RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/166
9 November 1999
(99-4839)
Council for Trade in Goods Original:  English
PHILIPPINE REQUEST PURSUANT TO ARTICLE 5.3 OF THE
AGREEMENT ON TRIMS
REPLY TO WRITTEN QUESTIONS FROM THE UNITED STATES
Measures
1. Please describe in detail the measures that are included in the Government of the
Philippines’ (“GOP”) request.  Could the GOP please elaborate beyond the description
provided in previous submissions.  For example:
(a) What local content requirements are ther e?  What percentage of local content is
required?  What kinds of local goods qualify (anything?  some parts but not others? etc.)
The measures that are relevant to the Philippi nes’ request for an extension of the transition
period, pursuant to Article 5.3 of the TRIMS Agreement, are described below:
The varying levels of local content requirements per existing guidelines (Memorandum Order
No. 346 effective 26 February 1996) are as follows:
Passenger Cars Commercial Vehicles Motorcycles
Cat. I (<1200cc) &
II (->1200cc-
2190cc- 40%)
Cat III (>2190cc) -
no local contentCat. I & II (GVW up to 3
Tons)    - 45%
Cat. III (GVW>3T-6T)
- 21.90%
Cat. IV (GVW >6T-
18T,Trucks & Buses)
13.53%-22.24%Cat. A (2-wheeler) – 45%
Cat. B (3-wheeler) – 35%
(b) To whom do these measures apply?  Are there any (local or foreign-owned) entities that
are exempt?  What domestic and foreign producers are affected by these measures?
These measures apply to all participants, foreig n or local, in the Motor Vehicle Development
Program who are registered with the Board of Investments (BOI).
(c) What is the difference between the various programs (CDP, CVDP, MDP)?  What does
it mean to be a “participant” in one or more of these programs?  Can a company choose not to
be a participant?  [See also next question]G/C/W/166
Page 2
The Car Development Program (CDP), the Commercial Vehicle Development Program
(CVDP) and the Motorcycle Development Program (MDP) are all under the umbrella program (as of
1988) known as the Motor Vehicle Development Program (MVDP).  Participants are motor vehicle
assemblers that register with the BOI to avail of the incentives under the program, mainly in the form
of low tariff. A company may opt not to register as a participant except that it would not be able to
enjoy the tariff incentive. A participant may belong to one or more of these programs if, say, it notonly produces passenger cars but also commercial vehicles.
(d) Are these measures mandatory or tied to an advantage?  If the latter, what is the
advantage?  [See also question 3]
These measures are requirements to be complied with to qualify for incentives. Tariff rates
are provided in no. 20 (c) below.
(e) What exchange balancing measures are there ?  What percentage of exchange balancing
is required?
Participants are also required to earn foreign exchange to finance their CKD (completely
knocked-down) importation. The varying levels of foreign exchange requirements (as a percentage of
CKD import value) under the existing guidelines are as follows:
Passenger Cars
Commercial Vehicles Motorcycles
Cat.    I   -   15% Cat. I  & II    -  15% Cat. A & B   -   15%         II   -   50%        III & IV     -    5%        III   -   75%
(f) For exchange balancing, to whom do these measures apply?  Are there any (local or
foreign-owned) entities that are exempt?  Wh at producers are affected by these measures?
As with the local content provision, the foreig n exchange provision applies to participants.
(g) For exchange balancing, what is the difference between the various programs? (CDP,
CVDP, MDP)  What does it mean to be a “participant” in one or more of these programs?  Can
a company choose not to be a participant?  [See also next question]
For the foreign exchange requirement, the appli cation covers participants in cars, commercial
vehicles and motorcycles assembly.
(h) For exchange balancing, are these measures mandatory or tied to an advantage?  If the
latter, what’s the advantage?  [See also question 3]
As mentioned in (c) above, the advantage is the tariff incentive.
2. How have the measures changed over time?
(a) What were the restrictions on 1/1/95?  Ha ve there been any changes since then?  What
are they?
As of 1 January 1995, the following restrictions existed:G/C/W/166
Page 3
- local content and foreign exchange requirement as described in No. 1 above;
- import restrictions on completely built-up uni ts (CBU) and semi-knocked-down units (SKD),
and completely knocked-down units (CKD) not produced locally
- each participant is limited to producing three models and three variants of each model
(b) Have these measures increased the amount or percentage of local content and/or trade
balancing percentages since 1/95/95?
