Non Tariff Barriers in Automotive Industry

by Sugato Sen Senior Director

SIAMSociety of Indian Automobile Manufacturers

February 26, 2009 Chennai

2 SIAM

Society of Indian Automobile Manufacturers

• Non-profit organization representing 44 vehicle & vehicular engine manufacturers

• Advocacy: Economic Policy, Technical Policy & Public Policy • Networking – Stakeholders National / International• Seminars / Conferences – Technical, Trade & Economic, Road Safety• Statistical services – Production, Sales and Exports• Auto Expo

Promotes sustainable development of Indian automobile industry

3 SIAM

Manufacturers in India

SIAM Members

4 SIAM

Auto Industry Today

• Turnover (2007-08) ~ $ 37.25 billion

• Exports (2007-08) ~ $ 2.47 billion

• Employment (direct & indirect) ~ 10.5 million

• GDP Contribution ~ 5%

• Sales growth (5 yr-CAGR) ~ 10%

• Exports growth (5 yr-CAGR) ~ 32%

• New investments ~ $ 19 billion

Indian Automobile Industry

5 SIAM

EASTWEST

SOUTH

Automotive Investments

New Hub : Uttaranchal

Indian Automobile Industry

19.6Total

1.4

Two & Three

Wheelers

6.8

Commercial

Vehicles

11.3

Passenger

Vehicles

USD

BillionSegments

NORTH

6 SIAM

Exports – Growth

High potential - Industry is creating opportunities

Currently around 10% of production is exportedIndian Automobile Industry

0

200

400

600

800

1000

1200

1400

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

5 year CAGR - 32%

7 SIAM

Non-Tariff Barriers (NTBs) are extensively used to restrict trade and investment opportunities in the automotive industry today.

They include an extensive range of measures to protect domestic auto industries and restrict market access.

NTBs are major impediments to enhancing the participation of developing countries in the growing global economy.

NTBs can be more important than tariffs in their adverse impact on auto companies’ trade and investment opportunities.

Removal of NTBs are Important

8 SIAM

GAID - A Working Group

• Composed of seven major national auto & auto parts manufacturingassociations that jointly represent three-fourth of global motor vehicle production. – Brazil: Associaçao Nacional dos Fabricantes de Veiculos Automotores

(ANFAVEA)– Canada: Canadian Vehicle Manufacturers Association (CVMA) – European Union: Association of European Motor Vehicle Manufacturers

(ACEA) – India: Society of Indian Automobile Manufacturers (SIAM) – Japan: Japan Automobile Manufacturers Association (JAMA) – Korea: Korean Automobile Manufacturers Association (KAMA)– United States: Automotive Trade Policy Council (ATPC)

On Automotive Non-Tariff Barriers

9 SIAM

GAID - Objective

• Meaningful NAMA negotiation needs resolution of NTBs that are replacing tariff barriers and restricting market access.

• WTO negotiators should be creative and ambitious and comprehensively address automotive NTBs in NAMA.

10 SIAM

• GAID has recommended for a comprehensive package of remedies be developed to address NTBs.

• Although a broad range of NTBs has been identified, the group has agreed to focus on the following categories. – Customs and Trade Facilitation– Performance & Operational Restrictions– TRIMS Compliance– Import Licensing and Quotas– Auto Standards and Technical Regulations– Discriminatory Taxes That Act as Trade Barriers and Investment in

the Auto Sector– Services– Intellectual Property Rights– Mediation & Expedited Dispute Process

GAID - Recommendations

11 SIAM

Customs and Trade Facilitation• In view of the widespread use of inconsistently applied valuation methods, we recommend that customs valuation of automotive products be based on transaction value in full compliance with the WTO Agreement on Customs Valuation. Allow legal recourse for the importer to dispute values assigned by countries; • To streamline and automate customs processes, adopt the use of electronic reporting, periodic entry, and expedited clearance procedures (max. 48 hours) for low-risk automotive importers (e.g., conditional clearance prior to arrival);• Any regulatory changes should allow industry input and provide public announcement as early as possible with adequate time for industry implementation.

Performance & Operational Restrictions• Restrictions and limitations on the percentage of ownership allowed in automotive industry, as well as the type of investments, including joint ventures, are a form of a performance/local content requirement that should be addressed by the WTO. GAID recommends Members seek ways to eliminate restrictions on foreign equity participation in the automotive sector of any Member (by date certain), and to prohibit imposing any new such restrictions.[Note: SIAM reserves on this issue]

GAID - Recommendations

12 SIAM

TRIMS Compliance• WTO Members must confirm that pursuant to the WTO TRIMs Agreement all past or existing automotive TRIMs have been notified and eliminated;• Requirement that Members expeditiously and fully respond to the requests of other Members asking for written documents relating to laws, rulings or regulations relating to investment policy, guidance, or agreements in the automotive sector; • Illustrations of the type and scope of TRIMs in the auto sector that have been eliminated to date under the TRIMs Agreement to facilitate understanding of the intent of the Agreement;• Expedited dispute/mediation process.

