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ISLAMABAD: In a surprise move, Japanese government threatened Pakistan to take the case for forcing its three car assembling companies to export their variants to the World Trade Organisation (WTO) which, according to Tokyo, is clear violation of WTO rules, well informed official sources told Business Recorder.

Japan’s three key auto companies; i.e., Honda, Toyota and Suzuki are operating in Pakistan under the following names: Indus Motor Company (Toyota) and Honda Atlas Cars Pvt. Ltd, and Pak Suzuki Motors Limited. The share of the three Japanese companies in Pakistan’s car market is about 75 to 80 per cent.

According to the Auto Industry Development and Export Policy (AIDEP) 2021-26, it was observed that the contract agreement of most of the local vehicle manufacturers with their Principals are for Pakistan market only, which may be one of the reasons for limited exports.

Pakistan’s auto industry seeks ‘remission’ after failing to meet export target during FY23

As Pakistan has acceded to United Nations Economic Commission for Europe (UNECE) WP-29, which ensures harmonised vehicle regulations, local automotive sector has a chance to enhance exports by ensuring compliance to the regulations of importing market.

In addition, all OEM contracts which forbid or restrain exports from Pakistan to any other country, need to be renegotiated/ amended to allow exports to target countries, and make Pakistan an export base, both for auto-parts and vehicles. Obligatory export of parts/ vehicles by manufacturers will be introduced under AIDEP. The OEMs were to be asked to comply, for export promotion; however meeting of targets earlier than schedule will be incentivised.

The Policy made it mandatory for the OEMs to export 2 per cent of cars in 2022-23 as ratio of total import, 4 per cent in 2023-24, 7 per cent in 2024-25 and 10 per cent 2025-26.

In October last year, Special Investment Facilitation Council (SIFC) took serious note of zero export of cars by the Japanese companies and directed Ministry of Industries and Production (MoI&P) to revalidate import quota of the three Japanese car assemblers. Subsequently, their import quotas were suspended for a few days.

The sources said, Japanese cars assemblers had been asked to submit their export plan to the government. The auto companies’ plans came under discussion at the SIFC level and they were asked to revise them.

The negotiations between the car assemblers and MoI&P were progressing on the revised export plan, but meanwhile Japanese government formally wrote to Pakistan’s Embassy in (Tokyo) Japan, Pakistan’s Mission at the WTO, Ministry of Commerce, Ministry of Industries and Production, the sources added.

“Japan has raised its Specific Trade Concern (STC) to Pakistan at four places; i.e., Pakistan Missions at WTO and Tokyo, Commerce Ministry and Industries Ministry, saying that Pakistan is forcing Japanese car companies to export their variants, which is violation of WTO agreement,” confirmed high level official sources.

However, Pakistan’s viewpoint is that whatever step the government has taken in this regard, is WTO compliant, the sources added.

“Both sides have their own justifications. First this issue will be discussed bilaterally between Japanese government and Pakistani government and if it is not settled bilaterally, then it will land at the WTO level committee,” the sources continued.

According to the WTO procedure, the matter is to be raised at the Committee on Market Access and Committee on Trade Related Investment Measures (TRIMs). The agreement in TRIMs, WTO members have agreed do not apply to certain investment measures related to trade in goods that restricts or distorts trade.

“When this issue will be raised at appropriate WTO forums, Pakistan will be asked to submit response to the concerns of Japan. Pakistan will submit its response in the next meeting of the Committee. If Japan is not satisfied with the response of Pakistani government two or three times and expresses disagreement with Pakistan, then the matter will be forwarded to the WTO dispute settlement body,” the sources further explained.

If this happens, it will take one year to start proceedings at the WTO dispute settlement forum as a complaint cannot be launched directly at the dispute settlement body, the sources said.

OEMs argue that they are non-competitive for exports due to extra tariff on Pakistan origin - parts, CBUs and used cars - due to non existence of Free Trade Agreements (FTAs) as automotive parts is not part of FTAs.

According to OEMs, second reason is absence of local raw materials make exports non-competitive and the third reason is limited avenues of right hand drive make vehicles export non-viable.

To make Pakistan origin export competitive with other countries zero-rated FTA (excluding CBUs+ localized parts to protect local vender industry) required for auto parts in ASEAN, GCC and Africa. All localised parts and investment made at vendors and OEMs to be safe guarded in signing FTA.

Other submission of auto sector are as follows: (i) extend “zero-rated” export to tier-1 and tier-II suppliers of OEMs working under SRO 655 & 656 to make localised parts competitive; (ii) establish local metal industry for base raw material such as steel, copper and aluminium (from Ore to FG); and (iii) establish local processing industry for resin/ rubber raw material such as PP, PE and PU.

Presently, 25 cases of auto sector are in local courts, of which 23 cases are related to new entrants whereas two cases have been filed by existing assemblers.

The sources said, Japanese Ambassador to Pakistan has held meetings with Commerce Minister, Jam Kamal and MoI&P Minister, Rana Tanvieer Hussain and raised the issue of quota and forced export mantra.

Copyright Business Recorder, 2024

Comments

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Usman Apr 08, 2024 06:10am
Lets boycott the japnese cars.Enough of them dumping useless cars which no one in the rest of the world would accept.
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Cool boy Apr 08, 2024 10:17am
Interesting.. Japanese assembler mafia has been looting Pakistanis and now the cat is out of the bag that they can't produce cheap local products and need to import everything
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Maqbool Apr 08, 2024 11:22am
We need to raise that none of them adhered to their commitment re Localization , in reply .
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abdus samad Khan Apr 08, 2024 12:22pm
Pakistan has nothing to say as poeple like Rana Tanveer are sitting on this. what does Rana know about this trade. he would like to see his chances of commission
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Usman Apr 08, 2024 12:25pm
Pakistan nation should bycott these japanese companies. They looted our nation by selling cars at more expensive prices and now they are blackmailing us. We slas nation should bycott now
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Make in Pakistan Apr 08, 2024 12:51pm
Every now and then, we find out that our state level contracts with multinational companies are flawed (IPP first and this). This points to deep rooted corruption since the very beginning.
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KU Apr 08, 2024 02:02pm
Japanese are afraid of being exposed in international market when they export low quality and low safety featured cars. The agreement with these companies exposes the corrupt baboos/ministers.
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KU Apr 08, 2024 02:07pm
It's test case for SIFC, will it fight or flight? Precedents are in danger of being set here, and so too accountability of corrupt who had agreements, while people were robbed with expensive cars.
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Aam Aadmi Apr 08, 2024 04:22pm
These companies cannot fulfill even the local needs, how can they export these cars? The sight of dollars is turning the authorities blind.
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Shahab Apr 09, 2024 03:43am
totally agree look at these manfucturers their cars are so poor that they cant even export them
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Azhar Apr 09, 2024 09:15am
Excellent Efforts by Govt of Pakistan Pakistan First
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Ali Apr 09, 2024 09:54am
united corruption Instead of negating Pakistan's vehicle import policy Japan should have focused more on the next to nothing quality of honda, Toyota and Suzuki vehicles being sold here.
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IMTIAZ HUSSAIN Apr 09, 2024 10:20am
Well done Govt of Pakistan. These car assemblers are main source of trade deficit and looting the Pakistani nation by selling poor quality cars at so much high prices
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Ali Khan Apr 09, 2024 10:51am
Japanese manufacturers are exploitative in nature and want to maintain export markets for their home manufacturing units. Clearly their imperial thinking is being challenged.
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