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RP: no tariff lifting sans investment

BusinessMirror, Manila

RP: no tariff lifting sans investment

By Max V. de Leon / Reporter

22 November 2009

The Philippines is likely to suspend its tariff-elimination commitments for Japanese vehicles and auto parts under the two countries’ economic partnership agreement starting in January, as the government still needs to determine if the “increased investment” that Japan promised has indeed come in already.

Trade Senior Undersecretary Thomas Aquino told the BusinessMirror the Philippines has already sent a notification to Japan seeking a renegotiation of the Japan-Philippines Economic Partnership Agreement (Jpepa) provisions on the auto- tariffs elimination. This is to allay fears of the industry, aired anew last week, that the country would be forfeiting its chance to renegotiate because the Jpepa specifies that this can only be done up to December 2009.

“The renegotiation has already started through the exchange of notification. It does not have to be completed within one year. We want them [Japan] to extend it [auto tariffs elimination schedule],” Aquino said.

Aquino said if Japan would insist on the tariff-elimination commitments as specified in the Jpepa timelines, the Philippines can always use as a bargaining chip the increase in investment that Japan promised to bring in to the industry.

Earlier, the Automotive Industry Workers’ Alliance (Aiwa) expressed dismay over the fact that it has not heard of any government move to renegotiate the deal.

“Aiwa is extremely apprehensive that the Philippine automotive industry will be in great peril in case such negotiation does not immediately materialize. The auto industry and its workers already expressed its position early this year to extend all the current tariff rates until the maximum period allowed by Jpepa or until 2013,” Angel Dimalanta, Aiwa president, said.

The country, he added, could witness the unrestricted entry from Japan, at zero tariff, of completely built-up motor vehicles and parts and components beginning next year.

This puts at risk the jobs of 75,000 industry workers; the P100-billion investment in the auto industry that generates around P12 billion in annual government revenue from duty, excise tax and value-added tax; merchandise exports totaling $2 billion annually; and P350 million in withholding tax per year.

Aquino, however, said any reduction in auto tariffs is premised on the commitment of Japan that it will be pouring in significant investments in the domestic industry, the scale of which is to be determined by the Philippines.

“That is the condition, we will bring the tariffs down if there is significant investment. That is the determining factor,” he said.

Right now, Aquino said the team of Board of Investments managing head Elmer Hernandez is in the process of validating if the increase in investment has indeed happened.

For the meantime, Aquino said the tariff situation will be on a status quo.

“When we have confirmed that there is the significant investment, that is the time when the tariffs will go down. The amount [of the investment] is our call but, of course, we will try to be as reasonable as possible,” he said.