WTO Trade Deal Could Spur Globalization, Expert Says

The agreement by the World Trade Organization to reduce import-export red tape may lead to a seismic shift in the global automotive sector, an industry expert says.

Peter Cooke, professor emeritus of automotive management at Britain’s University of Buckingham, tells WardsAuto that major emerging markets without a substantial auto sector may create capacity because of the deal.

Highlighting Pakistan and Indonesia as examples, Cooke says the removal of complex import rules that impede the purchase of parts could encourage automakers to develop local assembly plants serving vast and growing local markets.

“It could mean a change in the balance of power,” he predicts. “Places like Pakistan could start to build cars because they have a huge potential domestic market.” Once manufacturers can source parts, they “can put together cars at a sensible price,” he adds, saying the same process could happen in Indonesia, for example.

In Africa and South America, he notes Chinese manufacturers of all kinds have been investing in local companies and building new capacity – and this could happen with cars, if often-stifling import regimes on those continents are eased.

And while Chinese and Indian manufacturers currently are weak on product design, Cooke says improvements easily could be made. By locating assembly capacity in South America, for instance, Chinese-owned companies could thrive within a simplified trading regime that reduces international commerce-related bureaucracy.

“South America has everything: It’s got raw materials, demand and it’s relatively close (in shipping terms) to China. If you take down a lot of trade barriers, the whole picture can change.”

The WTO’s agreement on trade facilitation insists some detailed services be made available to exporters and importers.

Struck earlier this month in Bali, Indonesia, it calls on all WTO members (159 countries including all the world’s significant economies) publish all their import procedures, charges, tariffs and appeal systems.

Also, auto and parts exporters should be offered the ability to file customs documents electronically in advance for pre-arrival processing, with WTO member states offering  electronic payment of duties, taxes, fees and charges. The agreement allows importing countries to charge deposits or payment of taxes and fees before goods arrive in port.

The so-called Bali package says penalties for breaking customs rules must depend on the seriousness of the violation and not encourage officials to impose them arbitrarily, avoiding “conflicts of interest in the assessment and collection of penalties and duties.” Written explanations for imposing such penalties must be given.

Additionally, WTO member states have agreed to review and simplify their trade bureaucracies to make sure they are designed and applied “in a manner that aims at reducing the time and cost of compliance for traders and operators.” They would be “the least trade-restrictive measure chosen, where two or more alternative measures are reasonably available.”

The WTO general council on July 31 formally will adopt the agreement, which will need ratification by two-thirds of signatories before taking effect. The poorest, least-developing countries will have an effectively open-ended implementation deadline.

Indonesia Trade Minister Gita Wirjawan, the WTO meeting’s chairman, says the deal will “reduce the cost of trading, smooth the flow of goods across borders and provide more certainty for business. It will benefit all members, but particularly developing countries.”

The WTO estimates the agreement’s benefits to the world economy would be between $400 billion and $1 trillion.

A spokesman for the U.K.’s Society of Motor Manufacturers and Traders says: "The adoption of the Bali package is welcome…the trade-facilitation part of the package could provide opportunities, particularly in the developing BRIC (Brazil, Russia, India, China) countries and others.”

The American Automotive Policy Council, is still studying the ramifications of the proposal, says Charles D. Uthus, vice president-international policy. But, he notes, the deal could “have a positive effect on our member companies by removing some discretions that countries have to slow down imports.”

The agreement also could help U.S.-owned auto plants located overseas operate efficiently, he says. “The ability to move, engines and transmissions, for example, from North America and around the world is important for the competitiveness of our industry in general.”