The European automotive industry would welcome an EU free trade agreement (FTA) with India provided it met various criteria, including being balanced and reciprocal, and not diverging from the full tariff elimination principle (‘zero-for-zero’) for both motor vehicles and parts. An FTA with India should also contain a meaningful Automotive Annex to avoid future non-tariff barriers.
An EU FTA with India that results in the opening-up of both the EU and Indian markets would have the potential to offer long-term competitiveness, stability in employment and substantial commercial gains for the EU automotive industry as a whole.
The FTA negotiations were launched in July 2007. Various targets have been set, but no agreement has been concluded to date.
At present, India remains inflexible on the abolition of its automobile tariffs, showing reluctance to commit on substantial tariff dismantling for both vehicles and parts. It applies peak import tariffs of 100% on cars, 10% on trucks and buses, 7.5% to 15% on parts and components, and 30% on 'completely knocked down' parts (auto parts to be assembled by the end user).
While ACEA supports a deal under the right conditions, the industry is concerned that the current offers would not provide real market access to India, a country that is certain to be one of the great economic powers of the 21st century. The EU auto industry is concerned that such conditions would set a precedent for future FTA negotiations. Other countries applying peak automotive tariffs could then ask for a similar treatment in FTA negotiations with the EU. This would result in a major setback for EU manufacturing (with subsequent effects on growth and employment) and for the improvement of market access to these countries/regions.
- There should be no Indian 'negative list' reciting sectors or products that are not bound by the agreement. Rather, all sectors should be automatically covered.
- The dismantling of automotive tariffs should be on a 'zero-for-zero' basis. Without such tariff elimination, the trade balance will remain negative, providing greater export opportunities to Indian producers than to the EU industry.
- Longer or asymmetric tariff dismantling periods on motor vehicles would be acceptable provided that they eventually lead to full tariff elimination.
- India should not benefit from a duty drawback, and the standard EU Rules of Origin principles should apply.
- An FTA with India should ensure that all non-tariff barriers are eventually eliminated in full and within a reasonable lead-time. India should join the World Forum for Harmonization of Vehicle Regulations (Working Party 29) of the United Nations Economic Commission for Europe. A mechanism should be set up to deal with existing non-tarrif barriers and prevent the introduction of new ones.
ACEA, together with the European Association of Automotive Suppliers (CLEPA), has called upon the Commission to negotiate a fair and reciprocal deal, which provides for full market access to the Indian market.
Both in terms of units (8% of total imports; 163,000 cars) and of value (4.5% of total imports), India is the 6th largest importer of cars into the EU.