No, the measures concerning local content and foreign exchange requirements in place as of
1 January 1995 remain unchanged.  Nonetheless, it needs to be pointed out that liberalization had
taken place as early as 1990.  For example:  new categories such as the “people’s car” and luxurycategories in the program were created (Mem orandum Order No. 286-1990 and Memorandum Order
No. 68-1992).  With the creation of these new categories, new participants entered the industry.
Furthermore, in 1990, import restrictions on some automotive parts were lifted.  By 1993, the
importation of brand new CBUs with engine displacement of 2,800-3,100 cc was liberalized signaling
a significant opening of the domestic market (M emorandum Order No. 134-93); and by October 1995,
importation of brand new CBUs without limitations on engine displacement were allowed.
In February 1996, by virtue of Memorandum Or der No. 346, tariffs on all CKDs lines were
reduced from 20% to 3%.  Tariffs on CBUs were maintained at 40%.  However, in 1998, the tariff on
CKDs of passenger cars were adjusted to 10% to address the problems caused by the low 3% tariff onintermediate parts and components manufacturers.
Finally, it should be stressed that M.O. No. 346 al so provided for the complete elimination of local
content and foreign exchange requirements by 1 January 2000.
(c) Are the current measures more or less inco nsistent with the terms of the Agreement
since 1/1/95?
As there was no intensification of the subject TRIMS since 1 January 1995, there is therefore
no inconsistency with the terms of the TRIMS Agreement.  On the contrary, the reply in 2(b) abovedemonstrates adjustment measures that would facilitate the phase out of the TRIMS by
1 January 2000.
3.  Given that the GOP TRIMs notification im plies that participation in the program is
voluntary, we assume that it affords participants certain advantages.
(a) Please describe the benefits that accrue to participants in the various programs.  In
other words, what formulas are used to  decide on the scope of the benefits?
As stated above, the benefit that accrues to par ticipants in the program come essentially in the
form of tariff incentive.  Once registered with th e BOI in the program, participants are allowed to
import at the tariff levels described in No. 2(b) above.
(b) What is the total value of such benefits?
An estimate of the total value of such benefit is not available for now, and will be provided
later.
(c) Has any entity or legal person invested in the auto sector or importing products into the
Philippine auto market chosen not to  participate in the TRIMs programs?G/C/W/166
Page 4
No entity or legal person which has invested in the automotive sector has chosen not to
participate in the program.
4. The implementing agency, as listed in th e GOP’s TRIMs notification is the Board of
Investment/Department of Trade and Indust ry.  Is this statement still accurate?
(a) What responsibilities does this Board and Department have generally?
The Board of Investments (BOI), as an agen cy of the Department of Trade and Industry
(DTI), is the implementing agency of the MVDP. Th e BOI in general is the main agency charged with
investments promotions and with industry plan ning (sector development plans). The BOI also
determines the preferred areas of investments that are needed to spur economic growth anddevelopment.
(b) What are their responsibilities with respec t to the TRIMs measures and the auto-related
sector?
In respect of the MVDP, the BOI ensures that participants comply with the provisions
governing the implementation of M.O. 346.
(c) Are there any other GOP agencies or other entities or persons with responsibility for
implementing or otherwise supervising th e measures identified in question 1?
In matters concerning tariffs, the BOI coordinates with other agencies (e.g., Tariff
Commission, the National Economic Developmen t Authority, Department of Finance).
Basis for the Extension Request
5.  The GOP statement to the Council for Trade in Goods assert that the Asian financial
crisis is the major factor in your decision to request an extension and that the crisis has
significantly reduced Philippine domestic demand.   How was the five-year period determined?
What was the empirical evidence  examined to gauge that an additional five years would be
required to ensure that the GOP industry would recover?
It is the view of the Philippine government, as buttressed by estimates from the private sector,
that the elimination of subject TRIMS by 1 January 2000 would have been viable had the market not
contracted significantly from its base in 1996.  According to industry estimates, the 162,000 units of
cars and commercial vehicles sales attained in 1996 (resulting at that time in 90% capacity
utilization), which could have conservatively grown further by 15% annually, provided the necessarypre-requisite to the elimination of the subject TRIMS.  If the present market were to grow by 15%
annually, the benchmark of 162,000 units sales would only be attained in 10 years.  If the extension
were for five years, the market would need to grow by 30%.  Historically, from 1990 to 1996, the
market expanded by 20%.
