Manila blocks US request for WTO alcohol tax probe

GENEVA, April 8 Thu Apr 8, 2010 11:52am EDT

GENEVA, April 8 (Reuters) - The Philippines blocked on Thursday a U.S. request for a World Trade Organisation panel to investigate its alcohol taxes that Washington says discriminate against Jack Daniel's, Jim Beam and other American brands.

WTO rules allow countries to turn down an initial panel request to give more time for talks to resolve disputes. "The Phlippines blocked the establishment of a panel," a source familiar with the closed-door Dispute Settlement Board meeting said. "The panel was therefore not established."

The United States has argued that Manila taxes alcoholic products such as whiskey, brandy, gin, vodka and tequila made from domestic materials, such as sugar or palm, at much lower rates than imported spirits made from different materials.

But the Philippines says its excise tax system is consistent with WTO principles, and does not discriminate between imported and domestic products as Washington argues.

The United States is one of the largest exporters of distilled spirits, with worldwide exports averaging more than $1 billion per year from 2006 through 2008.

Victory in the WTO case could help U.S. producers such as Brown-Forman (BFb.N) and Fortune Brands FO.N break into the $3 billion Philippine spirits market. Kentucky-based Brown-Forman owns the Jack Daniel's brand and Fortune Brands, headquartered in Illinois, produces Jim Beam whiskey.

Under WTO rules, a dispute settlement panel is automatically set up after a second request. (Reporting by Laura MacInnis; Editing by Stephanie Nebehay and Elizabeth Fullerton)

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