RP okays phased reduction of automotive tariffs under proposed trade pact with Japan

The government has softened its position on the contentious automotive tariffs issue in the still ongoing negotiations for the Japan-Philippines Economic Partnership Agreement (JPEPA).

According to Trade Undersecretary and Board of Investments (BOI) Managing Head Elmer C. Hernandez, the Philippines is now agreeable to a phased tariff reduction over a five-year period for vehicles with an engine displacement of three liters and below instead of its earlier stance of a "sudden death" reduction.

The sudden death reduction would still apply, though, for vehicles with an engine displacement of three liters and above.

The phased reduction would involve a formula of 1-3-3-3-0.

Thus, upon the implementation of the JPEPA in 2006, the current 30-percent automotive tariff would be reduced by one percentage point to 29 percent.

In 2007, the tariff would be reduced by three percentage points to 26 percent, then to 23 percent by 2008, 20 percent by 2009 and down to zero by 2010.

Japan, in return, Hernandez said, commits to making additional investments in the Philippine automotive sector.

According to Hernandez the Philippines, wants to make sure that Japanese automotive firms would continue to invest in the country to manufacture local vehicles and not shutdown its local automotive manufacturing operations once the JPEPA is implemented and resort to pure importation of Japanese-made vehicles.

Japan is not committing any firm investment figure, but Hernandez assured that the agreement includes a provision on dispute settlement which would help resolve differences between the two countries should either one not abide or live up to its commitments under the agreement.

The automotive issue is one of four issues holding up the completion of the JPEPA.

The three other thorny issues are the movement of natural persons, trade in goods and trade in services.