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Foreign car makers in India get a bonanza
from WTO ruling
Our Corporate Bureau
Mumbai, Dec 18: The World Trade Organisation panel
report, which has ruled against the indigenisation requirements
and other restrictions imposed by the government on foreign
car manufacturers, is likely to benefit those foreign car
makers who are already here but yet to meet the export obligations
as per their agreements with the government, besides those
manufacturers who are yet to meet the mandated localisation
levels.
| Moore
unveils changes in secretariat ahead of TNC |
| WTO director-general Mike Moore has announced
changes in key secretariat personnel and structures, ahead
of the crucial trade negotiation committee (TNC) to follow.
The changes, according to Mr Moore, have taken input from
consultant Terry Slater, and enable the WTO Secretariat
to gear up for the tough task mandated for it in the Doha
ministerial. For starters, the WTO sessions and councils
divisions have been merged and placed under Evan Rogerson,
who will report to WTO deputy director-general Rodriguez
Mendoza. |
According to a senior official of a leading car company (with
a foreign parent), “the high customs duty on CBUs is a roundabout
method which the government employs to restrict imports. However,
with China’s entry into WTO and with free trade domain, New
Delhi is under pressure now.”
There are already a large number of foreign auto players
in the country, such as Hyundai Motors, General Motors, Fiat,
Honda Siel and Ford Motor, with domestic subsidiaries. While
most of these companies have met the desired localisation
levels and export commitments, the WTO panel’s decision will
benefit those players who are yet to attain these requirements.
Though the WTO panel had given its final verdict way back
in September this year, the report was made public only after
60 days as per the provisions of the world trade body. The
complaint against New Delhi was registered with the panel
on November 17 last year by the US and the European Union;
and the first meeting was held on March 23, 01.
The panel has said New Delhi has been acting illegally under
the WTO rules in making imports of car kits and components
subject to a slew of conditions, including setting up local
production facilities. Foreign car makers, who set up shop
in the country have to meet certain criteria.
Firstly, they were obliged to invest at least $50 million
if they were the majority stakeholders in any joint venture.
Secondly, they were asked to meet a 50 per cent local content
requirement in the first three years which would to increase
to 70 per cent after five years. Thirdly, these manufacturers
were also bound to neutralise forex flow. All these measures
breached WTO principles which demand equal treatment for imports
and domestic goods, the panel opined.
Though the government argued that the investment conditions
in question were no longer relevant from April, 01, as quantitative
restrictions were lifted then, the panel noted that the indigenisation
requirements and other curbs continue to bind on foreign car
manufacturers who had already signed MoUs.
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