Government urged to go slow on CBU tariff cuts

The head of Japan’s number one car company has cautioned the Philippines to go slow on its plan to reduce tariffs on completely built-up (CBU) car units as part of its trade liberalization policy.

Motomobu Takemoto, president of Toyota Motor Asia Pacific Pte. Ltd. said "such liberalization efforts is doing more harm than good."

Speaking before participants to the 27th Philippine Business Conference, Takemoto cited the experience of Australia, which reduced its tariff on CBUs to 15 percent resulting in a substantial loss to its domestic automotive industry.

As a result of the tariff reduction, Takemoto said, the share of imported vehicles in Australia rose to 68 percent.

Thus, he warned, even developed countries like Australia find it hard to hold on to market share. Even the US is setting a higher import duty of 25 percent on trucks, he added.

The Philippines, on the other hand, is planning to reduce its import duty on CBUs to five percent by the year 2004.

Takemoto said the experiences of the US and Australia indicate that "even developed countries suffer from the free flow of imports."

The Philippines should instead implement a "step-by-step" liberalization, the Toyota executive said, adding that the Philippines already has the lowest tariff rate on CBUs among ASEAN member countries.

Thailand, he said, imposes an 80-percent tariff on CBU packs.

If the decline in tariff rate is too fast, it will have an impact on the local manufacturing industry, Takemoto pointed out.

A couple of local car companies have indicated their preference for CBU importation instead of engaging in CKD operations.

Luxury carmaker BMW had expressed the view that importing CBUs may be cheaper for them as they would not have to set up assembly operations and hire workers.