THE Scotch whisky industry, buoyed by its victory in the tax war with the Japanese, is now going to take on the Koreans.

For years, the Scotch Whisky Association has claimed that other areas of Asia discriminate even more than Japan, where sales of Scotch have fallen 25% in volume in the past year. South America is another area where there are alleged tax malpractices.

A European Commission official said: ``We will now carefully consider the most appropriate action to take regarding tax regimes in other countries, notably Korea and Chile, that the commission also deems discriminatory.''

Commission officials confirmed yesterday's report in The Herald that the World Trade Organisation had come down firmly in favour of the Scotch industry in its complaint against Japanese discrimination against imported spirits.

In Geneva, WTO contracting parties were given copies of a report by trade investigators which vindicated years of argument by the Scotch industry and other spirits interests.

As a result, the Japanese must now appeal - which is regarded in Brussels as unlikely - or change their tax policy on shochu to make it less competitive with imported spirits in the next financial year.

As the Scotch industry celebrated its success after almost a decade of campaigning, Sir Leon Brittan, EU trade Commissioner - who admits to a liking for Scotch - said: ``These findings are very good news for the European drinks industry and should help remove serious hurdles currently hindering their exports to Japan.

``The EU fought in the Uruguay Round for effective dispute settlement mechanisms and intends to use them every time EU interests are threatened by discrimination.

``We believe the WTO's rulings are crucial to the credibility of the world trading system and should be accepted and respected promptly.''

Several years ago, the Japanese were forced by international trade law to stop discriminating in favour of local spirits but they held out in defence of shochu, a rice-based spirit which typically sells in supermarkets at about #2 a bottle compared with #8 for non-deluxe Scotch.

After yesterday's WTO decision, the Japanese are expected to comply with OECD practice and raise the price of shochu by taxing it on the basis of pure alcohol per litre. The result could mean big increases in Scotch exports to Japan and a boost to the industry whose production level at present is well below capacity.

An indication of how strong discrimination is in Korea can be gauged from EU figures produced yesterday which show that Japanese imports of spirits accounted for only 8% of the total domestic market while the figure for Korea was only 2%.

Import figures for other industrialised countries include 35% for the US, 38% for Canada, 73% for Australia, 30% each for France and Germany, 45% for Italy, and 80% for Belgium.

The US and Canada supported the EU in its efforts on behalf of Scotch whisky, arguing that Japan was violating Gatt rules by taxing spirits at different rates.

Mr Bill Miller, Labour Euro-MP for Glasgow who deals with liquor excise in the European Parliament's economic committee, said last night: ``It is interesting the Commission wants tax in Japan charged on the basis of pure alcohol per litre.

``The European Parliament and the Council of Ministers have avoided this policy but now we have the Commission arguing for it. This is double standards. This idea is backed by the Scotch whisky industry and its adoption would do it a lot of good.''

Mr Miller added that 40% of Scotch was sold in duty free shops which were due to disappear under EU single market rules by 1999. ``This decision affecting the Japanese should help to compensate the industry slightly for the expected loss of trade,'' he said.

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