Labor group seeks safeguard duty on imported vehicles

By: Roy Stephen C. Canivel, Philippine Daily Inquirer, 11 Nov 2019

Tens of thousands of factory workers in the automobile industry have lost their jobs after regional free trade deals paved the way for nearly a million imported vehicles to enter the country tariff-free.

The huge job losses have prompted a labor group to file for a safeguard measure against imported vehicles, marking the first time ever in the country that a labor group—and not a big industry player—had asked for a trade remedy from the Department of Trade and Industry (DTI).

The DTI is now seriously considering the petition, a game-changing development which—if the odds fall in the workers’ favor—could also help the government in its efforts to revive the manufacturing industry in the country.

The Philippine Metalworkers Alliance (PMA), a group of around 13,000 unionized workers, claimed that the surge of imports had come at the cost of local jobs since companies see a lesser need to assemble vehicles here when they could just import them instead.

PMA, which was formed in 2008, is basing its claim on the experience of its members who worked in major car companies and car parts makers as well as data from the Philippine Statistics Authority (PSA), whose labor force survey showed that the number of workers in the industry dropped in the past few years.

Back in April 2015, there were 86,428 workers in the industry, PSA data showed. The number, however, fell by more than 32 percent in the same month in 2018 to 57,982 workers. The group cited these figures in its letter to the DTI, a copy of which was obtained by the Inquirer.

The DTI, meanwhile, said that there were only 153,000 brand new imported motor vehicles back in 2014. But this climbed to more than one million units from 2014 to 2018, according to DTI Undersecretary Ceferino Rodolfo, who stopped short of calling this an import surge.

The DTI would still have to verify PMA’s claims while making its own investigation on the issue. Nevertheless, this could lead to protective measures such as tariffs to make imported cars more expensive.

A safeguard measure is imposed if a surge in imported goods has seriously injured a local industry that makes the same products. To get this trade remedy, a local industry only has to prove a serious injury caused by the surge—which could come in various forms such as job loss and smaller market share—or at least a threat from it.

This is the first time, however, that a labor group is speaking on behalf of a local industry, whereas previous cases only had the biggest players in an industry filing for safeguard measures. Local car companies were not part of the request to have a trade remedy.

In an interview with the Inquirer, PMA secretary general Reynaldo Rasing said local workers were being harmed by imports in a way that multinational car companies were not. Their letter cited cases of vehicles being made less and less such as Isuzu’s D-Max, which was phased out earlier this year.

In a global value chain, a car company that cuts its vehicle production so that it could import instead does not feel any significant loss because in the end, the retail sales of one country branch—either through imports or local production—go back to the pockets of large multinational companies.

“Regardless where they manufacture their cars, they will still have the profit. But in our case, the injury is on the workers because we are losing our jobs,” Rasing said.

About 80 percent of the more than one million imported vehicles came from countries that are members of a regional trade deal and could therefore bring their cars to the Philippines either at zero tariff or a significantly smaller tax compared to countries without a free-trade agreement (FTA).

Thailand and Indonesia alone both accounted for 70 percent of those imported vehicles during that time period, the DTI said, with Thailand shipping 428,000 units and Indonesia sending 312,000 units.

These countries have been exporting cars to the Philippines at zero tariff since 2015, thanks to an FTA among members of the Association of Southeast Asian Nations (Asean). Toyota and Mitsubishi, among other companies, have manufacturing hubs in the two countries.

South Korea, which currently has a 5-percent tariff under an Asean-Korea FTA, accounted for 101,000 units. In total, these three countries make up around 80 percent of the more than a million vehicle imports, with the rest being divided among Japan, Germany and others countries.

“The DTI, through the Bureau of Import Services, is assessing the application for safeguard duty on imported automobiles filed by the Philippine Metalworkers Alliance,” Rodolfo told reporters last Thursday.