Auto part firms to gain from WTO's ruling against China

The recent ruling by the World Trade Organization’s (WTO) highest appeals court, the Appellate Body, against the imposition of 25 per cent import duty on auto parts by China has come as a boost to Indian auto component manufacturers. These companies’ exports to China have been declining steadily. Indian automakers stand to benefit from the move as any cut in the duty will make their products cheaper in the Chinese market. “Auto ancillaries from India, like any other supplier elsewhere in the world, will have relatively freer access to the Chinese market, should the import duty be scaled down. The import duty is a trade barrier,” says Vishnu Mathur, executive director, Automotive Component Manufacturers Association of India (ACMA). Mathur says the benefit will come only if China accepts the ruling and reduces the duty. “China should not bring back the duty under a new name or a new policy. If that happens, other countries can retaliate against China,” he said. China applies 10 per cent duty on all auto components imported into the country. Indian auto component manufacturers say this could be as high as 25 per cent if vehicles built in China do not have local components to the extent of 40 per cent. India charges 7.5per cent to 10 per cent duty on all auto component imports, including from China. In the start of the decade, Indian auto ancillaries’ exports to China were more than the imports from that country. But that edge was short-lived. Imports of Chinese auto components surged at a CAGR (Compound Annual Growth Rate) of 113 per cent between 2003 and 2008, while Indian exports to China during the period grew at a CAGR of 17 per cent.