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POSSIBLE MITIGATION MEASURES
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| 9.5. POSSIBLE MITIGATION MEASURES The survey respondents, both OEMs and vendors, were also asked what measures are required to protect the automobile industry from possible serious injury from Indian imports, as contained in WTO and SAFTA* provisions. The proposals put forward areas follows % of responses 1) Develop standards to ensure import only of quality products (especially parts) from India 59 2) Reduce tariffs on imported sub-assemblies and sub-components 56 3) Raise tariff on indigenized parts and domestically produced vehicles 53 4) Put Indian imports on the Negative List 41 5) Strengthen valuation and anti-dumping mechanism 38 * Chapter 87 is mostly included in the Sensitive List of Pakistan in SAFTA to avoid any reduction in tariffs in the automotive sector. 91 It is significant that a minority of respondents, albeit large, have not demanded that the Negative List should be continued and automotive products put fora longer period in this list. This would effectively deny India MFN status and led to a loss of the goodwill that has been generated in bilateral relations. India has agreed to some major steps like rationalization of quality regulations and procedures for customs clearance, alongwith opening of more integrated check posts (like at Attari-Wagah) to facilitate movement of consignments by land routes. More recently, permission has been granted for investment by Pakistanis in India. Down the road, more steps at facilitation of trade maybe forthcoming from India. All these steps auger well for the greater access generally of Pakistani exports to the Indian market. The other proposals, (1), (2) and (5), are worthy of consideration. In the case of non- indigenized parts, the concessionary SRO maybe withdrawn and the statutory rate brought down to the present concessionary rate for sometime and the processing of import quantities by EDB, which is effectively a return of the licensing regime, be discontinued. As far as quality standards are concerned, these should definitely be strengthened, especially in the case of autoparts. The replacement market is already flooded with substandard parts, both domestic and imported. These practices need to be curbed through more effective regulation, either by federal or provincial agencies. There is definitely a strong case for strengthening valuation and anti-dumping mechanisms. The problem of underinvoicing of parts, in particular, has acquired serious proportions. This may necessitate a return to the International Trade Price (ITP) system or the use of specific duty on some items, including autoparts and other automotive products. In addition, the existing laws on Safeguards and Anti-Dumping need to be reviewed. The National Tariff Commission must have greater capacity to review a larger number of cases and impose counterveiling duties wherever necessary. Finally, we come to the issue of enhancement of tariffs, as mentioned in proposal (3) above. In Phase I of the Study, prior to the granting of MFN status of India, we had recommended in Chapter 4 that the maximum tariff be brought down to 35 percent by 2016-17, to induce greater competition in the industry for the benefit of consumers. Given apprehensions about the potential wide ranging competition from Indian exports in the automotive sector, we suggest that for the year, 2012-13, the present tariff rates largely be left unchanged. A subsequent review maybe conducted after an assessment is made of the actual impact on the industry following the granting of MFN status to India and the resulting expansion of trade. |