation's Dispute Settlement Understanding over concerns about discriminatory taxes and monopolies in Colombia, a move welcomed by Scotch whisky producers. This is the first stage in the WTO's dispute procedure.

The Scotch Whisky Association (SWA) said on January 13 the industry struggles to compete in Colombia because of high taxes on imported spirits and the practices of provincial alcohol monopolies which distort the market by favouring local producers. By law, Scotch whisky must be at least 40% alcohol by volume (abv), but Colombia applies a significantly lower excise rate to products at or below 35% abv. This favours domestic spirits, the vast majority of which are bottled at this strength.

The SWA said that the current situation has made it difficult for exporters of Scotch to benefit from the EU-Colombia Free Trade Agreement that came into force in 2013. Colombia committed to addressing these issues by August 2015, but this has not yet been delivered.

David Frost, Scotch Whisky Association chief executive, said:

"Scotch whisky is being treated unfairly in Colombia and is unable to compete against local spirit producers due to the discriminatory tax system and anti-competitive practices of the monopolies. We are pleased that the European Union has requested consultations with Colombia at the World Trade Organisation with a view to resolving these longstanding issues.

"Colombia is a key target market for us globally and offers great potential for Scotch whisky. In 2014, Scotch exports reached £24 million in shipment value, up 7% on 2013. The removal of tax discrimination and other discriminatory measures would give a major boost to the market."

"The current model in Colombia is similar to the Chilean system that was condemned by the WTO in a case some years ago. The WTO panel on Chile and three previous ones - Korea, Japan and the Philippines - said that all spirits categories compete and therefore governments cannot discriminate between them."

22 January, 2016