EU Opposes Brazil, Argentina Auto Parts Protectionism

The European Union is protesting Brazil’s hike in taxation of foreign-made components and Argentina’s requirement thatauto-parts importers file a sworn declaration, including production information, to the country’s customs authority.

Keith Nuthall, Correspondent

April 11, 2012

3 Min Read
Renault among foreign auto makers in Brazil facing high tax if 65 of parts arenrsquot sourced from regional trade bloc
Renault among foreign auto makers in Brazil facing high tax if 65% of parts aren’t sourced from regional trade bloc.

The European Commission is taking diplomatic action to oppose trade restrictions on European Union suppliers exporting auto parts to Brazil and Argentina.

The EC has raised concerns bilaterally with Brasilia and Buenos Aires and also at the World Trade Organization, where formal disputes proceedings could be launched.

Eleri Wessman, legal affairs and trade manager for CLEPA, the European association of automotive suppliers, says a key problem is in Argentina’s resolution that requires importers to file a sworn declaration, including production information, to the Argentine taxation and customs authority before any imports take place.

This came into force on Feb.1 and “is a significant import barrier to our members,” Wessman says. “We (have submitted) comments to the Commission, which is taking this case to the Council of Trade and Goods. It may then raise it at the WTO as a dispute settlement case.

“Companies have informed us they are facing serious problems in Argentina,” she adds. “Some say they have several confirmed orders with the import authorization still pending amounting to almost BR914,000 ($500,000).

Other suppliers have suspended all imports while this regulation is in effect.

“CLEPA is keeping the identity of complaining companies under wraps,” Wessman says. “We are very aware that (their) identity must be kept strictly confidential, and in fact many fear reprisals.”

Argentina is not the only country where there are problems. The EC also is upset with Brazil’s hike in its industrial products tax on auto makers that don’t source 65% their parts from the Mercosur trade bloc or Mexico.

Additionally, suppliers doing business in Brazil must invest at least 0.5% of their gross sales in research and development in the country and carry out a number of essential manufacturing processes there.

The Commission says in a report it has raised this issue with Brazil and relevant WTO bodies and is working with affected European parts suppliers to determine “appropriate further action.”

Wessman welcomes the Commission action. “We are against any protectionist trade measures and call for the promotion of liberalization globally,” she says, noting that Brazil already had high import duties for EU-made auto parts of between 14%-18% before taking this recent measure.

EU trades spokesman John Clancy tells WardsAuto, “The EU continues to monitor such protectionist measures closely as one of the priority market-access issues and does not rule out any option, including when judged necessary and appropriate (going) through the WTO.”

“We maintain an important dialogue with our Brazilian counterparts on trade matters, including at the political level, and we hope to find a swift resolution to this issue to ensure European business, notably its auto industry, does not have to suffer any further adverse effects."

Sigrid de Vries, director of communications and public relations for ACEA, the European automobile manufacturers association, says trade issues such as are the No.1 issue for ACEA.

With the failure of the WTO Doha Development Round, a plethora of bilateral trade deals have been negotiated and some countries are looking to protectionist measures to boost their competitive advantage.

“It’s becoming the (diplomatic) spaghetti ball that we were warned about,” says de Vries, commenting on the growing complexity of trade relations in the absence of a multilateral trade agreement.

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