6.  Regarding the employment figures, we note that the GOP statement to the General
Council lists the total number of workers laid off because of the crisis at 4,754 (in the parts
sector alone) and that there are estimates that by early next year an additional 10,000 would be
laid off.
(a) Does the 4,754 figure include only those work ers that remain unemployed or have some
of these regained positions in the industry or elsewhere in the economy?G/C/W/166
Page 5
It would be difficult to presume that the 4,524 employees laid off subsequently found
employment elsewhere.  It is worth noting that other industries also experienced significant layoffs/
retrenchments as a result of the crisis.  As of April 1999, there were 3.952 million Filipinos
nationwide who were unemployed (11.8% unemploymen t rate); in Metro Manila where most of the
facilities are located, the unemployment rate is 18.3%.
(b) Regarding the estimate of future employment losses in this particular sector, how was
this estimate of 10,000 determined?
The additional 10,000 employees who may likely be dislocated was determined on the basis
of the 25% of the remaining 40,000 employees who are forced to work on either staggered work
schedules or shortened week loads as a result of the lingering effects of the 1997-1998 crisis.  Given
that 1999 production and sales estimates remain even lower than those for 1998, and that capacityutilization remains at 40%, a rapid (and almost dramatic) pick up in the economy will be necessary to
maintain the remaining labor force of 40,000. (This matter is discussed further in no.13 (b) below.)
(c) Have similar estimates been undertaken to gauge whether this trend will continue?
No, there are no other estimates that will corroborate the calculations of the automotive
industry itself.
(d) Over the past 12 months, what are the tre nds in total employment in the Philippines
(i.e., has the employment rate decreased, increased, and if so, by what percentages)?
Over the past 12 months, the unemployment rate has remained stable (i.e., at around
12%-13%) but underemployment, at 23% at least, remains very high.
7.  Please describe the domestic parts and components industry in detail.  What efforts has
the industry taken to modernize or be more comp etitive internationally over the last five years?
The Philippine parts manufacturing sector consists of 256 companies producing various parts
and components made of metals, plastic, rubber and composite materials for both the Original
Equipment Manufacturing (OEM) and replacement markets.  By end of 1997, the parts industrycontributed cumulative investments of appr oximately P25.58 billion, employment of 44,715 and
exports of US$934 million.  Japan remained to be the top market for Philippine-made automotive
parts and components with 40% share of the total market, followed by the USA with 26% share and
Germany with 15% share.  Details on the exports of auto parts and components are provided in No. 18
below.
Over the last 5 years, the industry underwent modernization and expansion, participated in the
ASEAN Industrial Cooperation Scheme (AICO) proj ects to widen market share and attain economies
of scale to become more competitive.
8.  What measures had the relevant industry and the GOP undertaken prior to the Asian
financial crisis to begin the transition to a system that did not rely on TRIMs?
(a) What types of liberalization adjustments were or were not completed?
The reply to this question can already be found in No. 2 above
(b) At what point did the GOP make the decision to stop this process of becoming TRIMS
consistent (or does the process continue)?G/C/W/166
Page 6
The Philippine government decided to request for extension of the TRIMS only in
October 1999 after having determined that the industry will not recover from the effects of the crisis
and be able to adjust to a TRIM-less environment with a minimum of financial and social dislocation.
The economy in general was likewise slow in recove ry, with current recovery attributed mainly to
agricultural growth rather than industrial.
(c) What would the process be for changi ng the local content requirements – ( i.e.,
administrative changes, legislative changes)?
Please see 8(d) below.
(d) How quickly could such changes be conducted?
The local content requirements or any provision of the guidelines to implement the MVDP
may be amended or repealed by the President by virtue of a memorandum order, in consultations with
stakeholders.  This does not require legislative action by Congress.
9. Article 5.3 of the TRIMs Agreement requires the Council on Trade in Goods to conclude
that an applicant for an extension has demonstrated “particular difficulties”.
(a) How does the GOP consider that the difficulties it has described fit this requirement?
In the view of the Philippines, a massive contraction in the market base as a consequence of
the crisis resulting in present volumes that are almost a fourth of what they were in 1996,
accompanied by uncertain prospects for the next several years that will have untold financial and
social consequences, adequately and appropriately comply with the concept of  “particular
difficulties”.
(b) What makes these difficulties different from other Members’ situations?
It should be recalled that the Philippines was confronted with unique difficulties emanating
from a string of events and catastrophe that included political instability in the early-to-mid eighties
that also resulted in a foreign exchange crisis. In addition, there were 7 coup d’état  attempts in the late
eighties, a crippling energy crisis in the early nineties, and natural catastrophes such as destructive
earthquakes, typhoons, El Niño phenomenon and the er uption of a long-dormant volcano.  The Asian
financial crisis further exacerbated the situation.  All these served as a huge drain on the resources of
Philippine industries in general, the automotive sector in particular.
Nonetheless, it is also our view that “particular difficulties” is not meant to be a signal to
compare the situations across Members.  Instead, it is simply a mandate to consider the particulardifficulties per se  that confront a Member.
11(sic). The Council also has to take into account the individual development, financial and
trade needs of the Member in question.  Are ther e any particular factors that the GOP believes
should be taken into account with respect to th ese factors?  Please describe and discuss such
factors.
The reply to this question is partially addres sed in No. 9 above.  Additionally, however, it
must be stressed that the Philippines had sought to  comply with TRIMS in a timely manner.  When it
became evident that compliance would also mean massive financial and social dislocation, thePhilippines was constrained to invoke the flexibility available in Article 5.3.  It is our view that this
provision is precisely in the TRIMS Agreement as a priori  recognition that developing countries have
development, financial and trade needs and that these have to be fully taken into account.G/C/W/166
Page 7
12. What types of efforts were undertaken to prepare the relevant industry for the removal
of TRIMs on 1 January 2000?  Specifically:
(a) Did the GOP conduct discussions with the pr ivate sector and with labor organizations at
that time and even well before the completion of the Uruguay Round to inform them that these
policies would be eliminated in 2000?
The reply to the question on efforts undertaken to prepare the automotive industry for the
removal of TRIMS on 1 January 2000 can be found in No. 2(b) above.
It should also pointed out that at the time of the ratification deliberations on the Uruguay
Round results in the Philippine Senate in 1994, the automotive industry went on record to lend
support for the timely ratification of the WTO treaty.
(b) What kind of domestic consultation process concerning TRIMs has been conducted over
the past five years?
The automotive industry, as an important stakeholder, is also consulted on industrial policy
matters through established mechanisms, including in the formulation of M.O. No. 346 of 1996
which, among others, provided for the phase out of TRIMS by 1 January 1 2000.
(c) What administrative or legislative steps have which offices and officials explored with
which industry and labor groups?
See answer above.
(d) Are there legislative or administrative dra fts that they have submitted for consideration
over the past 5 years?
None.
(e) What plans exist for adjusting to the elimination of such TRIMs if there is no grant of
an extension available from the Council?
In the event of an unfavorable decision by the Council to grant the Philippines the extension it
requests, the Philippines will need to determine alternative and WTO-consistent policy measures to
ensure against the financial and social disloca tion a TRIM-less environment would imply for the
automotive sector.
13. Another key factor to focus on is employment :
(a) What is the basis for the assumption that jobs have been created by the TRIMs-related
polices since 1995?
The subject TRIMS have significantly contribute d to the growth of the automotive parts and
components sector. These measures have served a valuable purpose and they still do. They
encouraged CKD plants to export parts and to invite original equipment manufacturing (OEM)
suppliers to establish in the Philippines. They also encouraged locally owned companies to grow.
These translate to job creation which reached its peak in 1996 as follows:G/C/W/166
Page 8
No. of Employees
 
 Parts Makers 44,715
 Motorcycles    2,050
 4-Wheel Vehicles 11,403
 
(b) What is the basis for the assumption that jobs will be created or saved by the
continuation of the TRIMs-related policy after January 1, 2000?
Jobs will be saved by the continuation of the TRIMS after 1 January 2000 because the basis
for the concern over job losses - that is, the expected financial and social dislocation if the TRIMS
will not continue – will no longer hold.  In 1997 the Philippine parts manufacturing industry
employed 44,715 workers.  The Asian financial crisis, which started in July 1997, had already resultedin the layoff of 4,524 workers. Some of the remaining 40,000 workforce also suffer from shortened
and staggered working days. The vehicle assembly sector, which experienced a drastic 50% drop in
sales volume in 1998 as compared to the 1997 level, still continues to experience the adverse effects
of the crisis and is expected to face a further reduction of about 10% - 12% in sales volume in 1999.
