Finished goods take priority in gov’t’s MFN tariff review

The government has decided to prioritize finished products in the review of the country’s Most Favored Nation (MFN) tariff rates, with intermediate products and raw materials following in succession.

This was agreed upon by the Cabinet-level Trade and Related Matters (TRM) committee which has been tasked by President Arroyo to undertake the review, especially since the country’s MFN rates are scheduled to go down next year.

An MFN status carries privileges normally offered to World Trade Organization (WTO) members.

The government has lately been applying the brakes on the country’s trade liberalization policy following the flood of imported products which are threatening the viability of local industries.

In undertaking the review, the government has initially set five parameters. First, the proposed MFN rates should take into account local production. Second, there should be a comparison of Philippine MFN against MFN rates of neighboring countries, supplier countries and buyer countries. Third, the proposed MFN rates should also factor in the percentage of applied MFN rates to bound rates.

Fourth, there should be a consideration of rates for export products. And fifth, the impact on the consumer price index, particularly the food basket, should also be considered.

Current MFN rates have remained frozen at their 2002 levels, but only up to 2004. The impact of the current review, however, would go beyond 2004.

The review would also try to align the Philippines’ existing 5,500 tariff lines with the 10,000 tariff lines of neighboring ASEAN countries.

In previous meetings of the TRM Committee, their review of the MFN rated had resulted to a "segmentation" of tariff data.

The TRM had segmented items not locally produced; items where industry has petitioned that rates be maintained at 2002 level; items where industry wants the rates kept at 2001 levels and items where industry wants an increase beyond 2001 levels.

Based on the segmentation, the TRM felt it would have an easier time resolving which items could easily be resolved and changed or kept at their current levels and which items would need more analysis.