WTO Moot Court Problem
European Union – Measures Affecting Rear-Engined City Cars
29 August 2015
WTO Moot Court Problem
29 August 2015
European Union – Measures Affecting Rear-Engined City Cars (complaint by India) (DS543)1
Tata Nano, photograph, viewed 18 March 2014, < http://www.dexigner.com/news/image/19189/Tata_Nano >
Since March 2008, Tata Motors, India’s largest car manufacturer, produces and sells the Tata
Nano, a four-passenger, rear-engined city car. The cheapest Nano sells for 170.000 Indian Rupee.
The luxury Lx version, which has airco and power windows, is priced at 255.000 Indian Rupee.
The Nano is currently without any doubt the cheapest car in the world. While until recently sales
of the Nano were almost exclusively on the Indian domestic market and exports were negligible,
Tata Motors is convinced that there is also a market for its Nano in the European Union. It has
therefore developed an export version of the Nano, the Nano Europa. This export version was
first shown at the 2010 Geneva Motor Show. Heavily upgraded to meet EU safety and emission
standards, the Nano Europa is more expensive, heavier, and less fuel efficient than the standard
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This moot court problem is a product of the imagination of its author and written for mooting purposes only.
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WTO Moot Court Problem
European Union – Measures Affecting Rear-Engined City Cars
29 August 2015
Nano but at around € 3300, it is still priced well below the price of other city cars, such as the
new Fiat 500 which sells for around € 6000.
In response to the rapidly increasing sales of the Nano on the European market, the Italian
Government and Fiat S.p.A., one of Europe’s largest car manufacturers, turned in May 2012 to
the European Union for help. According to Fiat, any further increase in imports of the cheap
Nano would do great damage to Europe’s car industry and give rise to massive unemployment
among car workers in Italy and elsewhere in Europe. The European Automobile Manufacturers’
Association (ECEA) as well as the European Trade Union Confederation (ETUC) immediately joined
Italy’s and Fiat’s demand for EU action.
In June 2012, the European Commission decided to impose a 30% ad valorem customs duty on
four-passenger, rear-engined city cars. It also decided to impose a 100 Euro fee on the
importation of each four-passenger, rear-engined city car to cover the costs of additional safety
inspections. Note that the 30% customs duty does not apply to four- passenger, front-engined
city cars, such as the Chery QQ6, a four-passenger, front-engined city car produced by the
Chinese manufacturer Chery Automobile.
Also in June 2012, Italy increased the value added tax (VAT) on imported four-passenger, rearengined city cars from 20% to 40%. Other EU member States also took – or are considering to
take - fiscal measures in the face of the increasing sales of the Nano in Europe. While Poland does
not manufacture city cars, it increased the VAT on four-passenger, rear-engined city cars from
18% to 20%.
The European Automobile Manufacturers’ Association (ECEA) has successfully lobbied the
European Union for the imposition of an import quota of 1.000.000 units per year on fourpassenger, rear-engined city cars. This import quota will be applied as from 1 January 2016. At
present, the European Union imports 750.000 four-passenger, rear-engined city cars per year.
In July 2012, the French Ministry for the Economy granted Tata Motors permission to establish a
chain of car dealerships to sell the Nano in France. However, it limited the number of dealerships
to a maximum of 15 for the whole of France. Note that in 2010, Chery Automobile was granted
permission to establish 50 car dealerships and that there are no restrictions on the number of car
dealerships established by European car manufacturers.
In August 2012 the European Union adopted an amendment to its car safety legislation requiring
that rear-engined city cars (but not front-engined city cars such as the Fiat 500) be equipped with
side airbags and power steering. While the Nano Europa, unlike the standard Nano, is equipped
with frontal airbags (to meet the European safety requirements), it is not equipped with side
airbag. The Nano Europa has also no power steering. Equipping the Nano Europa with side
airbags and power steering will increase the price of this care considerably. In justification of
these stricter safety requirements, it is argued that these rear- engined cars (as opposed to frontengined cars) pose a more serious risk to the safety of their driver and passengers. Tata Motors
considers side airbag and power steering unnecessary due to limited maximum speed and the
low weight of the Nano respectively.
WTO Moot Court Problem
European Union – Measures Affecting Rear-Engined City Cars
29 August 2015
Also in August 2012, the Buy European Association has launched a media offensive to discourage
Europeans to purchase the Nano Europa. Through ads in large-circulation newspapers, the Buy
European Association informs potential buyers about the labour conditions at the Tata Motors
plants in India, which (allegedly) do not meet minimum labour standards as set out in various ILO
Conventions (to which India is a party). The Buy European Association strongly advises against
purchasing the Tata Nano and also warns European car dealers selling the Tata Nano that it will
organize a boycott against them. Since the start of this media campaign, several major car
dealers have stopped selling the Tata Nano. Note that the Buy European Association is a NGO
with close links to the European Trade Union Confederation (ETUC) and that part of its activities
relating to consumer information are subsidized by the European Union.
The European Car Institute, an interest group of car manufacturers representing about 40% of
the total European city car production argued before the European Commission that:
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the Gujarat state government made available to Tata Motors the land on which it built
the factory where the Nano Europa is produced;
the state-owned Industrial Development Bank of India (IDBI) (www.idbi.com) granted Tata
Motors a loan at a below-market interest rate to finance the construction of the factory in
Gujarat; and
the imports of the Nano has caused injury to Europe’s car industry.
In response, the European Commission imposed on four-seat, rear-engined city cars from India as
from 1 November 2013 a countervailing duty of 25% (see Council Implementing Regulation (EU)
No 777/2013 of 15 October 2013 imposing a definitive countervailing duty on all imports of fourseat, rear-engined city cars from India). According to India, the imposition of this countervailing
duty is inconsistent with the European Union’s obligations under the SCM Agreement because,
according to India, Tata Motors did not receive any subsidies from the Indian Government.
On 4 July 2014, India requested consultations with the European Union on the WTO consistency
of the various measures referred to above affecting rear-engined city cars. India contends that
these measures are inconsistent with the European Union’s obligations under the GATT 1994, the
TBT Agreement, the GATS and the SCM Agreement. After the consultations failed, India
requested on 6 September 2014 the DSB to establish a panel. In terms of the measures at issue
and the claims of inconsistency, the panel request is identical to the request for consultations,
The DSB established a panel at its meeting of 24 October 2014 and the WTO Director-General
decided on the composition of the Panel on 15 December 2014. At its organizational meeting on
5 January 2015, the Panel decided that there would only be one round of written submissions
and one meeting of the parties with the Panel. The written submissions of both India, the
complainant, and the European Union, the respondent, are due on ### 2015. The meeting of the
parties with the Panel will take place on ### 2015
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