Electronics, tariffs, semiconductors

BusinessWorld reported today on the ITA dispute, a panel hearing for which was held last week. The Philippines is a third-party complainant to the dispute:

"A WTO panel ended last week the first hearing on tariffs on certain information technology (IT) products, a dispute which pitted the EC against countries like the US, Japan, China and the Philippines. The complainants raised the issue to the multilateral trade group in May last year, charging that the duties EC members imposed on flat panel displays, set top boxes and multifunctional fax machines violated the Information Technology Agreement, a deal which eliminated tariffs on IT goods. A WTO panel, composed of officials from Switzerland, Canada and New Zealand, heard all the parties’ arguments last week and are slated to convene again in July to hear rebuttals, Ambassador Manuel A.J. Teehankee, Manila’s representative to the WTO said in a recent e-mail. If the case is decided in favor of the US and the other complainants, EC members will have to 'bring its policy into line with the ruling or recommendations' or else lower tariffs in other areas as compensation, the WTO said on its Web site."

In the meantime, local manufacturers are demanding (as expected) protectionist measures (click here):

"A local manufacturers’ group has renewed calls for higher import tariffs, saying this will provide domestic industries a respite from impending reductions under a proposed free trade deal.""The Federation of Philippine Industries (FPI), in a statement, pointed out that Philippine tariffs were already below those prescribed by the World Trade Organization (WTO). The average bound rate for non-agriculture products which the Philippines committed to at the WTO is 23.4% while the country’s applied rate averages at 7%, it said. '[We should] take advantage of the lull in the ... Doha Round and use the Philippines’ available policy space to raise the tariffs on critical products up to their bound rate limits,' the FPI said."

While the demand is the usual predictable riffraff coming from that bunch, the proposal unfortunately (as is typical from them) has not been thought through. Raising tariffs will not solve the issues confronting local business, which all credible economists and policy makers trace to declining global demand and low local competitiveness. Besides, there are other ways to help competitive local industries other than by way of protectionism.

Compare the manufacturers' stance above with the more positive and commendable attitude from the semiconductor industry (click here):

"The Semiconductor and Electronics Industries of the Philippines Inc. (Seipi) is keeping its forecast of a 20- to 30-percent decline in exports for 2009, even though prospects are now rosier for the rest of the year. Seipi chair Arthur Young said that although demand had started to pick up these past two months, the industry still had a lot to make up for, owing to large declines experienced in the first quarter. 'While the market has been steadily improving since March, and we are seeing month-to-month increases, the drop in the first quarter is a huge one to play catch up [with]. Ask us in end-June and we’ll have a better feel of the markets for the balance of the year,' he said in an interview yesterday. He said all indicators pointed to a better market from this point onward, as the industry had already hit bottom during the January-March period and has 'nowhere to go but up.'”