Manila will bring down tariffs on Japanese automobiles on one condition: Tokyo must liberalize its tariff regime on farm goods, especially tropical fruits, under the Philippines-Japan Economic Partnership Agreement (PJEPA).
According to Trade Undersecretary Ceferino S. Rodolfo Jr., the Philippines is amenable to lowering to 5 percent the tariff on Japanese-made automobiles. In exchange, he said Japan has to reduce tariffs on Philippine tropical fruits, particularly bananas, mangoes and pineapples.
“I think there is a need [for Japan] to reduce tariffs on some of our tropical products, such as bananas, mangoes and pineapples. It is really more for agricultural products because when Japan negotiated the PJEPA and all of their other bilaterals here in [Southeast Asia], their agricultural sector is really protected,” Rodolfo told the BusinessMirror.
“The negotiation for PJEPA was started 10 years ago. The situation now might be more different, especially since Japan has joined the TPP [Trans-Pacific Partnership],” he added.
Japan is a member of the Comprehensive and Progressive Agreement for TPP. With the aggressive liberalization pushed under this agreement, the Philippines hopes Japan can pursue the same in its other trade deals, including the PJEPA.
Local banana exporters pay a maximum of 18-percent import duty to Japan during winter season, and 8 percent during summer. This is in contrast with Vietnam, Indonesia, among others, that are exporting bananas to Japan at zero percent.
“Tariffs for agricultural products are still significant because they are highly protected by Japan. Our good access is only for industrial products,” Rodolfo said.
If Japan can bring down tariffs on tropical fruits, then the Philippines can reduce import duties on automobiles. Under the periodic review of the PJEPA, Tokyo is appealing to Manila to cut down tariffs on automobile not exceeding 3,000 cc to 5 percent, from 20 percent, said Takahiko Shiba, trade and commercial attaché of the Embassy of Japan.
“On our part, we are open as long as Tokyo lowers the tariffs on agricultural products, particularly bananas, mangoes and pineapples, as well as poultry products. It is fruits for cars,” Rodolfo added.
In a recent interview with reporters, Shiba said the Japanese government is asking Manila to allow its 3,000 cc and below cars to enter the Philippine market at 5-percent tariff. This is to allow Japan-made brands to be on the same playing field with South Korea-produced vehicles, which are imposed 5-percent tariff under the free-trade agreement between the Association of Southeast Asian Nations and South Korea.
“Most of tariff goods are reduced, [but] there are tariffs on automobiles and steel products [that are still significant],” Shiba said.
Japan can cope with the import duties on steel, as it is now oversupplied across the world due to restrictive measures imposed by the United States. However, on automobiles, it cannot afford the tariffs any longer, Shiba explained.
Rodolfo and Shiba are hopeful the two economic partners will meet eye to eye on their respective appeals to bring down tariffs on their “offensive products.” The two camps will meet again for the next round of the periodic review of the PJEPA in December.
The PJEPA is the country’s first and only bilateral free-trade agreement to date. It covers trade in goods, trade in services, investments, labor, and intellectual property, among others.
Data from the Philippine Statistics Authority showed the Philippines exported a total of $10.85 billion of goods to Japan in 2017. Japan that year was the country’s top export destination, followed by the United States, Hong Kong, China and South Korea.
Top Philippine exports to Japan last year were joinery and carpentry of wood ($1.11 billion), ignition wiring sets ($934.15 million), digital monolithic integrated circuits ($689.80 million), semiconductor devices ($629.78 million) and nickel oxide sinters ($444.30 million).