The World Trade Organisation (WTO) has set up a panel to examine whether India's auto policy breaks WTO rules and distorts international trade, as contended by the European Commission (EC) and US, say local sources (5/12/00).

India failed to persuade its two major trading partners from setting up the panel, despite strong protests from India's ambassador to the WTO, S Narayanan, at the WTO Dispute Settlement Body (DSB) meeting in Geneva on October 23.

During a DSB meeting, called on October 15 to consider measures affecting the Indian industry, Mr Narayanan said that his country's measures were not inconsistent with its obligations under Article 4 of the Trade-Related Investment Measures (TRIMs) Agreement, whereby all developing countries are given a transitional five-year period to eliminate all TRIMs maintained by them for balance of payments (BOP) reasons.

Sources say that India has allowed imports of SKD/CKD kits/components under its auto policy that is looking to attract foreign direct investment in the market.

Those foreign auto firms who are keen to establish themselves in India have to maintain foreign exchange neutrality over the entire period of memorandum of understanding signed between them and the Director-General of Foreign Trade (DGFT).