By Gustavo Capdevila
GENEVA, May 28 1998 (IPS)

Brazil’s car industry put feelers out in the World Trade Organisation (WTO) for possible obstacles to its plans to become one of the leading world vehicle producers.

A delegation from the National Association of Motor Vehicle producers (Anafavea) of Brazil started investigations in Geneva, Thursday, into their chances of applying differentiated import tariffs on vehicles in the Southern Cone Common Market (Mercosur), made up of Argentina, Brazil, Paraguay and Uruguay.

“We are testing the water,” said Jose Carlos Pinheiro Neto, Anafavea president, heading the Brazilian mission which will meet with members of the WTO secretariat Friday.

The plans of the Brazilian industry include the extension of the vehicle production scale to more than two million units in 197, to around three million before 2001.

These expansion plans have to be carried out within the common regime for the free passage of goods between the four Mercosur member countries.

In the automobile sector, by the year 2000, the bloc must agree a common external tariff and other rules -like the national component- in a tariff scheme which will also cover spare parts and the basic products needed as resources for the industry.

Brazil and Argentina, the two heavy-weight economies of the regional agreement, decided to start with, the common external tariff to be applied on the import of motor vehicles produced outside the bloc should be raised to 35 percent.

But this rate would be 50 percent lower in the case of vehicles imported by vehicle builders installed within the Mercosur area.

The other two partners, Paraguay and Uruguay, have still not accepted the proposed regime.

Pinheiro Neto said his entity “has already reached an agreement with ADEFA” (the Associatin of Automobile Producers of Argentina) on import rights for vehicles from outside the bloc.

“We came to Geneva to find out what stumbling blocks we may come across” in the application of the tariff agreed between Brazilian and Argentine industrialists, said the Anafavea leader.

The differentiated tariff policy runs the risk of unleashing fresh criticism of Mercosur along the lines of the comments made by WTO Director General Renato Ruggiero three weeks ago.

Ruggiero invariably cites the Mercosur when he complains the regional integration agreements have protectionist undercurrents, opposed to the principle of market liberalisation nurtured by the WTO.

Pinheiro Neto told IPS the tariff aspect of the Mercosur automobile regime drawn much criticism, but he refused to say from which quarters.

Most of the 23 Anafavea member companies are associates of the big companies from the United States, Europe and Japan, which dominate the world automobile business.

By the year 2000 they plan to have made investments of around 20 billion dollars in Brazil with the aim of increasing exports.

The Anafavea associate companies, which employ more than 112,000 workers, plan to make some six billion dollars on exports this year, a total of 20 percent up on 1997.

The Brazilian delegates met with WTO accredited officials from the Argentine and Brazilian missions Thursday.

Excerpt: