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Brussels, 29 November 2006

EU challenges Canadian discriminatory tax rules on wine and beer in the WTO

The European Union will today request WTO consultations with Canada on its new fiscal measures affecting wine and beer. The new Canadian measures provide excise tax relief to Canadian wine and beer, while leaving the excise tax on imported EU wine and beer intact. The new discriminatory tax regime has been applied on a provisional basis since 1 July 2006 but is still pending before the Canadian Parliament.

EU Trade Commissioner Peter Mandelson said: "These measures are contrary to the letter and the spirit of WTO rules. I hope we will be able to use the WTO consultation process to agree an amicable resolution to the problem".

“European wines and beers are second to none,” said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development. “We can compete with anyone as long as we have a level playing field on which to operate. This measure is unfair and I urge Canada to end this discrimination against our products.”


The discriminatory Canadian tax proposal was announced on 2 May 2006 within the federal budget proposal, prompting intervention from the European Commission side at various levels. Although the EU clearly expressed its concern at the WTO incompatibility of the envisaged measures, on 18 October 2006 the Canadian Government formally tabled Bill C-28 in the Canadian Parliament. The legislation eliminated or reduced excise duties on Canadian wine made from 100 per cent Canadian-grown agricultural products and on domestic beer, while leaving the excise tax on imported wine and beer intact. The act is currently being debated in the Parliament and is expected to be adopted at the end of November. Once approved, the Act foresees retroactive application from 1 July 2006. The exemption, however, is already being applied on the basis of an administrative decision of Canada’s Revenue Agency.

For European industry, there are considerable economic interests at stake. The EU exported 446 million euros worth of wine and 110 million euros worth of beer to Canada in 2005. Over the last decade these exports have been growing steadily. The measures introduced by Canada will negatively affect the EU’s ability to compete fairly in the Canadian market.

The consultations requested are the first steps in the WTO dispute settlement process. If they prove unsuccessful after 60 days, the EU will be entitled to ask for a WTO Panel to be set up to rule on the legality of the Canadian measures.

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