New Auto Policy Confusing: Us

The US has raised the issue of confusion over the auto policy of the government with the commerce ministry on behalf of its industry interests represented in India by Ford and General Motors, diplomatic sources told Business Standard.

The sources said it was not clear to the existing firms whether the new guidelines were applicable to them too or were only for new companies. The duties to be levied on imports was also not clear, they added.

Sources said that the Japanese were also joining issue on behalf of Hyundai and Honda and had objections to some of the clauses required to be met by the Japanese firms, which were not applied to other foreign companies. This could be interpreted as being tantamount to discriminatory treatment and was not compatible with WTO norms, they added.

 

The Americans are also of the view that the entire memorandum of understanding (MoU) policy is not consistent with the trade related investment measures (TRIMs) agreement and feel that this could be the next issue India could come up against under the WTO mechanism. It has been argued that the Indian government may be forced to review the entire policy as it was not WTO consistent.

According to the Uruguay Round agreement on trade related investment measures, TRIMs that are inconsistent with the obligation of general elimination of quantitative restrictions include those which restrict imports by an enterprise of products used in or related to its local production generally or to an amount related to the volume or value of its local production that it exports.

Further, it is inconsistent to restrict imports by an enterprise of products used on or related to its local production by restricting its access to foreign exchange to an amount related to the foreign exchange inflows attributable to an enterprise. It is also not permissible to restrict export or sale for export by an enterprise of products in any form either.

Sources said that local content requirements, as imposed on car manufacturers, are also inconsistent with the spirit of the TRIMs agreement when a country loses it balance of payments cover and agrees to phase out quantitative restrictions, which India has now done.

However, since India is seeking a transition period for phase out of restrictions, it is not clear whether the MoU system can continue during the phase out.