1. Barcadia and Trinson are Members of the World Trade Organization (WTO). Traditionally, there has been a strong wine-drinking culture in Barcadia. Recent mark research, however, has shown that demand for beer in Barcadia is growing exponentially. Windmill Breweries Ltd, a company headquartered in Trinson, is one of the largest beer brewing companies in the world. The company wishes to capitalize on the growing demand for beer in Barcadia and intends to increase its exports of lager beer, speciality beers and non-alcoholic beer to Barcadia.
Barcadia’s WTO Schedule of Concessions includes the following bound tariffs:
– 10 per cent on wine;
– 15 per cent on lager beer and non-alcoholic beer; and
– 20 per cent on speciality beers
The applied tariff on all types of alcoholic beverages is 5 percent
Barcadia’s National Association of Wine Producers is concerned about the impact than an increase of beer consumption may have on the wine industry. They lobby the Barcadian Government to adopt measures to protect the wine industry, asserting that, compared to wine, beer has more deleterious effects on human health. In response, Barcadia’s Ministry of Trade adopts the following measures:
a) Increase in the applied tariff on all types of beers to 20 per cent;
b) Application of the following excise tax rates:
o 15 per cent on wine;
o 15.5 per cent on lager beer and non-alcoholic beer; and
o 30 per cent on speciality beers;
c) Exemption of wine makers from value-added tax (VAT) on goods used in the production of wine;
d) Introduction of a requirement that beer, whether domestic or imported, may only be sold by licensed beer merchants and may not be sold in supermarkets. No such restriction applies for the sale of domestic or imported wine.
Windmill Breweries Ltd. has just received the measures adopted by Barcadia’s Minister of Trade and requests your advice. Specifically, Windmill Breweries Ltd would like to know:
- Whether measures a), b), c) and d), above, adopted by Barcadia’s Minister of Trade, are consistent with Barcadia’s obligations under the General Agreement on Tariffs and Trade (GATT) 1994 and, if not; (12 marks)
- Whether any of the violations of Barcadia’s obligations can be justified under GATT 1994. (8 marks)
Advise Windmill Breweries Ltd.