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Auto firms drive protest against free trade pacts

Times of India

Auto firms drive protest against free trade pacts

By Sidhartha

2 October 2006 (Times News Network)

NEW DELHI : After plantations and agriculture, its now the turn of the auto sector to protest against free trade agreements (FTA).

The Automotive Components Manufacturers Association (Acma) and Society of Indian Automobile Industry (Siam) have jointly petitioned the commerce ministry against bilateral trade pacts with Asian countries that result in duty-free imports into the country, lowering the country’s attractiveness to foreign investors.

In a presentation to commerce and industry minister Kamal Nath last week, Acma said the recent Bangkok Agreement - which allows duty free import of components from China from September 1 - the framework agreement for an FTA with Thailand and the proposed treaty with Asean could divert investment from India to the more competitive east Asian countries which provide a slew of tax incentives to companies setting up units.

Acma is of the opinion that the increase in auto component exports would have taken place even without the agreement with Thailand as an increase has only been witnessed in case of export of gear box by Toyota.

It said that Toyota has a policy of regional sourcing and India is the hub of gear box. "But if automotive investments get diverted to Thailand today, trade will start flowing out of Thailand into India’s domestic market in the next two-three years," the presentation said.

According to the component industry’s estimates, during 2005-06, auto part exports to Thailand were estimated at Rs 751.5 crore - 86.5% higher than the previous year - while India’s exports of car spares rose nearly three times to Rs 349 crore, which, Acma officials said, was due to Toyota.

In fact, they expect import of engine parts, spring leaves, pumps and lighting equipment from Thailand to either decrease or stay stagnant this fiscal.

Arguing that the FTAs were signed without adequate analysis, Acma has urged that all further FTA negotiations be suspended and should only be revived after a national strategy to provide level-playing field to the domestic industry has been put in place.

It said the local industry was facing dual difficulty with the components permitted to be imported at zero duty while raw materials attracted 5-12.5% customs tariff.

Though the damage has already been done, Acma wants the government to delete auto components from the list of items covered under the Bangkok Agreement and wants the sector to be put on the negative list - so that duty is not reduced - for all trade pacts with China.

It has also asked the government to immediately address the issue of inverted duty structure.