Auto parts manufacturers worry over upcoming FTA with S. Korea

A laborer works at the main factory of Hyundai Motor in Ulsan, southeast of Seoul, July 13, 2012. — REUTERS

By Jenina P. Ibanez, Reporter

AUTOMOTIVE parts manufacturers expect a drop in production and employment if tariffs on automotive products imported from South Korea are lowered as part of the upcoming bilateral free trade agreement (FTA).

FTA negotiations between South Korea and the Philippines are expected to conclude this year. Talks initially stalled after the countries did not agree on reduced tariffs for Philippine banana exports and South Korean auto exports.

Reduced tariffs are being considered for both South Korean automotive completely built up units (CBUs) and component parts.

Philippine Parts Maker Association, Inc. (PPMA) President Ferdinand I. Raquelsantos said he does not expect the local industry to suffer losses from Korean component parts imports, because local manufacturers do not supply parts for Korean cars that are not locally assembled.

In a phone interview on Friday, he said the local auto parts industry would lose work if CBUs from South Korea compete with the locally assembled vehicles they supply parts for.

“It would lessen the sales of the local CKDs (Completely Knocked Down) or locally assembled vehicles which in turn we get affected with. With lesser volume produced, lesser production for us,” he said.

CBUs imported from Korea currently have a 5% duty under the ASEAN-Korea FTA.

Mr. Raquelsantos said some smaller companies have scaled down operations and increased layoffs because of the effects of the lockdown.

“With this FTA, it’s going to be a little bit worse for us. That’s what we’re worried about,” he said. “If there’s gonna be more imports to come, there’s going to be more loss of jobs.”

He said the local industry hopes that South Korean manufacturers would start assembling at least one car model in the Philippines.

“Don’t just export CBUs. They should let their local counterparts here to do assembly,” he said.

The Board of Investments last year said that it would consider the removal of import duty on South Korean cars if South Korea invests in electric vehicle assembly and electric motors and batteries production in the Philippines.

The Trade department has not yet responded to requests for comment.

PPMA has been lobbying the Department of Trade and Industry to create safeguard measures and block the importation of CBUs.

Last year, workers in the Philippine Metalworkers Alliance applied for possible safeguard measures on imported automobiles with the Trade department, citing a link between the surge in automobile imports and the decline in employment in the domestic automotive industry.

Locally manufactured automotive sales declined around 48% in the first eight months of 2020, with Toyota Motors Philippines remaining the market leader, followed by Mitsubishi Motors Philippines Corp. and Nissan Philippines, Inc.

Imported vehicle sales dropped 49% in the eight months to August, while the distributor of Hyundai Motors vehicles retained the most sales that month.

The banana export industry, meanwhile, continues to lobby for the reduction of tariffs to South Korea, from its current 30%.

“If the banana tariff is not lowered, the volume of banana exports will continue to decrease because Korean importers will be sourcing more from other producing countries where the bananas can be bought cheaper,” Pilipino Banana Growers and Exporters Association Executive Director Stephen A. Antig said in an e-mail.

“The effects of the pandemic are not that significant compared to losing our market share if we do not reach a favorable tariff agreement.”

The Trade department last year reported an “early achievement package” on negotiations between South Korea and the Philippines. It listed priority products such as bananas, garments, and auto parts for the Philippines and pharmaceuticals, petrochemicals, and auto parts for South Korea.

“Korea has a strong pharmaceuticals business with strong local companies doing their own drug discovery and development,” Pharmaceutical and Healthcare Association of the Philippines President Beaver Tamesis said in a mobile message.

“So new innovations, properly vetted for safety and efficacy, can only be good for the Filipino patient.”

South Korea is one of the Philippines’ largest trading partners, according to the Philippine Statistics Authority. It was the Philippines’ sixth-largest export destination in 2019, with exports valued at $3.2 billion accounting for 4.6% of the value of total Philippine exports.

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