TOKYO - Flush with success in helping to overturn Indonesia's discriminatory automotive policy, Japan has fired a warning shot across the bow of India. Tokyo's real target, however, may be China.
Japan's Ministry of International Trade and Industry said Japan has asked India for a detailed explanation of its local-content requirements, the first step in a possible formal complaint to the Geneva-based World Trade Organization.
Last December, India unveiled a policy requiring that foreign carmakers operating in India raise their local-content ratios to 50 percent by their third year of operation and 70 percent in the fifth year. Starting in the fourth year of operation, foreign carmakers also are required to export parts or finished cars equal to the value of the parts they import.
LOCAL CONTENT RULES
Because China also has stiff local-content requirements for foreign carmakers, Japan's stance vis-a-vis India is seen by policy experts here as a warning to Beijing that those policies also may come under World Trade Organization scrutiny.
China is not a member of the World Trade Organization but is eager to join the global trade body.
In late March, the World Trade Organization's Dispute Settlement Body ruled that Indonesia's so-called national car project was a 'government-mandated trade distortion' that violated World Trade Organization agreements and conventions.
Japan, followed by the United States and the European Union, had taken Indonesia to the World Trade Organization over the 1996 national car project.
They argued that the project, headed by President Suharto's son, had been given tax and import-duty breaks in violation of World Trade Organization rules.
The World Trade Organization ruling is largely symbolic, because Indonesia has agreed to dismantle the tax breaks for the Timor as a result of pressure from the International Monetary Fund, which is arranging a financial rescue package for the Southeast Asian nation.