The continuous slide of the vehicle volume sales coupled with a removal of TRIMS is estimated totranslate in a 25% retrenchment of the remaining 40,000 workforce in the parts sector, or 10,000
workers.  The massive displacement will largely come from existing parts makers already
experiencing staggered working hours.
 
 The calculated 10,000 worker displacement will likewise have broader negative social impact
to the Philippine economy as follows:
 
- 60,000 Filipinos (since the average size of a Filipino family is 6) falling below  the poverty
threshold;
 - 40,000 children will be added to the out-of-school youth due to lack of resources to finance
their studies.
 
 In short, poverty incidence will aggravate.  And this will only heighten the vicious cycle that
unfortunately occurs in many developing countries like the Philippines:  since the motor vehicle is nota basic necessity, at least in the Philippine setting, the persistent weakness in demand will translate
into lower output and job losses for this sector, which in turn will contribute to lower demand and,
again, further cutbacks in production.
 
(c) Which entity, agency or persons analyzed th e estimate of the job losses and gains that
have arisen and presumably will continue to arise from adherence to the TRIMS-related
polices?
 
 The Department of Labor and Employment is the government entity that undertakes the
management of job losses and gains of the labor sector in general.
 
(d) What was the total employment in the industry before the TRIMS policy and what is itafter and during the policy?
 
 It would not be possible to compare employment in the automotive industry before, during and after
TRIMS because the automotive industry of the Philippines was founded on the basis of TRIMS in the
early seventies following the industrial models of other countries in the region.
 
 (e) What is the basis for the belief or assump tion that the TRIMS policy actually created
the jobs that would not have been there but for the policy?G/C/W/166
Page 9
It is not so much a matter of a belief or assumption that the TRIMS policy actually created
jobs, but rather a situation where, in the face of a greatly contracted market, the task is to ensure
market preservation for the existing participants un til such time that recovery is well underway, thus
paving the way for a less painful and socially-manageable phase out of the TRIMS.
14. With respect to “development, financial,  and trade needs” referenced in Article 5.3:
(a) How is the maintenance of these auto TRIMS part of the development plans and needs
of the Philippines?
The Motor Vehicle Development Program is part of the over-all development program of the
Philippines.  As stated earlier, the maintenance of auto TRIMS at the present stage and for the period
requested for is essential to the very survival of the program.
(b) How long have such TRIMS been pa rt of the development plans and needs?
Such TRIMS have been part of such plans sin ce the early 70s.  (Please see related matter in
No. 13(d) above.)
(c) How can it be determined that these same development policies will not still be used and
needed after a 5 year period?  Why should one exp ect that this policy will be different 1, 2, 5, or
10  years from now?
Distinction must be made between the Motor Vehicle Development Program and the
maintenance of auto TRIMS itself.  The pursuit of the Program is a part of an over-all development
policy, and it is expected that the Program, as such, will be pursued with equal vigor in the future.  At
present, however, the Philippines is not in a posit ion to determine whether or not auto TRIMS would
still need to be applied in the future to ensure the survival of the Program.  In this regard, the
Philippines can only acknowledge that it would likewise need the consent of Members to enable it to
apply auto TRIMS beyond the extended period for which it may presently be authorized.
(d) Were the development policie s identified in the previous answers part of the
development needs and plans of the GOP prior to the Uruguay Round?
Yes.
(e) What are the financial needs of the GOP related to the maintenance of the TRIMS?
The relevant financial needs of the Philippines must be understood in the context of the
depressed state of the industry.  While there are other concerns, the most immediate is the effect of thefailure of the industry on the already diminished capability of the Government to provide adequate
social safety nets to the more than 4,000 workers already laid off, and the possibility of the laying off
of at least another 10,000 workers, including the families of those workers.  This is the context of (i)
an unemployment rate of 12 - 13%, in addition to the an underemployment rate of 23%, and (ii) a
population growth rate which is among the highest in the world.
(f) What analysis has been conducted to dete rmine whether the elimination of the TRIMs
would actually increase, decrease, or be ne utral concerning the financial needs of the
Philippines?
Please see reply under No. 15(b) below.G/C/W/166
Page 10
15. Has the GOP considered other non-TRIMS options that would protect your industry
but would allow for the elimination of your TRIMS regime as it currently exists?  For example:
(a) Why is it necessary to retain both the local content and foreign exchange balancing
portions of the program?
