Trade Secretary Ramon M. Lopez has initiated an investigation to determine whether the government should impose a safeguard measure on cement, as imports of the construction commodity rose in significant volumes in the past years to the detriment of the domestic industry.
An industry review by the Department of Trade and Industry (DTI) reported that the volume of cement imports increased continuously in absolute terms from 2013 to 2017, which is also the period that will be probed by the agency. The increases compared with the previous years are 70 percent in 2014; 4,391 percent in 2015; 549 percent in 2016 and 72 percent last year.
The DTI review also pointed to an augmentation in cement’s share of imports during the period, from 0.02 percent in 2013 to 15 percent in 2017. This has apparently damaged the local cement industry, whose market share declined in spite of a larger market size.
“From having a small share in the domestic market from 2013 to 2015, the share of imported cement grew to 8 percent and 13 percent in 2016 and 2017, respectively. While the domestic industry’s sales revenue increased from 2013 to 2016, it went down by P11.1 billion in 2017, a decline of 12 percent,” the review read.
Also, domestic cement firms recorded growth in earnings of 6 percent in 2014, 15 percent in 2015 and 8 percent in 2016. However, as interest and taxes went up, their earnings went down by 49 percent last year.
The review also claimed that the weighted landed cost average of cement imports is lower than the average selling price of the domestic product, resulting to price undercutting of about 14 percent.
This, the review added, caused cement manufacturers to reduce prices by almost 10 percent to compete with cheaper import cement. It concluded then that the increase in the volume of imported cement preceded the serious injury to the industry last year.
“The conditions of competition show that the market share of locally produced cement was essentially displaced during the period of investigation, as the share of imports in the domestic market significantly increase,” it read.
Citing Section 6 of the Safeguard Measures Act, the trade chief can initiate a motu proprio probe if there is evidence that increased imports of a product substantially harm its domestic counterpart. The trade chief, however, has to consider the impact on political and economic condition and the capacity of the domestic industry to provide for the prevailing demand if he decides to apply a safeguard measure.
Safeguard measures can be implemented by any World Trade Organization member to protect a specific industry from an increase in imports of any product causing serious injury to its local counterpart. One safeguard measure the government can apply under the law is to increase the tariff on the imported product.