MANILA, PHILIPPINES: The automotive industry is "supportive" of a free trade agreement (FTA) with Japan but wants higher tariffs on completely built-up (CBU) vehicles from outside the Association of Southeast Asian Nations maintained at current rates at least until 2010.

In a position paper, the Philippine Automotive Federation, which groups together assemblers of automobiles and trucks, motorcycle manufacturers, and parts producers, said the "integrity" and viability" of the local assembly and parts industry must be maintained.

Federation President Vicente T. Mills, Jr. submitted the position paper last month to Tariff Commission Chairman Edgardo B. Abon, who had requested comments and recommendations on the ongoing Japan-Philippines Economic Partnership Agreement (JPEPA) talks.

Mr. Mills said the tariff differential between CBUs and completely knocked-down (CKD) units being imported by car assemblers should be maintained. Tariffs on CBUs are up to 30%. For CKDs, the rates are 1% for commercial vehicles and 3% for passenger cars.

The group said negotiators should instead push for "any possible specific concessions", particularly on products not produced locally. "For example, raw materials being imported from Japan for the production of parts and components can be offered for tariff concession since Japan is a big source of these raw materials," Mr. Mills said.

He also took issue with the "unabated influx of used motor vehicles from Japan," saying this "erodes the viability of existing investments and hinders investment opportunities in the automotive industry."

"Ironically, substantial Japanese investments in the local automotive industry are among those being directly undermined by the used vehicle imports from Japan. This current practice of 'exporting' used vehicles to the Philippines from Japan is in conflict with mutual enhancement of investment opportunities and does not encourage investor confidence in the local industry," he added.

Mr. Mills also called for strengthened technical cooperation projects with the Japanese government and an expanded development program for small and medium enterprises engaged in parts and components manufacturing "through skills development programs and equipment and technology acquisition."

Philippine and Japanese officials concluded the second JPEPA negotiating session in Cebu recently. The next round of talks will be in Japan. Trade officials expect the FTA, the country's first, to be signed before yearend or early next year.

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