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DISCUSSION ON MODALITIES PROPOSAL

DISCUSSION ON MODALITIES PROPOSAL. JUNE 9, 2003, CHENNAI. Society of Indian Automobile Manufacturers. DOHA DECLARATION. Non-agricultural Market Access in negotiating agenda:. Mandate.

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DISCUSSION ON MODALITIES PROPOSAL

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  1. DISCUSSION ONMODALITIES PROPOSAL JUNE 9, 2003, CHENNAI Society of Indian Automobile Manufacturers This is a property of Society of Indian Automobile Manufacturers

  2. DOHA DECLARATION Non-agricultural Market Access in negotiating agenda: Mandate . . To reduce or as appropriate eliminate tariffs; reduction or elimination of tariff peaks, high tariffs and tariff escalation; reduction and elimination of non-tariff measures, in particular on products of export interest to developing countries. . . . Product coverage shall be comprehensive and without a priori exclusions. It was agreed that in case of developing countries, less than full reciprocity in reduction commitments principles would be applied Doha declaration also set up a mechanism to look into the issues of access to technology This is a property of Society of Indian Automobile Manufacturers

  3. SIAM VIEW ON TARIFF & TECHNOLOGY • Trade & Technology has an inverse relation to tariff • High tariff – trade does not flow, technology flows for market access • Low tariff – trade flows but technology does not • Need optimal tariff for smooth technology transfer This is a property of Society of Indian Automobile Manufacturers

  4. ISSUE Negotiating Group on Market Access (NGMA), Chair’s (Pierre Louis Girard) proposal on Modalities for tariff reduction of non-agricultural products • Tariff Reduction: Formula • Sectorial Tariff Elimination • 5% Tariff lines may remain unbound – developing countries Preliminary draft under the Chair’s own responsibility Ministry of Commerce, GoI wants quick view from automotive industry This is a property of Society of Indian Automobile Manufacturers

  5. INDIA’S POSITION ON MARKET ACCESS • Core Modality – Line by line • A simple percentage cut on bound tariffs (by33% and 50%) • Members shall not impose a tariff on any product in excess of three times their average tariff • Special & Differential Treatment • Higher percentage reduction for developed countries. • In determining the reduction by developing countries dependence on customs revenue to be kept in view. • Flexibility to developing countries to decide on actual bindings of some tariff lines while maintaining the percentage reduction on average basis. • Developing countries should have the flexibility to not bind certain tariff lines considered highly sensitive Source: WTO, NGMA-Overview of Proposals Submitted; TN/MA/6, February 5, 2003 This is a property of Society of Indian Automobile Manufacturers

  6. INDIA’S POSITION ON MARKET ACCESS • Base Rates • For bound tariff lines, reductions should be undertaken only from bound levels • Special & Differential Treatment • For unbound tariff lines, developing countries should have the flexibility to bind them at levels generally above the higher of the bound rates prevailing for bound items in a country’s tariff schedule Source: WTO, NGMA-Overview of Proposals Submitted; TN/MA/6, February 5, 2003 This is a property of Society of Indian Automobile Manufacturers

  7. INDIA’S POSITION ON MARKET ACCESS • Sectoral Elimination Initiatives • Supplemental “zero for zero” proposals are to be kept to a minimum • Special & Differential Treatment • Higher harmonised tariff level for developing countries • Greater credit for tariff reductions by developing countries • Longer implementation periods would need to be incorporated in sectoral initiatives Source: WTO, NGMA-Overview of Proposals Submitted; TN/MA/6, February 5, 2003 This is a property of Society of Indian Automobile Manufacturers

  8. INDIA’S CURRENT TARIFFS This is a property of Society of Indian Automobile Manufacturers

  9. ISSUES OF CONCERN What happens to • Unbound Tariff lines • Passenger cars/MUVs • Two Wheelers • Bound Tariff Lines • Commercial Vehicles/MUVs • Components BOUNDS RATES WOULD RESTRICT DUTIES ON SECOND HAND VEHICLES ALSO This is a property of Society of Indian Automobile Manufacturers

  10. PROPOSED TARIFF REDUCTION FORMULAE The Formulae where, t1 is the final rate, to be bound in ad valorem terms t0 is the base rate in the year 2001 ta is the average of the base rates of years 1999-2001 B is a coefficient with a unique value to be determined by the participants Base Rate: Tariff reduction or elimination on all non-agricultural products from the bound rates. However, for unbound items, the basis for commencing the tariff reductions shall be two times the MFN applied rate.When the MFN applied rate in the base year is zero, 5 percent shall be used as the basis This is a property of Society of Indian Automobile Manufacturers

