Andean countries sign new automotive agreement

Lima, Sept. 16. Colombia, Ecuador and Venezuela today signed a new automotive complementarity agreement in order to take better advantage of the Andean market and lay the groundwork for further development of that sector in the subregion.

The Automotive Complementarity Agreement was signed in Lima by the Ministers of Foreign Trade and Economic Development of Colombia, Marta Lucía Ramírez and Jaime Alberto Cabal, respectively; the Production and Trade Minister of Venezuela, Juan de Jesús Montilla, and the Vice-Minister of Foreign Trade of Ecuador, Julián García Miranda.

The countries expect the application of this agreement to boost subregional vehicle production from 212 thousand units a year to 500 thousand over a period of less than ten years.

They also hope to heavily increase intra-Community vehicle and autopart transactions, which in 1998 generated more than 600 million dollars and represent the most important industrial sector of Andean trade.

The agreement will enter into effect on January 1, 2000 for a period of ten years, which may be renewed. It will replace the agreement signed in 1993 by the three cited Andean Community (CAN) countries.

The elimination of possible incompatibilities with the World Trade Organization (WTO), by not including -for example- formulas that demanded a subregional content in local production, is an important element of the new agreement that differentiates it from the existing one.

When it becomes effective, vehicles assembled by Andean producers will have free access to the subregional market merely by fulfilling the specific requirement of origin established by the General Secretariat.

The new agreement maintains the common external tariff (CET) of 35 percent for category 1 vehicles, which are light units with a maximum carrying capacity of 16 persons or 4.5 tons of cargo.

The CET for category 2, or heavy, vehicles (those with a larger carrying capacity than stipulated above) will be 15 percent in the cases of Colombia and Venezuela and 10 percent for Ecuador.

The countries, in turn, commit themselves to authorize the importation of new vehicles and autoparts only, in order to guarantee minimum safety, environmental conservation, consumer defense, and industrial property conditions.

The agreement reinforces the CAN's negotiating position with regional trade blocs and brings the Andean automotive industry into line with international demands. It also replaces the performance requirement with the provision of origin and specifies the terms of reference of the Automotive Committee, which is made up of representatives of each of the participating countries.

The agreement provides for the incorporation of the other Andean Community countries, for which the terms of accession may be negotiated.

It also establishes a regime suspending the payment of import duties by assembly plants that will enable the latter to incorporate subregional and imported material so that the vehicle is able to circulate throughout the subregion tax free after having fulfilled the requirements of origin.