The US, through the World Trade Organisation, has sought the removal of non-tariff barriers on import of re-manufactured goods -- used and refurbished -- with a view to increasing market access in the automobile sector.
In a communication circulated among WTO members and received by the Indian commerce ministry, the US has said that "barriers to the importation (sic) and sale of re-manufactured products" and other restrictions are affecting the US automotive industry.
These are, excessive restrictions on finance of motor vehicles, distribution channels closed to imported products, a rise in taxation with an increase in the engine capacity, and restrictions on foreign equity in the manufacture of automobiles.
Even though the US note has not defined re-manufactured goods, the proposal to ease their imports has the Indian automobile industry squirming, which fears that the domestic market may get flooded with cheap, second-hand imports from countries like Japan, where old cars attract higher taxes and are junked by their owners in under three years.
Besides, there is fear that the provision may soon be extended to other products like consumer durables.
India's trade policy allows for import of used capital goods, but restricts the inflow of most others. There is over 100 per cent Customs duty on import of second-hand cars, in addition to non-tariff barriers like stringent safety and emission norms.
The issue of importing re-manufactured goods was understood to have been defused by Meredith Broadbent, assistant US trade representative for industry and market access, during her recent visit to India. But industry sources said the US was still pushing for it.
Branding the automotive sector as one of the most globalised, the US representation has emphasised the need to open up this sector, with greater market access.
"NTBs (non-tariff barriers) increasingly act to limit market access in international automotive trade," said the US proposal. Several developing countries like Vietnam and Thailand have strong barriers on imports of used goods while countries like Malaysia allow such imports on a quota basis.
According to WTO trade statistics, the automotive industry has a significant role in global trade, pooling in $724 billion in 2003.
Automotive trade represents 13.3 per cent of global trade in manufactured goods. In 2003, according to the US's proposal, Brazil had an automotive exports of $6.5 billion and South Korea, of $22.3 billion.
The proposal also underlines the significance of the US automobile industry, which accounts for 3.5 per cent of the country's GDP with an employment base of close to a million people in 2003.
The automobile industry in the US also accounts for 13.4 per cent of steel consumed in the country, 74.3 per cent of natural rubber and 31.4 per cent of iron sold annually.
Trade blocks
