Petrochem, auto industries to enjoy tariff protection till 2004

Prompted by aggressive lobbying by petrochemical and automotive manufacturers, government has agreed to continue protecting these two industries until 2004.

The decision came during the meeting of the Cabinet committee on Tariffs and Related Matters (TRM) which finally made the official decision to retain 2000 tariffs until 2001, with a few exceptions.

The TRM said over the weekend that the Cabinet has decided to revise its tariff reduction schedule but the target to bring down tariffs to five percent by 2004 would stay.

The TRM committee has not made the list of exceptions or specific schedules for every product. A top TRM source said the technical working group would be going through the entire tariff lines and assess them line by line.

The only clear decision, the source said, was that the tariffs on petrochemical products and automotive parts would be retained until 2004. In effect, there will be a sudden reduction of tariffs for the two industries at the end of the prescribed period.

The petrochemical industry has a pending request for continued protection until 2010 but the TRM official said government would not seriously consider this until the planned construction of the $1-billion naphtha cracker actually materializes.

The TRM, however, did not discuss the petition of the automotive sector to retain the current tariff structure for automotive parts until 2004 and possibly extend the schedule since the World Trade Organization does not require uniform tariffs for automotive until 2020 for developing countries.

The exceptions would be based on industry positions. If there is a petition for reduction in a certain imported product, it would be reduced if there would be no corresponding objection from local producers or if there are no domestic producers.

Petition for tariff increases would not be entertained but government would maintain the prevailing tariff rates and not reduce them in 2001.

The same would apply to products that are produced locally but only in insufficient quantities, unless the intermediate downstream products are covered by a higher tariff than the input.

Imported products that are not produced locally would be reduced as scheduled. Documents from the TRM indicate that government‘s tact is to show a downward adjustment from 2000 to 2001 but to keep silent about the rates in the 2002 onwards.

This way, government has the room to review tariffs regularly and still have the flexibility for adjustment while still showing an effort to lower tariffs on imported products. – Des Ferriols