Beyond the increase in prices of imported sedans and light commercial vehicles (LCVs), the imposition of safeguard duties on these vehicles will have far-reaching effect on not just the automotive sector but on the economy as a whole, industry leaders said.
This as government sources said the Department of Trade and Industry (DTI) is eyeing the possibility of imposing the protective duties for 10 years, the maximum allowable time allowed by the Safeguard Measures Act or Republic Act 8800 and by the World Trade Organization (WTO) agreement.
Section 15 of RA 8800 and Article 9 of the WTO agreement allows developing countries to impose safeguard measures for a maximum of 10 years.
“That’s part of the review,” one of the sources said, adding tapping these provisions hinges on how fast or how short the local industry will be able to adjust and if the Tariff Commission concurs with the DTI as part of the process of determining the definitive safeguard measures.
Longer protection is, however, seen as ensuring the viability of the operations of existing assemblers and in attracting new players.
The DTI in Department Administrative Order 20-11 published yesterday is imposing provisional duties in the form of cash bond of P70,000 per unit of imported sedans and P110,000 per unit of LCVs for a period 200 days.
In a statement, Rommel Gutierrez, president of the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI), said the imposition of provisional safeguard measures against imported vehicles is yet another blow to the automotive industry at a time when it is reeling from the adverse impact of the pandemic is not enough.
In a separate statement, Ma. Fe Perez-Agudo, president of the Association of Vehicle Importers and Distributors (AVID), said the imposition of provisional safeguard measures on imported vehicles is “like pulling the rug from under the auto sector that is still struggling to get back on its feet with a 40 percent drop in sales in 2020.”
Both warned this will further derail the recovery efforts of industry players and stakeholders.
In the short-term, Gutierrez said the imposition will result to the disruption in regional production and supply.
Over the medium to long term, Gutierrez warned of even more dire consequences: further slowdown regional economic growth because of chain reaction to other industrial sector and weakening of weaken trade and economic relations triggered by retaliation by concerned exporting countries to the Philippines.
Gutierrez said while CAMPI supports the development of local vehicle manufacturing, it has consistently opposed to the imposition of safeguard duty against imported completely built-up units or CBUs.
“We project further reduction in sales volume which in turn poses risk of employment downsizing, not to mention government revenue loss,” Gutierrez said.
He also warned the possible revival of grey market or used vehicle market which the government has long stomped.
With much uncertainty, investments in dealer expansion and parts localization may be deferred, Gutierrez said.
Agudo said the measure will aggravate the already anemic demand and make it harder for Filipinos to afford personal mobility with the projected price hikes.
“AVID has always aimed for the long-term development of the automotive sector, including the advancement of manufacturing as an inclusive means for growth. We have clearly and consistently expressed our position that penalizing imports will not trigger investments or create more jobs, much less address issues on the regional competitiveness of our local manufacturing sector,” Agudo said.
Agudo said AVID is calling for long-term policies that will further improve the ease of doing business which would open opportunities for investments, create jobs and provide the Filipino reliable and affordable means of transport.