Trade policy - an impasse

Each year, there comes a time when the ministry of commerce is engulfed in heated debates between industrialists, traders and representatives of the government as the annual trade policy is finalised.
Sure enough, battle lines are drawn at the ministry once again as the upcoming trade policy is expected to be fully formulated by the end of August. Manufacturers and traders have crossed swords with each other, as the former demand restrictions on imports of semi-finished and finished goods, while the latter are calling for easier import conditions. Without much of a strategy of its own, the government appears torn between the two sides.
A proposal submitted by the Overseas Investors Chamber of Commerce & Industry (OICCI) has strongly advised the government to revert reams of incentives provided last year to facilitate the import of used cars; so that the local auto sector May be protected.
Last year, the government enhanced the age limit for the import of used vehicles from three years to five years under the Gift, Baggage & Transfer of Residence Scheme. It also increased the maximum depreciation to 60 percent from 50 percent. On top of that, duty deprecation was increased by one percentage point per month to two percent per month.
"The Automotive Industry considers that the local industry is unable to absorb the dent on account of Used Car as did in 2005-06," according to the proposal. Local car companies cite that economic growth has sputtered of late and the consumer finance sector is weaker compared to 2005-06 when the import of cars manufactured up to five years previously was allowed.
Therefore, they demanded that the government take cue from import policies of India and Thailand as these countries have imposed stringent non-tariff barriers and do not allow duty depreciation (Discount in Custom Levies).
The business body has also grumbled about a contradiction in Para 11 of Appendix C of the Import Policy Order (IPO), 2009 and SRO 499(I)/2009 dated June 13, 2009. The IPO restricts the import of used parts, while the SRO allows used car parts against payment of penal duties.
They highlighted that some importers exploit this facility by importing new parts as used parts.
Another document also highlighted that Hinopak Motors Ltd complained of the misuse of PCT 8705.9000, which allows the import of heavy duty specialized used vehicles, such as sprinkler-lorries and water browsers, as some traders import sprinkle lorries and later convert these into lorries and trucks.
On the other hand, legislators have demanded the imports of tractors should be deemed duty-free and imports of second-hand tractors, threshers and other agricultural equipment should also be tax free.
Since supplies from Japan have been disrupted in the aftermath of the natural disaster there; Pakistan Suzuki Motor Company has requested that it be allowed to import components, machines, jigs, dyes and moulds from India.
All these considerations would definitely give policy markers a lot of substance to muse about, but the key challenge lies in how effectively policy markers formulate a fresh response to address issues and design policies that would lead to expansion in local manufacturing base.