The industry has many components.  Those components have to survive.  The chances of
survival would be enhanced through the continued imposition of local content requirements.  At the
same time, as a result of the financial crisis, the domestic market had a much-reduced capability to
absorb the products of the industry, even operating at much lower capacities.  Encouragement of
exports through foreign exchange balancing requirements is therefore still essential. The reprieve
period is therefore necessary to enhance the chances of survival.
(b) Please describe the analysis/research that the GOP undertook to ensure that both
measures need to be retained.
A study was conducted by a team composed of representatives of government and the
industry concerned during the period March-October,  1999.  The results of that study is the basis of
the Philippine request, and most of what is presented here.
(c) Why is it necessary to retain measures in the auto, commercial vehicle and motorcycle
sectors?
Please see reply under subparagraph 15(a) above.
(d) Please describe the research that the GOP undertook to ensure that all measures need to
be retained.
Please see reply under subparagraph 15(b) above.
Investment Statistics
16. What is the Philippine government estimation of future foreign investment in its
domestic market by both parts producers and manufacturers both in production amounts and
dollar values?
At present, the Philippine government does not expect the infusion of additional foreign
investments by both parts producers and manufacturers.  As earlier stated, as it is, capacity is grossly
underutilized, and the best of estimates indicate that at most, utilization rate will not reach 90% by
2004.  However, there could be modest additional investments of up to $1.2 million up to 2004 fornecessary retooling in connection with the introduction of new models.
17. What is the history of the investment in flows due to the Philippine TRIMs program?
Specifically:
(a) Have investments increased since the TRIMs policy?
Yes.  For example, equity investments for parts and components alone increased from
Pesos (P
) 18.6 billion in 1995 to P  25.58 billion in 1997.
(b) From which WTO members have the investments originated?
Such investments have originated mainly from Germany, Japan, Korea, and the United States.G/C/W/166
Page 11
(c) Would investment decrease if the TRIMs policy were eliminated?
As earlier stated, no substantial additional investments are expected.  However, if auto
TRIMS were eliminated, there is the strong possibility of closures and the subsequent repatriation of
proceeds from the liquidation of present equity investments, which would be much less than the
original amounts invested.
(d) What studies have been done of this possibility?
Please refer to No. 15(d) above.
(e) What alternative measures have been consid ered other than TRIMS to seek to maintain
employment in the auto parts and automobile sector?
Other options have been considered, including the possibility of increasing tariffs.  However,
the interests of consumers would be adversely affected.  More importantly, this would be a more
substantial deviation from the over-all policy of further trade liberalization.
(f) How can it be said that the existing auto  parts manufacturers would not be competitive
if the local content requirements were eliminated?  What studies have been conducted of this?
Please refer to paragraph 15.
Other Statistics
18. The GOP has indicated that its automotive industry is focused on exports in many
regards. What is the destination for exports from the Philippines (i.e., what countries) for both
parts and vehicles and what are the dollar values and quantities (if applicable).
The Philippine Automotive industry is focused on exports in many regards. The following
information relates to this:G/C/W/166
Page 12
Motor Vehicle Parts & Components Exports (US Million $)
1998 Export Destination
Japan
35.93%USA
25.29%Netherlands
2.19%France
1.74%
Australia
2.42%Taiwan
2.72%
Thailand
4.24%
Germany
18.02%Canada
1.47%
Others
5.97%
19. What are the figures for:  production, sales, exports, and imports of passenger cars,
light trucks, SKDs, CKDs, and auto parts and components for 1996, 1997, 1998, and year to
date 1999?  In addition, what is the trend for your industry for the year 2000?374
228362444689755822934866
504
02004006008001000
1990 1991 1992 1993 1994 1995 1996 1997 1998 Jan-
Jun
1999G/C/W/166
Page 13
Production, Sales and Other Statistics
Auto Parts Cars Commercial
VehiclesMotorcycle
Capacity 6.13 M metric tons/year 221,450 units/year 45,960 units/year 350,000 units/year
Investments as of 1997 P25.6 B P39.4B (assets) P10.42 B (assets) P5.52 B (assets)
Employment as of 1997 44,715 11,403 2,050
Domestic Sales 1990 NA 34874 22584 67783
In Units 1991 NA 27796 20158 59245
1992 NA 35149 25268 77580
1993 NA 46565 30716 99031
1994 NA 58570 40386 108590
1995 NA 72418 49854 139141
1996 NA 88978 73118 189727
1997 NA 75760 68675 196185
 1998 NA 34688 45543 171297
 1999 NA 18246 (Jan-Aug) 29050(Jan-Aug) 106600(Jan-Aug)
Export 1990 374
 (In $, Million) 1991 228
1992 362
1993 444
1994 689
1995 755
1996 822 18 18  
1997 934 47 47  
 1998 866 376 496  
 1999 504  (Jan-Aug)    
Imports 1990 NA 147 105 32
(In $, Million) 1991 NA 131 126 28
1992 282.65 163 164 44
1993 237.48 271 226 75
1994 238.92 320 319 86
1995 438.79 462 370 105
1996 542.49 500 285 140
1997 478.31 253 239 159
1998 147.61 (Jan-June) 26 (Jan-June) 53 (Jan-June) 52 (Jan-June)
 1999 NA 38 (Jan-June) 86 (Jan-June) 50 (Jan-June)G/C/W/166
Page 14
20. We would also like to discuss some of the issues related to the Philippine auto sector in
general.  The first item is duty rates on vehicles and components.  Currently, it is our
understanding that passenger cars and light trucks are subject to tariffs of  40 percent and that
there is a scheduled further reduction to 30 percent as of 2000.
