The European Commission has launched formal World Trade Organisation (WTO) disputes proceedings with Canada over a discriminatory tax break for Canadian wine and beer producers.

Under the country's 2006 budget proposals, excise duties on wine made from 100% Canadian-grown agricultural products and domestic beer would either be reduced or abolished, while excise tax remains on imported wine and beer.

The law should be adopted by 1 December, including retroactive application from 1 July. The tax break is already applied provisionally by the Canada Revenue Agency.

EU Agriculture Commissioner Mariann Fischer Boel said: "This measure is unfair and I urge Canada to end this discrimination against our products."