EU poised to attack Indian car import rules

Date: 14/01/1999

By Peter Chapman

THE EU is considering action within the World Trade Organisation against India's car-import regime, claiming that it discriminates illegally against European manufacturers.

European Commission trade negotiators are waiting for Indian officials to respond to a list of questions about the regime and how it applies to EU car-makers. An official said the Commission would call for a WTO complaints panel at the earliest opportunity if it became clear the regime was discriminating against European manufacturers.

“We are waiting for these answers and, in view of the replies, then we would decide to hold further consultations,” he said, adding: “If it is clear-cut, then it is possible to go quickly for a panel.”

The dispute erupted after EU car firms complained that India had prohibited exports of finished vehicles. Commission efforts to take the country to task follow its success in an earlier dispute panel over Indonesia's car import regime, which was widely perceived to have defended the family interests of former President Suharto.

Experts claim the latest row with India could be compounded if New Delhi tables its own complaints regarding the EU's import regime, although a top Indian trade diplomat in Geneva said his government had not yet decided how to respond to the Commission's demands. The Indian capital claims that the EU allows east European firms to sell cars duty-free while Indian manufacturers must pay an import levy.

Officials say the Commission must make every attempt to force India to change its regime so as to appear even-handed, as it has already taken action in the WTO against Indonesia over similar restrictions.

After India blocked finished-vehicles imports, it agreed with the EU that this restriction would be phased out by 2003, but doubts remain over two other sets of curbs. These cover New Delhi's treatment of imports of spare parts as well as 'semi-knock-down vehicles', or cars sold in kit form to be assembled in India. Restrictions include tough investment criteria for foreign firms entering the Indian market and rules designed to avoid the loss of precious foreign-exchange reserves.

Top Commission trade negotiator Hervé Jouanjean recently claimed that car companies had to shoulder taxes approaching 150&percent; to get their goods into the subcontinent's market.

Italy's Fiat, France's Peugeot and German-US firm DaimlerChrysler are all present in the Indian market, but few other EU companies have made inroads there, partly due to the red-tape and high taxes and partly because the market for expensive foreign cars is underdeveloped.

“Although they have nearly a billion inhabitants, the market there is very small,” said the Commission official. “Consumers do not really have the purchasing power.”

India is under attack at the WTO over high duties across the board, which are believed by some to be well above commitments the country made when it signed the General Agreement on Tariffs and Trade. The Indians strongly deny this charge.

New Delhi also applies a series of quota restrictions on a number of products. The Commission is conducting bilateral consultations with Indian officials in a bid to avoid an escalation of the dispute at the Geneva-based trade watchdog.