Does the GOP still plan to implement this reduction to a 30 percent duty?
See 20 (c) below.
(b) What are the plans in regards to further re ductions for tariffs for light trucks and cars
once TRIMs are removed?
See 20 (c) below.
(c) Are there any plans to change these tariff s at this time or in the near future?
Duty rates from 1999 – 2000 of vehicles and components are as follows:
CBU Passenger Cars 40%
CBU Commercial Vehicles 3%-40%
Refrigerated vans 3%
Dumpers 3%Transports 6 Tons Up 20%
Transports <6 Tons 40%
Transport 10> Passengers 30%
Buses 5 – 16 Tons 20%
Others 30%Drilling Derricks 3%
Fire trucks 40%
Concrete Mixers 3%
CKD Passenger Cars 10%
CKD Commercial Vehicles 3%
CKD Motorcycles 3%
Tariff rates for 2001 up to 2004 are still under study by the government.
21. Are there plans to reduce the rates on au tomotive parts and components (currently
between 10-35 percent), vehicle CKDs (currently at 10 percent for participants in the MotorVehicle Development Program), and component subassemblies and raw materials (currently at
5-40 percent)?  Will these tariffs rates change once the GOP TRIMs are completely removed?
It would not be possible at this point to publicly, and definitively, announce what tariff rates
will apply to the automotive industry, although the general thrust of tariff policy is to move to arate-range of 0 to 5% by 2004.
22. Is the GOP considering changing its excise tax regime from one based on engine size to
one based on value?  If so, how soon does it expect a value-based excise tax regime to be in
place?G/C/W/166
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The Department of Finance is reviewing the totality of the excise taxation system.  It should
be pointed out however that the present excise taxation system that is based on engine displacement is
driven by energy conservation objectives.  It is not clear, at this point, if a shift from this system to
one based on value will serve those objectives.
Other TRIMS
23. Additionally, we were pleased to learn that the GOP does not need to request an
extension for notified TRIMS in the Coconut-Based Chemicals Sector.
(a) Can you detail the GOP efforts in this regard?See 23 (b) below.(b) What differentiates this sector (which we presume would have also been affected by the
financial crisis) from the auto sector -- why the GOP was successful in it and not in the auto
sector?
The Philippine government has not requested for an extension for notified TRIMS in the
coconut-based chemical sector.  This should not however be construed necessarily as an indication
that a similar extension for such notified TRIMS would not be useful or beneficial to that sector,
which has likewise been adversely affected by the financial crisis.  It suffices to state that, for now,
the Philippine Government has no intention to request for a similar extension, and that the probabilitythat such a request would be made becomes even increasingly less as the expiration of the transition
period specified in Article 5:2 of the TRIMS Agreement approaches.  If no such extension is
requested for, then the Philippines would have to address the concerns of that sector through other
WTO-consistent means.  Perhaps, this could serve to highlight by contrast that in the best judgment of
the Philippine government, acting in full consultation with the domestic motor vehicle industry,extending auto TRIMS up to at least 31 December 2004 is a WTO-consistent, effective and
indispensable component of efforts to ensure the survival of that industry.
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