In an interview last Friday following a courtesy call by Ford Philippines president Henry Co to Trade and Industry Secretary Peter B. Favila and BOI managing head Elmer C. Hernandez, Co admitted that Ford’s concern regarding the still ongoing negotiations for a Japan-Philippines EPA (JPEPA) is "alignment."
Co warned that if the JPEPA is not "aligned" with other EPAs Japan has negotiated or is negotiating with other ASEAN member countries, "distortions" could occur.
Ford is apparently concerned following reports that Japan does not appear inclined to extend the same automotive tariff concessions to the Philippines as it did to Thailand last September.
Japan is pushing the Philippines to agree to drastically lower its tariff barrier on automotive imports, especially since the Philippine does not have a substantial domestic automotive market as Thailand.
Industry observers said it would be more feasible for Japan to export completely built up (CBU) units to the Philippines instead of supporting local assembly of already limited models.
The Philippines, following Thailand‘s success in its own Japan-Thailand EPA (JTEPA), has recently revised its position, seeking an automotive tariff reduction similar to that of Thailand and also ensuring a renegotiation by 2009.
Ford, understandably, is concerned that a JPEPA would put it at a huge disadvantage since Ford, being an American company, would not be covered by the JPEPA and would be subject to much higher tariffs.
Ford, likewise, has established the Philippines as part of its ASEAN production hub for its Focus, Escape and Mazda Tribute models.
Ford earlier had also lobbied hard to ensure that tariffs for vehicles with an engine of three liters and above be maintained at 30 percent.
Ford manufactures the big engine Expedition, F150 as well as the Escape and Mazda Tribute.
Aside from renegotiating the automotive tariff structure, the Philippines has also asked Japan to agree to the continued production of completely-knocked down (CKD) models in the Philippines.
According to Hernandez, local automotive manufacturers have asked JPEPA negotiators to ensure that in exchange for a phased reduction in automotive tariffs, Japan would ensure that Japanese automotive manufacturers would continue to assemble at least two CKD models each for their Philippine subsidiaries.
Including such a provision would ensure the continued viability of Philippine automotive manufacturing.
The local automotive industry fears that without such an assurance, their Japanese principals would shift completely to exporting CBU units and terminate all CKD assembly operations especially once the tariffs on CBUs make it more financially viable to resort to such exports.
They said that without local CKD operations, there could be massive layoffs in the automotive industry.
CBU imports only require the addition of tires and batteries, while CKD assembly still has plenty of local auto part content and requires skilled labor.
Hernandez also disclosed that the local automotive industry through their various associations such as the Chamber of Automotive Manufacturers of the Philippines (CAMPI) and the Philippine Automotive Federation, Inc. (PAFI) support the JPEPA negotiators in taking a stand that any agreed upon tariff reduction commitment would still be subject to review by 2009 specifically for vehicles with an engine displacement of three liters and below.
Ford, along with other Philippine automotive car manufacturers, is set to leave for Japan this week for an industry-to-industry dialogue with their Japanese counterparts hoping to convince them to help support the Philippines position in the JPEPA negotiations.