The impact of NTMs affecting automotive industry in the Philippines

Transcription

1 ESCAP-ARTNet Capacity Building Workshop on Evidence-Based Trade Policy Making for Sustainable Development November 28, 2018 Bangkok, Thailand The impact of NTMs affecting automotive industry in the Philippines Maureen Ane D. Rosellon Arjan Paulo S. Salvanera

2 Outline Describe the PH Automotive industry imports for automotive manufacturing industry, specifically for Automotive Parts and Components. Assess the bottlenecks of importing automotive parts with Tariff and Non-Tariff Barriers and compare it with other major automotive manufacturing country. Propose findings that will determine means to reduce input cost. This will aid the CARS program of the country.

3 Background of the Study Automotive industry mainly serves the domestic market rather than the regional or global market. It is comprised of two-subsegments: the motor vehicle assembly and motor vehicles Two major types of imports: Completely Built Units (CBU) and Completely Knocked Down Units (CKD) CKD can be further breakdown into Original Equipment Parts and the replacement parts DTI, 2017

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5 Comprehensive Automotive Resurgence Program Manufacturing Resurgence in the Philippines for Automotive Industry CARS provision of incentives to lead firms. The program aims to generate economies of scale in the domestic market by offering US$600 million in incentives to a limited number of lead firms. By capping the output-based assistance to a maximum of three models, the program enables local parts makers to generate economies of scale by producing components for a small number of products. Motor Vehicle Development Program DTI, 2017

6 Philippine Participation in the Automotive GVC DTI, The Philippines in the Automotive Global Value Chain Duke University Global Value Chain

7 Electronic components Automotive Parts and Components Mechanical components Motor vehicles; parts and accessories, of heading no to 8705 Composite Components Wiring

8 Philippine automotive industry structure Llanto and Ortiz 2015

9 Companies and Employment in the Automotive Industry Companies and Employment in the Automotive In DTI Board of Investments

10 Automotive Parts and Components Motor vehicles; parts and accessories, of heading no to 8705 Top Exports Country Destinations Trade Value (US$) Japan 388,711,103 Thailand 307,596,226 USA 171,108,807 China 131,577,647 Indonesia 59,889,776 Mexico 31,603,215 South Africa 29,452,330 Spain 29,065,501 United Kingdom 18,225,171 Argentina 18,162,922

11 Automotive Parts and Components Motor vehicles; parts and accessories, of heading no to 8705 Trade Value Top Imports Country Origin (US$) Japan 204,171,970 Thailand 105,036,645 China 58,534,842 Indonesia 34,736,458 USA 20,637,941 Singapore 18,781,314 Rep. of Korea 17,845,803 Malaysia 13,258,590 China, Hong Kong SAR 11,381,009 Other Asia, nes 8,237,581

12 Automotive Parts and Components Motor vehicles; parts and accessories, of heading no to 8705

13 Non-Tariff Measures for Parts and Components Non-tariff measures (NTMs) are policy measures, other than ordinary customs tariffs, that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both (UNCTAD, 2010). TBT for PH UN Author s Frequency Coverage 73 84

14 B14 Authorization requirement for TBT reasons Requirement that the importer should receive authorization, permits or approval from a relevant government agency of the destination country, for reasons such as national security, environment protection, etc. UNCTAD, 2012 Measure Description Product Description and National Basis BOI shall issue Certificates of motor vehicle parts and Authority to import to allow components participants to import knocked down parts and components at Comprehensive Industrial their tariff rates. [Participants are Policy and Directions for duly registered under the MVDP.] the Motor Vehicle Development Program Upon arrival of the imported used motor vehicles or used parts and components at the Bureau of Customs, the importer shall secure from DTI-BIS a Release Certificate to be used as the basis for the release of the goods from BOC. used motor vehicles, used parts and components Comprehensive Industrial Policy and Directions for the Motor Vehicle Development Program

15 A86 Quarantine requirement Requirement to detain or isolate animals, plants or their products on arrival at a port or place for a given period in order to prevent the spread of infectious or contagious disease, or contamination. UNCTAD, 2012 Measure Description Product Description and National Basis Used vehicles, earth moving equipment and container vans brought into the country shall be subjected to plant quarantine inspection to determine that they are free from soils, sand, or earth and those found contaminated shall be required to be disinfected or washed and cleaned thoroughly. used motor vehicles, used parts and components Promulgating the Plant Quarantine Law of 1978, thereby Revising and Consolidating Existing Plant Quarantine Laws to further Improve and Strengthen the Plant Quarantine Service of BPI

16 B15 Registration requirement for importers for TBT reasons Measure Description Product Description and National Basis Only DTI-accredited road vehicle rebuilders may import used parts and components used motor vehicles, used parts and components Requirement that importers should be registered in order to import certain products. To register, importers may need to comply with certain requirements, documentation and registration fees. It also includes the cases when the registration of establishments producing certain products is required. UNCTAD, 2012 Participation for the manufacture and assembly of the motor vehicles classified hereto shall require separate registration under the Motor Vehicle Development Program. Approved participants shall be issued a Certificate of Registration by the BOI. passenger cars, commercial vehicles, and motorcycles Department of Trade and Industry - Guidelines to Implement EO 156, Providing for a Comprehensive Industrial Policy and Directions for the Motor Vehicle Development Program

17 Review of Literature Automotive industry is a highly specialized industry. The effects of NTMs are facilitative, trade restrictive or no impact at all. Private standards are usually more stringent than Public Standards for the automotive industry It is costly for the country to produce some of the products.

18 Methodology Import value of Automotive Parts and Components is estimated through the formula: VOL o PF o = MA j Wherein VOL o represents the Volume of Automotive Parts and Components from country o, and PF o represents the Price of Imported Components from country o; lnma j = β 0 + β 1 ln 1 + TAR jo + β 2 NTM jo + β 4 COS jo + β 5 PL jo + μ Key H.L., Nincita, A., & Olarreaga, M. (2009).

19 Methodology Computation of ad valorem equivalents (AVE) of NTMs NTM AVE = Key H.L., Nincita, A., & Olarreaga, M. (2009). P d P w 1 + τ Cost of Shipping COS jo = FRE jo + INS jo

20 Results Ordinary least squares (ols) random effects model Free on Board Import Value Coefficient P-value Tariff Rates Non-Tariff Measures Cost of Shipping Local Price

21 Conclusion Tariff is still considered to be high in terms of Automotive Parts and Components. Only imports from Japan (through PJEPA) are practically tariff-free. (ave tariff rate <1) Philippine Non-tariff Measures (public and private standards) do not have an impact. Firm vs Consumer Private Standards are necessary for the automotive industries. No price reduction. In fact, it is relatively cheaper to buy parts and components outside Philippines. The benefits from the full ASEAN liberalization are relatively small for the Philippines

22 Policy Recommendation ASEAN Member States are consolidating the ASEAN Automotive Manufacturing Chain; Philippines must determine its place in ASEAN Industrial policy should focus on the related goods of electrical components and harness wiring rather than in the automotive industry in general. Philippines must liberalize the automotive sector (not a priority) No discrimination against foreign firms. No import restriction Capacitate Policy makers in terms of Manufacturing NTMs. Government agencies must have close coordination with one another.

23 Policy Recommendation Big Potential for the Philippines outside the ASEAN and Japan. PH has automotive service linkages in Middle Eastern Countries rhinocarhire.com

24 Further Studies Focus on prospective country partners of the Philippines in terms of Automotive Industries. (Middle Eastern Countries) Primary data needed for industry-related studies.

25 Thank you! Arjan Paulo Salvanera Philippine Institute for Development Studies School of Economics, De La Salle University