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Europe’s carmakers hit out at India trade deal

Financial Times

Europe’s carmakers hit out at India trade deal

By John Reed in London

29 January 2012

Europe’s carmakers are crying foul over a proposed free-trade agreement between the European Union and India, which they say would restrict access to one of the most important but highly protected markets.

The industry, led by Germany’s powerful VDA carmakers’ association, say the agreement as currently discussed would grant Indian-built cars immediate duty-free access to the EU but leave a 30 per cent tariff barrier to European vehicle exports intact indefinitely.

“The results which are on the table are not deserving of the name ‘free trade’ because it’s not a real free-trade deal,” said Matthias Wissmann, VDA president. “The Indian side wants to keep a 30 per cent tariff on passenger cars, and gives only vague promises that it will negotiate with the EU again in 2017.”

Carmakers have been pressing their case ahead of an EU-India summit on February 10 at which this and other contentious issues blocking a proposed agreement are likely to be aired.

Ivan Hodac, head of Acea, the pan-European automakers’ association whose members include Volkswagen and General Motors’ Opel/Vauxhall, said the group supported free-trade agreements in principle but opposed the Indian FTA as currently discussed.

“We want to have an unrestricted access to the Indian market in return for unrestricted access to the European market,” Mr Hodac said. “We want a level playing field.”

The EU’s trade spokesman said talks toward a free-trade agreement continued and “we are looking forward to the political impetus and momentum the upcoming EU-India summit can bring to the discussions”.

The intervention by one of Europe’s biggest industries adds to a host of barriers to an agreement, where the two sides are still at odds on a range of topics, including visas, the Indian commercial sector and the opposition of some Indian states.

The trade deal has been under discussion since 2007 and Indian ministers have emphasised the need to keep open markets during the economic downturn. Manmohan Singh, the prime minister, this month warned that protectionism is on the rise.

European-built cars face a 60 per cent tariff in India, which carmakers say doubles the price of imported cars once value added tax and other costs are added.

European carmakers say their cars face significant non-tariff barriers in India, including “redundant” and costly protocols on testing of things such as horns and wheels, according to the VDA.

Premium German brands such as BMW and Daimler’s Mercedes-Benz are especially hard-hit by the barriers because they export a greater proportion of their cars than most mass-market producers, which have bigger manufacturing operations in India.

Indian-built cars face a 10 per cent tariff in the EU, lowered to 6.5 per cent because India is considered a developing country.

European carmakers point to a large trade surplus in India’s favour as evidence that the country’s industry does not need special treatment. The country exported 223,102 cars to Europe in 2011, but imported just 4,002, according to Acea.

Additional reporting, Joshua Chaffin in Brussels and James Lamont in New Delhi