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Trade: European Commission finally takes action to prevent discrimination by Canadian authorities against EU car manufacturers 2

United Kingdom
27/10/1998
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The Commission has announced action to redress Canadian discriminatory measures on imports of automotive products. The Commission is requesting formal consultations under the World Trade Organisation (WTO) in order to put an end to the Canadian policy of subsidising a number of automotive companies which made certain criteria, notably minimum local content requirements.

Under the current regime for trade in automotive products Canada grants selected companies the right to import both automotive components and finished vehicles duty free provided they use a minimum proportion of Canadian components and that production in Canada represents at least a certain percentage of sales there. While the exact proportions required vary from company to company, Canada currently applies a 6.7% tariff on vehicles and 6% on automotive components imported from the European Union. The WTO Agreement on Trade-Related Investment Measures prohibits local content requirements compelling a manufacturer to use domestically produced goods in order to benefit from particular trade advantages. The WTO Agreement on Subsidies and Countervailing Measures also prohibits such advantages in so far as they include subsidies.

As the Canadian scheme seems to breaks the WTO rules by giving benefiting companies an unfair advantage over their European competitors the Commission has requested, with the backing of EU Governments and industry, formal consultations in the WTO.

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