TOKYO - Flush from its success in fighting unfair automotive trade in Indonesia, Japan has fired a shot across the bow of India.
Tokyo's real target, however, may be China.
Japan's Ministry of International Trade and Industry said that Japan has asked India for a detailed explanation of its local-content requirements. The query is the first step in what could become a formal complaint to the Geneva-based World Trade Organization.
Last December, India unveiled a policy requiring that foreign carmakers operating in India raise their local-content quotas to 50 percent by their third year and 70 percent in the fifth year of operation in India.
Starting in the fourth year of operation, foreign carmakers also are required to export parts or finished cars equal to the value of the parts they import.
Because China also has stiff local-content requirements for foreign carmakers, Japan's stance on the question of India's rule is seen as a warning to Beijing. Japan could bring those policies under WTO scrutiny.
China is not a member of the WTO, but it wants to join the trade body.
In late March, the WTO's Dispute Settlement Body ruled that Indonesia's so-called 'national car' project was a 'government-mandated trade distortion' in violation of WTO agreements and conventions.
Japan, followed by the USA and the European Union, had taken Indonesia to the trade organization over the 1996 Timor national car project.
They argued that the project, headed by President Suharto's son, had been given tax and import-duty breaks in violation of WTO rules.
The WTO ruling is largely symbolic because Indonesia has agreed to dismantle the tax breaks for the Timor as a result of pressure from the International Monetary Fund, which is arranging a financial rescue package for the Southeast Asian nation.