CLEPA Position Paper EU-MERCOSUR Free Trade Agreement

Date

07 Mar 2017

Press release

In  light  of  the  renewed  political  revival  in  the  EU-MERCOSUR  FTA  negotiations,  CLEPA underlines its continued support for the negotiations as they would bring important benefits  to both economies, in the form  of an ambitious and comprehensive trade deal. CLEPA hopes that the changes  in  the  political  landscape  will  favour  stronger  commitment  to  pave  the  way  for  a successful conclusion of the negotiations. 

Under HS tariff code 8707 (automotive parts and accessories), the trading volumes during 2016 between the EU and Brazil was 1.8bn USD and between the EU and Argentina it was 848 million USD. 

The  objective  of  the  negotiations  between  the  European  Union  and  MERCOSUR  centres  on cutting customs duties, removing barriers to trade in services and improving the rules relating to public tenders, customs procedures, technical barriers to trade, as well as protection of intellectual property rights. 

CLEPA agrees that a Free Trade Agreement is the best way to achieve meaningful market openings and improve the overall trade and investment conditions for its members in the MERCOSUR region. 

In line with CLEPA’s general principles on FTAs,

CLEPA supports:

  • Full tariff liberalisation;

The elimination of all customs duties and quotas  symmetrically (at the same time and under the same conditions) and within short transitional periods (2-5 years), reciprocally;

  • Addition of an automotive specific Annex (for vehicles and parts), eliminating all Non-Tariff Barriers.
  • CLEPA  is  a  strong  supporter  of  the  UNECE  process,  as  the  main  focus  for international harmonisation of technical regulations (and of ISO for international standards). CLEPA supports the abolition of all NTBs and welcomes the active, focused  and  political  support  of  the  European  Commission  to  convince MERCOSUR members to join the Geneva WP.29 Forum, to become Contracting Parties  to  the  UN  1958  Agreement  and  to  sign  and  apply  at  least  all  the  UN Regulations,  annexed  to  the  1958  Agreement  which  the  EU  has  signed  and  is applying. In the case where a country has not signed, it should at least recognise and accept the EU and UNECE approvals and markings for EU automotive goods, thereby accepting the corresponding UN and EC type-approved products, without any  additional  requirements  (e.g.  further  testing,  marking  or  administrative procedures) which would cover the acceptance of new technologies. 

  • It is noted that Brazil has for a long time established its own national legislation, laying down mandatory certification, compliance approval processes and marking requirements, including  conformity  assessment procedures for  automotive parts, despite  the  Brazilian  technical  requirements  being  highly  compatible  to  the corresponding  UN  Regulations.  One  such  example  for  Brazilian  national regulations which duplicate existing international standards is the certification by INMETRO  (Instituto  Nacional  de  Metrologia,  Qualidade  e  Tecnologia)  for importers of car parts.

Worldwide harmonisation reduces  costs for  a globally operating industry. To this end, an EU FTA agreement with MERCOSUR should seek specific legal language on the acceptance of UNECE regulations to provide legal certainty. CLEPA will support Commission projects to this end. 

  • Compliance  with  the  relevant,  specific  WTO  Agreements  on  Technical Barriers to Trade (TBTs)
  • Removal of import taxes

Currently, 85% of EU exports to MERCOSUR  are subject to import  duties and taxes. CLEPA  requests  the complete removal of these import  duties and  taxes as they represent  an unfair and discriminatory barrier to trade, e.g. federal state taxes can effectively double the cost of importation. Taxation schemes such as INOVAR AUTO clearly discriminate against imported automotive products from abroad into Brazil, where the applied import tariff rate is in the region of 30-40%. In addition, an internal IPI tax is payable of 30-40%, where parts are not sourced locally. Tax credits are reduce directly in line with the quantity of imported parts. Throughout MERCOSUR, there are high levels of a minimum local content percentage to be achieved:  Brazil  =  60%;  Argentina  =  60%;  Paraguay  =  50%;  Uruguay  =  55%; Venezuela = 60%.

  • Duty Drawback 

CLEPA is in favour of reciprocal duty drawback. 

  • Rules of Origin

CLEPA supports 50% of non-originating material (generally), and no more than 30%  on  non-originating  products  (for  electronics),  given  the  great  volumes  of electronic products coming from Asia. CLEPA is supportive of a Change of Tariff Heading, compared to the NAFTA rules. 

CLEPA’s supports cumulation of origin with other countries which have already signed a FTA with the EU.

FTA negotiations should strive for worldwide harmonised and easy to handle rules of origin for all FTAs. The FTA should avoid providing only simultaneous structures for determining preferential origin, such as “a change of tariff heading” “added value rule”. The added value rule should be the primary rule. In case there is only a change of tariff heading rule or only a change of tariff heading rule in combination with an added value rule, there should always be an alternative based on an added value rule. Other variations of the rules of origin in FTAs should be avoided. Thus, a mechanism to adapt the structure of rules of origin to a changing business environment should be foreseen in the FTAs.

  • Customs and trade facilitation 

CLEPA supports the streamlining of customs rules, controls and procedures in order to facilitate goods through customs and furthermore CLEPA supports the harmonisation of general rules for interpretation of the HS and General Complementary Rules of NCM. 

CLEPA supports the effective tackling of any type of “protectionist measure”, e.g. unnecessary  import  licensing  regime;  requests  for  advance  import  affidavits causing  delays  and  blockage  of  goods.  CLEPA  supports  harmonisation  of  the calculation of customs value. (Brazil has 5 methods of calculating import value, EU has 5 methods).

  • Inclusion, recognition and acceptance of  remanufactured goods*,  to ensure the free trade of cores and remanufactured parts across borders. 
* A remanufactured part fulfils at least the same function as an ‘original part’. It is restored from an existing part, i.e.  from the core, using standardized industrial processes, in line with specific technical specifications 
A remanufactured part is given the same warranty as a New Part. 
This  is  a  common  definition  of  APRA,  CLEPA,  FIRM,  VDA  and  ACEA.  A remanufactured  part  is  different  from  a  reused,  repaired,  rebuilt,  refurbished, reworked or reconditioned part.
  • Mechanism to properly protect Intellectual Property Rights, establishing a good legal framework. 

  • Improving the  rules related to public tenders, customs procedures, as well as protection of intellectual property rights. 

CLEPA supports the inclusion of Venezuela and Bolivia (the latter being an Observer) as parties to the EU-MERCOSUR Agreement negotiations.

 

*****

CLEPA  is  the  European  Association  of  Automotive  Suppliers.  120  of  the  world's  most  prominent suppliers for car parts, systems and modules and 23  National trade associations and European sector associations are members of CLEPA, representing more than 3 thousand companies, employing more than 5  million  people  and  covering  all  products  and  services  within  the  automotive  supply  chain.  Based  in Brussels, Belgium, CLEPA is recognised as the natural discussion partner by the European Institutions, United Nations and fellow associations (ACEA, JAMA, MEMA, etc.).

Facts about the European automotive industry

  • Some 12 million people are employed in the European automotive industry
  • European automotive suppliers directly employ 5 million people
  • European automotive suppliers invest €22bn in RDI per year. They are the biggest private investor into research and innovation
  • Per year, 18 million vehicles are manufactured in Europe, contributing to the stability and growth of the European economy

 

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