7 October 2005
RP pushes for car-tariff clause in Japan talks
By ANGELO S. SAMONTE, The Manila Times Reporter
The Philippines will push for a provision in a planned free-trade deal with Japan that would allow renegotiation on motor vehicle tariffs by 2009.
Trade Undersecretary Elmer Hernandez told reporters Wednesday night that the Philippines will adopt a position Thailand pushed under its free-trade accord with Japan.
The renegotiation would come ahead of the elimination of all tariffs by 2010 under the proposed Japan-Philippine Economic Partnership Agreement (JPEPA).
Based on the proposal by local car assemblers, the Philippines will cut tariffs on imported motor vehicles by 1 percent for 2006 and 3 percent in succeeding years until 2009, for cars with engine displacement of below three liters.
For bigger cars, the tariff would be maintained at 30 percent until 2009 and will be subject to negotiations before any reduction. The Philippines impose a 30-percent tariff on all imported automobiles.
Philippine negotiators previously agreed to gradual tariff reduction on imported completely built-up (CBU) cars with engine displacement of below three liters, one of the major sticking points in the JPEPA talks.
Hernandez said the renegotiation clause and tariff reduction formula will provide domestic automotive assemblers time to prepare themselves for a more competitive environment come 2010.
The gradual tariff reduction position of the Board of Investment (BOI) on the medium-range car segment, which accounts for the bulk of local production and sales, hardly departs from its original position of a sudden death in CBU tariffs, which calls for the retention of the existing 30-percent rate and the removal of tariffs come 2010.
Japan prefers a phased reduction while US car assemblers have lobbied for the sudden death proposal, fearing Japanese cars can displace their products once the JPEPA takes effect.
The tariff-reduction scheme on CBU imports, however, is tied to Japanese commitment for additional investments on local assembly operations, Hernandez said.
"Tariff reduction is providing market access provided you put in investments. That is nonnegotiable," he said.
Japanese automakers, however, have yet to make a clear commitment as to their additional investments into the country.
The government fears that once tariffs are removed, Japan will no longer continue its car-assembly operations in the Philippines for it would become more profitable to just ship CBUs to the Philippines.
Besides the automotive sector, two other pending issues are the movement of natural persons and trade in goods and services.
The Philippines hopes to complete trade talks with Japan and sign the agreement by December this year.