India may ask Sri Lanka to cut automobile tariffs: report

Dec 11, 2012 (LBO) – India is mulling asking Sri Lanka to reduce import duties which had been raised twice last year hitting small car imports and three wheeler vehicles in particular, a media report said. Another report said Chinese manufacturers are being allowed to set up assembly plants in Sri Lanka which could potentially export products to India without duty.

Under a free trade deal between the two countries India has cut taxes on a large number of products while nationalist business had placed a bigger negative list blocking the trade freedoms of Sri Lankans hitting the poor in particular.

Rent-seeking Sri Lankan businesses have placed a ‘negative list’ of 1,198 items on the Indo Lanka free trade deal while Indian authorities have allowed their businesses to block the trade freedoms of their citizens by only 196 items.

Local assembly or any protected domestic industry engage in tax-arbitrage collecting as profits what would have gone to the state as taxes, while keeping overall prices high for the general public, particularly the less well off.

There are however ‘rules of origin’ which can make re-exports of items without sufficient local content difficult.

Analysts say ‘ru