Import Licensing and Quotas• Seek compliance with WTO obligations where discriminatory licensing practices and quotas still exist in the automotive sector; • Allow Members to seek and expeditiously receive access to all information regarding such policies and practices, including laws, rulings or regulations of another Member regarding relevant licensing or quota practices.

GAID - Recommendations

13 SIAM

Auto Standards and Technical Regulations• WTO recognize international automotive regulatory standards adopted by UN/ECE Working Party 29 for purposes of assessing compliance with the TBT Agreement;• WP 29 experts assistance to work out globally accepted solutions to technical barriers;• Expedited dispute/mediation process.

Discriminatory Taxes That Act as Trade Barriers and Investment in the Auto Sector• Seek a basis in the WTO for review and remedy of national taxes, charges and fees on motor vehicles by Member countries that intentionally or unintentionally violate National Treatment and discriminate against the auto imports or local production of another WTO member.

Services• As part of the DDA negotiations on services, seek commitment allowing global motor vehicle companies to provide financial services for wholesale, retail and consumer financing without any discriminatory equity or operating restrictions;• Automotive manufacturers seek to establish, control and manage their distribution networks and GAID recommends establishment of rules to prevent discrimination between auto companies in their distribution system.

GAID - Recommendations

14 SIAM

Intellectual Property Rights• In light of the rampant spread of IPR violations in the global automotive sector, GAID recommends a commitment by all Member governments to accelerate full implementation, including enforcement obligations, of the TRIPS Agreement; • The GAID is prepared to consult with Member governments to consider action under the TRIPS Agreement.

Mediation & Expedited Dispute Process• The GAID asks the WTO to explore and develop a system that will permit Members to bring issues related to NTBs within the auto industry to a binding mediation/arbitration process that will: 1) Avoid confrontational lengthy Dispute Resolution Process;2) Reduce cost and time associated with existing DSU process;3) Generate better decisions that are more reflective of the reality of the global automotive sector by drawing on automotive experts.• The GAID asks the WTO to explore a self-policing mechanism (eg, compliance review within WTO Committees).

GAID - Recommendations

15 SIAM

GAID – Support to WTO

• GAID has been willing to offer its services to a WTO Automotive Industry Advisory Board, composed of representatives of the auto and auto parts manufacturing industry– To provide technical expertise, and

– To support the activities of the various WTO Working Groups and Standing Committees of jurisdiction.

16 SIAM

Current Developments

• Governments of some of the GAID member countries have come out with text-based proposals in WTO which necessarily do not fall in line with the understanding reached in GAID.

US Paper – Sought resolution of automotive NTBs but introduced concept of Remanufactured Goods

EU Paper – Sought resolution of automotive standards and technical barriers to trade but talked of signing 1958 Agreementof UNECE WP29

India and others – Dispute Settlement paper opposed by a Government of GAID member

17 SIAM

TBT NotificationNOTIFICATIONThe following notification is being circulated in accordance with Article 10.6

Text available from: National enquiry point [ X], or address, telephone and fax numbers, e-mail and web-site addresses, if available of the other body: http://www.inmetro.gov.br/legislacao/rtac/pdf/RTAC001374.pdf

11.

Final date for comments: 60 days after the publication of this notice.10.

Not stated}Proposed date of adoption: Proposed date of entry into force:

9.

Relevant documents: (1) Brazilian Official Journal (Diário Oficial da União), section 1, 17 October 2008; (2) Ministerial Act number 361, 16 October 2008 (Portaria No 361, de 16 de Outubro de 2008), issued by Inmetro, (3) Brazilian Official Journal (Diário Oficial da União) (4) Not stated.

8.

Objective and rationale, including the nature of urgent problems where applicable: Consumer safety.7.

Description of content: Draft Ministerial Act on conformity assessment procedure for tyres.6.

Title, number of pages and language(s) of the notified document: Draft Ministerial Act for tyres (25 pages, in Portuguese). 5.

Products covered (HS or CCCN where applicable, otherwise national tariff heading. ICS numbers may be provided in addition, where applicable): Tyres (HS 4011).

4.

Notified under Article 2.9.2 [ ], 2.10.1 [ ], 5.6.2 [ X ], 5.7.1 [ ], other: 3.

