By Aubrey Rose A. Inosante, Reporter
THE PHILIPPINES could have lost its edge within the US market because the US imposed an identical 19% tariff on imports from Indonesia, Cambodia, Malaysia and Thailand, analysts said.
Analysts warned this will likely undermine the Philippines’ competitiveness because it erodes the margin of preference and limits opportunities for trade diversion.
In an executive order signed on July 31, US President Donald J. Trump imposed a 19% duty on many goods from five members of the Association of Southeast Asian Nations (ASEAN) — the Philippines, Cambodia, Malaysia, Thailand and Indonesia. This can take effect on Aug. 7.
“What we’ve been saying before is that a 20% and even 19% tariff is appropriate — so long as our competitors have higher rates than us,” Philippine Exporters Confederation, Inc. (Philexport) President Sergio Ortiz-Luis, Jr. said in a phone interview over the weekend.
“The issue now in Asia is that countries like Japan and South Korea have even lower tariffs, and now we’ve been matched by Indonesia, Thailand, and the remainder of the ASEAN+5, who’re also our direct competitors. That’s where the issue lies for us.”
The Philippines had received the smallest tariff discount amongst ASEAN members regardless that Philippine President Ferdinand R. Marcos, Jr. met with Mr. Trump on the White House. The brand new rate is barely lower than the 20% the US had threatened to impose, but higher than the 17% tariff announced in April.
Unliked the Philippines, other ASEAN countries received significant tariff discounts from the US, namely, Indonesia (from 32%) Malaysia (from 25%), Thailand (from 36%), Cambodia (from 36%), and Vietnam (from 46%).
At the identical time, Mr. Trump set 15% duty on goods from South Korea (from 25%) and Japan (from 25%).
As the brand new US tariffs are set to take effect on Aug. 7, Trade Secretary Ma. Cristina A. Roque said the talks with the US are still ongoing to give you a “mutually useful deal.”
“While some ASEAN member states got also 19% reciprocal tariff rate, I’m not aware what deals or concessions got for that because every country has its own sensitivities and priorities,” Ms. Roque told BusinessWorld in a Viber message on Saturday.
LOWER EXPORTS
Mr. Ortiz-Luis warned the upper US tariffs will dampen demand for Philippine goods, which can result in lower exports for the US market. He said this also leaves no room for Philippine exporters to extend prices as regional competitors now have similar or lower tariff rates.
In June, america was the highest destination for Philippine-made goods amounting to $1.22 billion, 35.2% higher from the identical month a yr ago.
“[Exporters] might be scared. We glance to the federal government now to give you mitigating measures to support our exporters. But I don’t know if the federal government is ready to do this,” he said.
Mr. Ortiz-Luis also said the exporters group remains to be in the dead of night on the excellent details of the recent US-Philippines trade deal
Jose Enrique A. Africa, executive director at IBON Foundation, said “the Philippines loses much of the margin of preference and price-based advantage that the federal government was counting on to offset our underdeveloped manufacturing workforce, infrastructure, and ecosystem.”
He also said the changes in tariff rates within the region further reduce the probabilities of the Philippines benefiting from trade diversion or US manufacturers searching for supply-chain players.
“The best direction is unquestionably to not recklessly pursue more free trade agreements, since many years of such openness have already led to our premature deindustrialization and current inability to compete or benefit from market access, even when it exists on paper,” Mr. Africa said.
Former Tariff Commissioner George N. Manzano said the Philippines is “not disadvantaged” regardless that it has the identical US tariff rates as Cambodia, Malaysia, Thailand, and Indonesia.
“My only commentary is that in relative terms, we paid a steep price in concessions by way of tariff revenue foregone by agreeing to duty-free imports of US imports in some products in comparison with our ASEAN neighbors, because we had a discount of only one percentage point from 20%,” Mr. Manzano told BusinessWorld in a Viber message.
Finance Secretary Ralph G. Recto earlier said the federal government is anticipating between P3 billion and P6 billion in foregone revenues following its decision to grant zero tariffs on chosen US products corresponding to automobiles, wheat, soy, and pharmaceuticals.
Meanwhile, Ms. Roque said the Philippines stays competitive because it recently introduced economic reforms corresponding to the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act, and free trade agreements with other countries.