In a surprise move, Japan has threatened Pakistan to take the case of forced export of cars manufactured by three car assembly plants in Pakistan to the World Trade Organization (WTO). Informed sources said that according to the Japanese government, this export is against WTO rules.
Three Japanese car manufacturers Honda, Toyota and Suzuki are operating in Pakistan under the names of Honda Atlas Cars Private Limited, Indus Motor Company and Pak Suzuki Motor Limited respectively. The total share of these three companies in the car market of Pakistan is 75 to 80 percent.
Under the Auto Industry Development Export Policy 2021-26 (AIDEP), most of the local manufacturers have contracts with their respective foreign ‘Original Equipment Manufacturers’ (OEMs) to manufacture vehicles for the Pakistani market only. Limited exports are hardly the reason.
Pakistan is affiliated to the United Nations Economic Commission for Europe (UNECE) WP-29 which ensures harmonization of vehicle regulations and the local automotive sector can increase exports if the import market regulations are fully implemented.
According to high-level government sources, Japan has said that Pakistan is putting pressure on Japanese car assemblers to export their models in violation of WTO agreements.
However, Pakistan’s position is that whatever steps the government has taken in this regard are in line with WTO norms. Sources say that the parties have their own arguments and justifications. Efforts will be made to settle the issues on a bilateral basis first. If the two governments fail to do so, the matter will go to a WTO committee.
As per the WTO procedure, the matter will be taken up in the Committee on Market Access and the Committee on Trade Related Investment Measures (TRIMs). TRIMs agreements do not apply to investments in trade-restricting or trade-distorting goods.
When the matter is taken up in the WTO, Pakistan will be asked to file its response regarding the redressal of Japanese reservations. Pakistan will file its reply in the next meeting of the concerned committee. If the Japanese government is not satisfied with Pakistan’s response even two or three times, then the matter will go to the WTO dispute settlement body.
If this happens, it will take a year to initiate the process of settling cases in the WTO because the application cannot be made directly to the dispute settlement body.
Original Equipment Manufacturers argue that additional tariffs on exports of finished parts, CBUs and used cars in Pakistan are not in a competitive position in the export sector as there is no free trade agreement and parts are part of the agreement. no.
Another reason, according to OEMs, is that competition in the export sector is not possible due to lack of local raw materials. And the third reason is that there is not much consumption capacity in the global market for right hand steering wheel vehicles manufactured in Pakistan.