Malaysia backs RP bid for petrochem tariff wall

Malaysia is supportive of the Philippines’ decision to invoke an ASEAN protocol excluding the petrochemical industry from a lowering of tariffs under the Common Effective Preferential Tariff (CEPT) scheme.

Trade and Industry Secretary Manuel Roxas II said Malaysia has expressed its support for the Philippines’ attempt to shield its petrochemical industry and allow it to strengthen its competitiveness before finally lowering tariffs.

In a letter circulated to all members of the AFTA Council, Malaysian Trade Minister Rafidah Aziz said she has agreed to the request of the Philippines to temporarily suspend CEPT concessions on 11 tariff lines of petrochemical products.

She did not indicate any request for compensation, but noted that "the issue on compensatory adjustment measures between affected parties be settled expeditiously."

Roxas is hopeful that Malaysia will not seek any compensation especially since the Philippines had also supported Malaysia when it sought to protect its automotive industry.

Aziz, however, stressed in her letter that "while Malaysia understands and appreciates the difficulties faced by the Philippines on the matter, we look forward to the reinstatement of the CEPT rate of five percent on the affected products after the expiry of the suspension period on Dec. 31, 2004."

Under the CEPT scheme of the ASEAN Free Trade Area (AFTA), member countries are supposed to lower their tariffs to zero to five percent to allow a free flow of goods among participating countries.

However, under an agreed protocol, member countries can opt to temporarily exclude certain industries.

But in doing so, the requesting country must also be prepared to compensate its neighboring ASEAN countries which would be adversely affected by the delay in the lowering of tariffs.

Aside from Malaysia, those who are affected are Singapore and Thailand.

Singapore has already submitted a list to the Philippines of products which it wants the Philippines to allow in as compensation for its agreement to the request for CEPT exclusion.