A conflict is brewing between Pakistan and Japan over ‘forced’ exports of cars and could end in front of the World Trade Organization.

Japan is concerned that Pakistan is forcing Honda, Suzuki and Toyota to export a part of their manufactured products to other parts of the world. However, the exports are not believed to be competitive enough for the international market.

So far the the Japanese government has raised the matter with Pakistan at the country’s embassy in Tokyo, at Pakistan’s mission in WTO as well as directly with the ministries of commerce and industry.

Pakistan’s rules required the manufacturers to export atleast 2% of their production abroad by 2023. The rules had asked for the export ration to be raised to 4% in 2024, 7% in 2025 and 10% 2026.

However, a meeting of the Special Investment Facilitation Council had found in October last year that the companies had been exporting 0% percent of its cars.

While the SIFC asked departments to press the companies to revise their export plans, Japan took objection to the measure and contacted the government.

The companies believe Pakistani car exports are non-competitive due to additional tariffs as well as non-existence of Free Trade Agreements.

They also believe that right-hand vehicles have limited avenues for exports.

However, a major reason causing Pakistani car exports to lose against cars from ASEAN, GCC and African countries is lack of local raw materials. The companies believe that factories processing metal and rubber in Pakistan could make the cars more competitive.

Pakistan and Japan will try multiple avenues to settle the issue bilaterally, the failure of which could lead to the matter being referred to the WTO.