The Philippines and Japan are at loggerheads over automotive import tariffs.

Japan is pressing for zero tariff on both completely built-up packs with engine displacements of above 3 liters and automotive parts imported from Japan while the Philippines may be amenable only to zero tariff on imported CBUs of above 3 liters but would like to keep the rates on auto parts of as much as 30 percent until 2013.

Trade and Industry senior undersecretary and chief negotiator of the Japan-Philippines Economic Partnership Agreement (JPEPA) Thomas G. Aquino described the ongoing negotiations as “very tough.”

“We are in a very hard position now. We are in a stage of very tough negotiation and we have the same level of intensity,” Aquino said.

“I agree,” said Tomichika Uyama, chief economic affairs of the Japanese Embassy in Manila.
According to Aquino, the Philippine position is consistent with the industry development program under the Motor Vehicle Development Program (MVDP).

“Our position is as long as what they offer is consistent with our industry development program,” Aquino stressed. Apparently, the Japan position does not jive with the local industry plan.

Actually, the Philippine position is already an improvement of its original position to keep the CBU tariffs at 30 percent as well as the 10-20-30 tariff rates on autoparts until 2013.

The Philippines though may agree to bring down to zero the CBU rates because there is no local assembler of the 3-liter above vehicles.

Besides, an official explained that the JPEPA provides for the reduction to zero the tariff on above 3 liter vehicles by 2010 although the deal also provided for a renegotiation of the auto tariffs for as long as the contracting party initiates it before end 2009, which the Philippines did.

But the DTI said that this is premised on a condition that any reduction in auto tariffs is premised on the commitment of Japan that it will pour in significant investments in the domestic industry, the scale of which is to be determined by the Philippines.

An official said that this is now a contentious issue because Japan has not really made additional investments in the local auto sector since under the JPEPA.

This situation, however, has strengthened the argument that since there is no local assembler in the above 3-liter category to protect, then tariffs could now be reduced to zero as stated under the JPEPA.
“It is up to each auto company to invest more in the Philippines although we would like to encourage them to invest here,” Uyama said.

Generally, Uyama said it is but difficult for government to predict if there would be new Japanese investments into the Philippines.

“But, what I can say is that the global economic crisis, particularly Asia, is recovering and hope this trend will continue also in the Philippines,” he said.

He said the JPEPA provided for better environment to improve business and both countries continue their talks to improve business environment.