Agency responsible: National Institute of Metrology, Standardization and Industrial Quality – InmetroTel: +(55) 21 2563 2821Fax: +(55) 21 2502 6542Email: barreirastecnicas@inmetro.gov.brWebsite: www.inmetro.gov.br/barreirastecnicasName and address (including telephone and fax numbers, email and web-site addresses, if available) of agency or authority designated to handle comments regarding the notification shall be indicated if different from above:

2.

Member to Agreement notifying: BRAZILIf applicable, name of local government involved (Article 3.2 and 7.2):

1.

18 SIAM

TBT Notification

19 SIAM

TBT Notification

20 SIAM

TBT Notification

Texts available from: National enquiry point [ X ] or address, telephone and fax numbers, e-mail and web-site addresses, if available of the other body: WTO/TBT National Notification and Enquiry Center of the People’s Republic of ChinaTel: +86 10 8226 0618Fax: +86 10 8226 2448Email: tbt@aqsiq.gov.cnAnd at:http://members.wto.org/crnattachments/2008/tbt/chn/08_3112_00_x.pdf

11.

Final date for comments: 60 days after circulation by the WTO Secretariat10.

90 days after circulation by the WTO Secretariat6 months after adoption

Proposed date of adoption:

Proposed date of entry into force:

9.

Relevant documents: -8.

Objective and rationale, including the nature of urgent problems where applicable: To protect personal safety7.

Description of content: This standard specifies the product classifications, technical requirements, test methods, inspection rules and relevant requirements of marking, package, store and transport of ribbed belt for automobiles.

6.

Title, number of pages and language(s) of the notified document: National Standard of the P.R.C., Automotive V-Ribbed Belts (17 pages, in Chinese)

5.

Products covered (HS or CCCN where applicable, otherwise national tariff heading.ICS numbers may be provided in addition, where applicable): Automotive V-ribbed belts (ICS: 21.220.10; HS: 4010390000)

4.

Notified under Article 2.9.2 [ X ], 2.10.1 [ ], 5.6.2 [ ], 5.7.1 [ ], other:3.

Agency responsible: Standardization Administration of China (SAC)Name and address (including telephone and fax numbers, e-mail and web-site addresses, if available) of agency or authority designated to handle comments regarding the notification shall be indicated if different from above:

2.

Member to Agreement notifying: CHINAIf applicable, name of local government involved (Articles 3.2 and 7.2):

1.

21 SIAM

TBT Notification

22 SIAM

TBT Notification

Text available from: National enquiry point [ X], or address, telephone and fax numbers, e-mail and web-site addresses, if available of the other body:

11.

Final date for comments: 23 January 200910.

February 2009}Proposed date of adoption: Proposed date of entry into force:

9.

Relevant documents: Road Vehicles Act (1951 Law No.185), Safety Regulations for Road Vehicles (1951 Ministry of Transport Ordinance No. 67), etc. The amendments will appear in "KAMPO" (Official Government Gazette) when promulgated.

8.

Objective and rationale, including the nature of urgent problems where applicable: The objective of amending the regulations is to improve safety of vehicles and to harmonize with relevant international standards.

7.

Description of content: Amendments to the relevant regulations concerning safety-belt anchorages, safety-belts, motorcycle braking, etc. in order to harmonize them with Nos. 14, 16, 78 and 123 of regulations based on "UN/ECE 1958 Agreement", and amendments to relevant regulations on digital tachograph.

6.

Title, number of pages and language(s) of the notified document: Partial Amendment to the Announcement that Prescribes Details of Safety Regulations for Road Vehicles (1 page, in English).

5.

Products covered (HS or CCCN where applicable, otherwise national tariff heading. ICS numbers may be provided in addition, where applicable): Motor vehicles (HS: 87.01-08, 87.11, 87.13 and 87.14)

4.

Notified under Article 2.9.2 [ X ], 2.10.1 [ ], 5.6.2 [X], 5.7.1 [ ], other: 3.

Agency responsible: Ministry of Land, Infrastructure, Transport and TourismName and address (including telephone and fax numbers, email and web-site addresses, if available) of agency or authority designated to handle comments regarding the notification shall be indicated if different from above:

2.

Member to Agreement notifying: JAPANIf applicable, name of local government involved (Article 3.2 and 7.2):

1.

23 SIAM

TBT Notification

Need centralized processing of notifications, including collection and translation of details

24 SIAM

Way Forward

• Need to take own Governments in confidence and bring them on board

• Need to identify NTBs being faced by our companies abroad

• Need to put in place WTO compatible measures as is being done by the others

Work closely with GovernmentWork closely with Government

Thank you!

Society of Indian Automobile Manufacturers (SIAM)Core 4B, 5th Floor

India Habitat Centre, Lodi Road, New Delhi, IndiaPhone: +91 11 2464 7810 – 12, Fax: +91 11 2464 8222

E-mail: ssen@siam.in Website: www.siam.in