Hindu Businessline | April 9 2013
Automakers fear free trade pact with EU will hit investments
Indian auto industry body Society of Indian Automobile Manufacturers (SIAM) on Monday came with a White Paper on the India-European Union Free Trade Agreement (EU-FTA). It has said the pact will curtail investments in automotive manufacturing in India and, consequently, employment opportunities.
“In terms of automotive exports, the EU is a declining market. On the other hand, India is a rapidly growing market. Therefore, the gains through this FTA will only be for the EU and not for India,” it said.
It said the India-EU trade agreement has become more dangerous with the introduction of the concept of Non-New Goods — which essentially means used or re-manufactured goods. The EU is demanding that India cannot ‘apply to non-new goods requirements or other measures, including enforcement measures, which are more restrictive than to new goods’.
The industry body also said the proposed FTA is bigger than all the FTAs, with huge trade and manufacturing implications for both sides.
“We are again not going to gain anything but will lose significantly in most sectors. For passenger cars, the EU’s duty rate is 10 per cent against India’s import duty rate of 60 per cent,” it said.
Indian cars can already be exported at 6.5 per cent duty to Europe and India will not gain much by further reduction of EU duties for cars.
Gains for EU industry
However, if Indian duties are reduced by 50 per cent or even more, it will be a substantial reduction in tariff. The gains will clearly be for the EU industry, it said.
“SIAM understands from various sources that India is under pressure to make offers to EU on opening up trade of CBUs. There are talks of a 50 per cent reduction of tariff on all cars, from 60 per cent to 30 per cent and, additionally, a certain quota of cars that can be exported by EU to India at a highly reduced duty of only 10-15 per cent,” it added.