One of the automakers hardest hit by the protective measure of the Dilma administration, the increase in the IPI (Excise Tax), China’s JAC Motors accused Brazil of breaching the guidelines of the WTO (World Trade Organization) and confirmed that it has frozen its plans to open a factory in the country.
“The way in which the Brazilian government raised the tax is a serious violation of the basic principles of the WTO,” said JAC Motors, in a written response to Folha.
“The discontinuous, irrational and partial Brazilian policy strongly undermined the confidence of JAC and other automakers to invest in Brazil. Therefore JAC is forced to re-evaluate its decision to invest in Brazil,” the company said.
The Chinese automaker says that the measure did not forecast an adjustment period and cites three alleged violations of Brazil to the general guidelines of the WTO: market access, fair competition and non-discrimination.
In JAC’s judgment, Brazil adopted the measure looking to limit Chinese cars, compromising fair competition. The company says that it functions without subsidies from the Chinese government and has not been accused of dumping (charging artificially low prices).
“The Brazilian government offered special treatment to Mercosul and other countries (Mexico) to the detriment of China, breaking the principle of MFN (Most Favored Nation),” the Chinese automaker says.
MFN, taken by the WTO as one of the most important guidelines for international trade, states that in normal situations, one cannot differentiate between trading partners.
$600 MILLION FACTORY
JAC also mentions that the increase in the IPI differentiates between domestic and imported products, in violation of the principle of “national treatment” whereby imported products must have the same conditions of local competition after already entering the domestic market. The directive allows customs duties which is not the case of the IPI.
Representatives of JAC met on Tuesday with the Commerce Ministry to pressure the Chinese government to act on behalf of the company. But until yesterday there was no official statement on the issue.
At the beginning of August, JAC had announced the construction of a factory in Brazil, which would start production in 2014. The planned investment was $600 million to produce 100 thousand units per year. According to the company, this would generate 3500 jobs directly and another 10,000 indirectly.
JAC is a Chinese company that sold the most cars in Brazil this year – about 14.5 thousand.
Founded in 1964, the China Anhui Jianghuai Automobile Company is headquartered in the city of Hefei (east). Last year, it sold 460 thousand units, earning 50% more than in 2009.