Government to maintain current MFN tariff rates until 2004

The government is keen on maintaining the Most Favored Nations (MFN) tariff rates at the 2002 levels until 2004 in the face of a ballooning budget deficit, Trade and Industry Secretary Manuel Roxas II said yesterday.

MFN rates are duties given to countries outside the ASEAN Free Trade Area (FTA).

In 2001, the government suspended the scheduled tariff rate cuts to help industries which were severely affected by the global economic slowdown.

Tariff levels under the Common Effective Preferential Tariff (CEPT) of the ASEAN Free Trade Area (FTA) have been reduced to zero-five percent in January this year while the MFN tariffs for non-ASEAN or under the World Trade Organization (WTO) should be reduced this year until the rate reaches the agreed minimum rate of five percent by 2004.

Following a meeting of the Cabinet-level Tariff and Related Matters (TRM) Committee last Wednesday, Roxas said that a review of the MFN rates by the TRM led to a "segmentation" of tariff data.

"Based on the segmentation, the TRM would have an easier time resolving which items could easily be resolved and changed or kept at their current levels and which items would need more analysis," Roxas explained.

Last year, President Arroyo ordered the Department of Trade and Industry, the National Economic and Development Authority and the Tariff Commission to review all the country’s tariff rates in an effort to bring these up at par with the existing tariff in other countries and remove any existing distortions.

The review was intended to prevent the Philippines from becoming the "biggest recipient of foreign goods" following the reduction of the MFN rates by 2004 as mandated by the WTO.

Sources said Malacañang is keen on maintaining the current MFN rates this year, the third straight year that the duty cuts have been deferred.

They said the government is willing to forego trade liberalization because of its pressing concern on the budget deficit.

Local industries have become increasingly vocal about the headlong rush toward liberalization in the face of other countries’ reluctance to open up their markets.

Several key industries such as the petrochemical, automotive, steel, paper, cement, sugar and a few others have sought a deferment of tariff cuts, saying that they need continued protection to be able to compete with the expected flood of competing products from other countries.