Scheme to avert collapse of RP industries due to tariff cuts proposed

An alliance of industry, labor, agriculture, consumer and civil society groups has presented the government a six-point range of options to avert the collapse of many local industries and the dislocation of hundreds of thousands of workers due to the impending massive tariff reductions under the ASEAN Free Trade Area-Common Effective Preferential Tariff (AFTA-CEPT) scheme set to be fully implemented next year.

To complete the government’s unilateral tariff reduction program, a similar scheme covering the most-favored nations (MFN) outside the ASEAN will also be implemented in 2004. Both the CEPT-AFTA and MFN aim to reduce tariffs to a band of zero to five percent on almost all imported products with 60 percent of Philippine tariff lines to be further reduced to zero percent under the AFTA-CEPT in 2003.

In a letter to Trade and Industry Secretary Manuel Roxas II, the Fair Trade Alliance (FTA) headed by former Sen. Wigberto Tañada stressed that the tariff reduction programs were undertaken without adequate notice and consultations with affected industries and producers. The FTA said tariffs were slashed at accelerated speed without regard to their effects on industries and producers.

"The current tariff policy does not serve national interest," Tañada said in a statement presented to Roxas. "The current tariff policy deters investments in highly capital-intensive industries and undercuts the viability of local producers. It is biased against manufacturing that has significant and substantial contributions to the economy in terms of taxes, value generation and employment opportunity," he added.

"Since our ASEAN and other neighbors have been cautious in the opening of their respective economies, choosing to institute non-tariff barriers, the maintenance of high MFN tariff walls, and a gradual reduction of their AFTA-CEPT rates for their key industries, excess capacities found its way into the Philippines, severely undermining local industries and producers," said the FTA.

The FTA said that the tariff policy is "myopic" because it fails to anticipate that excess capacities are temporary and that it will disappear in the long-term. "If local industries perish in the interregnum, the Philippines and its consumers will ultimately be subjected to higher prices and instability of supply," the group said.

At least 13 strategic and big industries were named by the group as already suffering or under threat of serious injury because of the tariff reductions. These are the industries in petrochemicals, chemicals, cement, textile, flat glass, pulp and paper, rubber, ceramic tile, match, cordage, tire, oleochemicals, and footwear.

The group urged government to exempt strategic industries like the midstream and downstream sectors of the petrochemical industry from AFTA coverage to "eliminate the distortions caused by the AFTA-CEPT scheme and ensure their viability." Another option is the invocation of a protocol under the AFTA-CEPT that allows the delay of the transfer to the inclusion list of certain products or suspend concessions on products already in the inclusion list "if such transfer or concession would cause or have caused real problems."

FTA also asked for the disaggregation of tariff lines and review of concessions given to AFTA countries, the strengthening of safety nets, and the leveling of the playing field for local industries and producers.