US FTA could upend market for imported CBU autos, DTI says

A FREE Trade Agreement (FTA) with the United States could disrupt the market for automotive imports by making US automobiles more attractive to ship in than competing products from Asia, the Department of Trade and Industry (DTI) said.

Trade Undersecretary Ceferino S. Rodolfo said at the US FTA workshop at Manila Polo Club Monday that the department’s view is a shift to US sources for the completely built-up unit (CBU) segment of the market.

“When it comes to an FTA with the US, what we are foreseeing is a diversion of current import sources to the US,” he said.

He added that the shift to the US could also be supported by the ongoing investigation into possible safeguard duties on current auto imports.

“If (the investigation) progresses and if for instance there is a positive determination on the part of the BIS (Bureau of Import Services) and the DTI Secretary, there could be provisional safeguard duty on auto.”

He said the combination of an FTA that lowers tariff rates for the US as well as safeguard duties on competing imports could produce “a situation wherein we can potentially not only level the playing field but in fact give it an even more preferential rate for CBU imports of autos coming from the US.”

He called the Philippines “the fastest-growing automotive market in this region. We are the biggest importer of SUVs in the whole of Southeast Asia.”

He said that the Philippines is currently waiting to start negotiations with the US, which is currently working on its trade deals with Canada and Mexico.

The Philippine Metalworkers Alliance has filed an application with the DTI for an investigation into possible safeguard measures on automobiles to protect domestic jobs, asserting a link between the surge in automobile imports and a decline in employment in the automotive industry.

World Trade Organization rules allow the imposition of safeguard duties if imports are found to have damaged domestic industries.

In his presentation, University of Asia and the Pacific economist and former tariff commissioner George N. Manzano said a US FTA represents an “asymmetry” because the Philippines needs it more.

“We see that there is disparity, asymmetry, difference that’s basically like Goliath versus David — but I would like to qualify that since FTA is a partnership, it is not really ‘versus’ but points of cooperation and mutual interest,” he said.

“But in terms of the lay of the land, we see that there is in fact a big disparity.”

He said Philippine exports to the US account for 14-16% of total exports. On the other hand, US exports to the Philippines represent less than 1% of its total.

He said such imbalances are typical of small economies negotiating trade deals with the US. — Jenina P. Ibañez