Trade liberalisation: Auto industry worried over approval of negative trade list

Measure likely to result in win-win situation for consumers.

Farhan Zaheer February 29, 2012


Manufacturers of automobiles and their parts on Wednesday lost their last hope when the cabinet approved a negative list for trade with India which will be phased out by the end of this year, believing this will massively hurt the country’s auto industry.

After months of deliberations with different industries and inter-ministerial dialogue, the government finally gave the go-ahead to the negative list containing 1,209 items, replacing the positive list, in an attempt to boost trade between the two countries.

The government had been facing strong resistance from different sectors which believed that the negative list should be phased out gradually over a number of years so that it would not hurt the domestic manufacturing industry. Among top advocates of the go-slow policy was the automobile industry.

Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Chairman Syed Nabeel Hashmi told The Express Tribune that the government’s decision to phase out the negative list in just a few months was going to badly hurt the automobile industry.

“We had asked the government to give at least four to five years to the domestic industry before phasing out the negative trade list with India,” he said.

“This is all drama. Despite our reservations, the government has taken this decision which will cost us a lot,” Hashmi said. “The government had decided long ago what it had to do and this is what we are seeing now.”

Hashmi said Pakistan’s auto part manufacturers exported to different parts of the world, but they could not ship their products to India because of non-tariff barriers. “The government is not supporting us in our issues,” he said.

“As far as I think, this decision will lead to an increase in import of Indian products in Pakistan. And eventually all our auto manufacturing units will shift abroad because of unhealthy manufacturing environment in the country,” he said.

Some analysts believe that the phasing out of the negative list is aimed at paving the way for the South Asia Free Trade Agreement (Safta), which the two countries want to implement quickly.

Atlas Honda, the biggest motorcycle manufacturer in Pakistan, has also expressed fear over the cabinet move.

General Manager Corporate Affairs Razi-ur-Rahman said it would significantly increase import of Indian motorcycles in the country because of a significant reduction in duties.

At present, Pakistan imports completely built units (CBUs), or finished motorcycles, from China at 65 per cent duty. The cabinet decision will bring the duty to just 20 per cent in 2012 and then 0-5 per cent in 2013 in trade with India, which will make it very easy to import motorcycles.

Pakistani manufacturers believe that India with the help of non-tariff barriers tries to block their exports. However, Delhi insists that it does not discriminate against Pakistan’s export products at any level. Despite these differences, both the governments have vowed to remove all misconceptions and significantly boost bilateral trade in coming years.

This huge loss to the auto industry, however, is a clear win-win situation for the consumers, who will get cheap products – motorcycles and cars.

For instance, the duty reduction from 65 per cent to 20 per cent will significantly reduce motorcycle prices in the retail market. On the other hand, carmakers will be able to import cheap Indian auto parts that they otherwise import from Thailand at higher prices.

Published in The Express Tribune, March 1st, 2012.


Rational_thinker | 11 years ago | Reply

We had asked the government to give at least four to five years to the domestic industry before phasing out the negative trade list with India,” he said. Can someone explain to me what these guys have been doing so far and what do they want to do in next four years?

B.J Khan | 11 years ago | Reply

Time for the strong to survive and weak manufacturers to perish ....let there be trade with out Goverment interferance ....Hindu Muslim Sikh or Issaee all are welome in the arena of Global trade ...

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