Pakistan to restrict auto spare parts imports from Sri Lanka under FTA
Pakistan is to impose restrictions on auto spare parts imports from Sri Lanka under the Free Trade Agreement (FTA) between the two countries as it indirectly provides market access to India which is planning to set up joint ventures with the island nation, official sources revealed.
The entry of Indian auto components to Pakistan via Sri Lanka under the FTA came up for discussion at the recent joint economic commission (JEC) meeting and the two sides agreed to take up this matter at the upcoming ministerial meeting of the JEC.The FTA with Sri Lanka indirectly provided market access to India, which could take advantage of the agreement and dump its subsidized products in Pakistan, Pakistan media reports revealed.
The Pakistan Automotive Manufacturers Association (PAMA) has urged the Pakistani government to tread carefully on its trade agreement with Sri Lanka, the Pakistani-based The Express Tribune newspaper reported last week.
Negotiations are underway to include auto spares to the negative list of the FTA with the aim of blocking the entry of Indian auto spares to Pakistan via Sri Lanka, a senior government official said adding that Pakistan authorities were of the view that all the auto-parts exports from Sri Lanka to Pakistan should be included in the negative list.
Sri Lanka has agreed to allow Pakistan to place 49 items in its negative list and the remaining 38 relating to auto sector will be discussed in the next meeting along with Sri Lanka’s request list tabled during the previous JEC meeting.
The Sri Lankan government is to encourage the manufacture of vehicle spare parts by providing incentives similar to those available in India, senior government official told the Business Times adding that the country plans to make use of FTAs in finding better markets for auto spares in South Asian and African countries.
However the protest of the Pakistan Automotive Manufacturers Association will have a negative impact on this ambitious plan, he pointed out.
Apart from direct auto spare parts imports from India, Sri Lanka has the potential to become a significant hub for auto components through collaborations with Indian auto companies and by establishing joint ventures in this sector.
Sri Lanka is manufacturing tyres, batteries, upholsteries and some rubber components for the auto industry on a small scale but the country has the ability and skills to produce various vehicle spare parts, he said.
The Pakistan industry is already facing a hostile tariff regime where local vendors are importing castings and forging at 20 per cent duty. With the finished products, like gears, being allowed to be imported at 5 per cent or less duty from Sri Lanka, the local industry will suffer badly, The Express Tribune newspaper quoted PAMA Director General Abdul Waheed as saying. “We will be giving away our market to Indian products routed through Sri Lanka at the cost and peril of a domestic value adding industry”.
“If finished products like gears are allowed to be imported at 5 per cent or less duty from Sri Lanka, the local industry will suffer massive haemorrhage. Parts like ignition coils, CD units and parts and accessories for motorcycles including mopeds, etc are attracting basic customs duty of 35 per cent and an additional duty of 15 per cent. These parts, if imported from Sri Lanka, will come at 5 per cent duty or less,” Mr. Waheed told the Express Tribune.
The Sri Lankan officials expressed the belief that tariffs on herbal cosmetics, biscuits, confectionery and ceramic tiles made in Sri Lanka would be removed once the issue of auto parts is addressed.