  11. IMPACT ON AUTO INDUSTRY Issues that need clarity Is “B” unique of entire world? Unique for each country? Is “B” Sector specific? “Ta” Sector specific? Is “Ta” average of only bound rates, only applied rates or is it average of applied (only where there is no bound rate) and bound rates? Automotive Sector: Chapter 87 Auto Sector average of applied rates (1999-2001): : 37.89 Auto Sector average of applied & bound rates (1999-2001) : 40.33 APPLICATION OF FORMULA ON AUTO SECTOR Ta To : Car/MUV/2whlr = 60x2; CV/MUV/Comp = 40 This is a property of Society of Indian Automobile Manufacturers

  12. IMPACT ON AUTO INDUSTRY National Tariff Average : Non-agriculture Goods WTO Document JOB(03)/67: India’s simple average tariff is 34.3% ASSOCHAM: India’s average tariff is 42.0% APPLICATION OF FORMULA ON ABOVE Ta To : Car/MUV/2whlr = 60x2; CV/MUV/Comp = 40 This is a property of Society of Indian Automobile Manufacturers

  13. CONCERNS Various Views of different quarters VIEW A : B=0.6% - 0.7% VIEW B : B=1% Implications for Auto industry: To : Car/MUV/2whlr = 60x2; CV/MUV/Comp = 40 This is a property of Society of Indian Automobile Manufacturers

  14. OBSERVATIONS UNBOUND TARIFF LINES • Developing countries could keep 5% tariff lines unbound. • Automobiles is one sector which is considered sensitive as per governments assessment and • Govt’s intention is to keep it unbound. • In case formula has to be applied, tariff should not go down by more than 33%. i.e., B= 5-4 • Impact would be straight jacketing – no leeway This is a property of Society of Indian Automobile Manufacturers

  15. AUTO INDUSTRY SPECIAL CONCERN BOUND TARIFF LINES • For commercial vehicles, the bound rates (40%) would have to be necessarily brought down. • For components zero rate has been suggested under sectoral tariff elimination plan CV bound rates should be determined keeping in view used vehicle import This is a property of Society of Indian Automobile Manufacturers

  16. SECTORAL TARIFF ELIMINATION PLAN • Chair has suggested a tariff elimination plan for: • Electronics & Electrical Goods • Fish & Fish Products • Footwear & Leather Goods • Motor Vehicle Parts & Components • Stones, Gems & Precious Metals • Textiles & Clothing • As these are products of particular export interest to developing countries Areas of concern: In the context of Tariff Peaks GoI has identified following as “areas of interest to developing countries”: • Textile & Clothing • Leather, rubber footwear and travel goods • Transport equipment • Fish & Fish products WTO-NGMA could extend list to include vehicles in the next phase This is a property of Society of Indian Automobile Manufacturers

  17. SECTORAL TARIFF ELIMINATION PLAN (CONTD.) • Suggested three phase tariff elimination plan: • Developed participants and other participants who so decide, shall eliminate tariffs at the end of the first phase • Other participants shall achieve tariff reduction and elimination as: • Tariff reduction to a proposed level of not more than 10% • Maintain this level during the second phase • Achieve elimination of tariff at the end of third phase • If the rate (Bound or MFN applied) is less than 10% lower rate remains Areas of concern: US has been propagating “As soon as possible, but not later than 2010 elimination of tariffs in the zero-for-zero sector” This is a property of Society of Indian Automobile Manufacturers

  18. MERITS OF THE PROPOSAL • Covers many aspects of Doha Declaration - Consolidates divergent views • Formula – If value of “B” could be negotiated at a level suitable to India, it may give a solution to tariff reduction system • 5% exclusion for developing countries – need judicious selection of tariff lines • Sectoral tariff elimination – Should be applicable only for developed countries This is a property of Society of Indian Automobile Manufacturers

  19. OPTIONS FOR SUGGESTION • Reject Chair’s Proposal – Too Straight Jacketing. • Keep cars & two wheelers unbound. Accept Tariff Reduction With B=4, Reject Sectoral Tariff Elimination Plan. • Keep cars & two wheelers unbound. Accept Tariff Reduction With B=4, Remove Second Bullet (Other participants shall achieve tariff reduction and elimination. . . ) from the Plan. • Keep cars & two wheelers unbound. Accept Tariff Reduction With B=4, Remove “Motor Vehicle Parts & Components” Form The List. • Accept Tariff Reduction With B=4, Accept Sectoral Tariff Elimination Plan With Extended Time Frame. Used vehicles to be treated separately. This is a property of Society of Indian Automobile Manufacturers

  20. Thank You Society of Indian Automobile Manufacturers Core-4B, 5th Floor, India Habitat Centre Lodi Road, New Delhi - 110 003 Tel.: 011- 24647810/11/12 Fax: 011- 24648222 Email: siam@vsnl.com This is a property of Society of Indian Automobile Manufacturers

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