FairTrade urges DTI to reverse ruling on STPP safeguard*

It has come to our attention that the application of the definitive safeguard on imported STPP-TG (Sodium Tri-polyphosphates) which was filed by CAWC, Inc., a local manufacturer of the same product, has been dismissed by your office.We are saddened by this turn of events. The Fair Trade Alliance (FairTrade) has always fought, alongside with our domestic producers, for the flexibilities they deserve under our laws and World Trade Organization (WTO) rules. Public and national interests dictate that we give industry the safety nets promised by the government in 1994-95, when we joined the WTO, and already provided by our existing safeguard laws, to enable them to compete and remain operationally viable against the unfair trade practices of other nations and sectors such as smuggling, dumping and subsidies. Of course, within the time that safeguards are in effect, we expect industries to use the safeguard period to adopt the necessary adjustment measures to become competitive in a regime of low tariffs.

In this case, FairTrade supported the 2006 safeguard petition of CAWC, INC., to give them breathing space amid the suffocating surge of STPP imports, coming mainly from China. In fact, the Tariff Commission, in its report, said that STPP imports, in 2005, captured 65% of the market and took over the market leadership from the domestic industry leaving the latter with a record low of 35% share of the market. The preliminary investigation in 2006, where all the stakeholders (CAWC, INC., detergents sector, consumer, labor, industry associations and representatives of embassies of countries exporting STPP to the Philippines) were present, the DTI said there was sufficient basis to provide the company the safeguard measure. We supported DTI’s action and hailed DTI’s decisiveness to grant CAWC, INC. provisional safeguards for 200 days, as a temporary counter against illegal and unfair trade practices.

As required under the Safeguards Law (RA 8800), the Tariff Commission conducted hearings and investigation on this case. Again, all stakeholders were given time to present their respective sides. Ultimately, the Tariff Commission made a positive final determination favoring CAWC, INC. a definitive general safeguard for three years.

We were therefore shocked that DTI has now completely reversed its original position thru the new DTI order dismissing the definitive safeguards on STPP imports.

Mr. Secretary, the only way CAWC, INC. – and other companies in the Philippines – can survive is through the “equalization” of the business playing field for the locals and the application of these safeguard measures against unwarranted and unfair flooding of our domestic market with goods being dumped by other countries. As you know, many of our domestic industries, including agriculture, are operating with huge handicaps – lower tariffs due to that one-sided unilateral tariff reduction program implemented in the l980s-1990s, and a relatively higher cost of doing business.

These handicaps are further aggravated by the inability of our own government to stop smuggling and impose safeguards when called for, like what the United States, the European Union, Japan and other developed countries, including India, China and Thailand, when faced with similar problems. The said countries do not hesitate to impose safeguard tariffs or even impose an outright ban on importation in the name of protecting their own industries and jobs against unfair trade and unfair competition. This is exactly what President George Bush did a few years ago when he imposed immediately and almost automatically a 30 per cent safeguard tariff against Russian and Korean steel, when he slapped Chinese and Vietnamese shrimps with 100-105 per cent safeguard tariffs the other year, and more recently, when he imposed a 55 per cent tariff on Brazilian sugar ethanol.

Papayagan ba natin na maging dumping ground na lamang ang Pilipinas ng produkto ng ibang bayan na ayaw sumunod sa fair trade rules at fair competition?

We therefore urge DTI to remain consistent with its earlier position and stand by the recommendation of the Tariff Commission.

—————————

* Submitted to the Department of Trade and Industry, Office of the President and Tariff Commission dated March 15, 2007.

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  1. Greetings to my friends in the FTA.

    This is to present an alternative view on the matter (see http://www.paseoblur.blogspot.com).

    The denial of safeguard measures on STPP is a boon to the local soap and detergent manufacturers, as well as the thousands of Filipinos employed by those companies. It must be emphasized that the domestic industry producing STPP has been receiving government protection for nearly three decades, through high tariff rates (until the tariff reform program), antidumping duties (1997 to present) and provisional safeguard measures (2006-2007). Despite these, the local industry still requires safeguard measures.

    Based on calculations made, the total amount of protection accorded to this company has already reached some Php 674 million as of 2005 (based on the total revenues collected on STPP imports and premiums paid by local soap and detergent manufacturers to CAWC since 1997). This, by any measure, is a substantial amount of money.

    The dismissal of the safeguards petition will allow local soap manufacturers access to a wider variety of raw material suppliers at the lowest costs. This will promote normal and natural commercial conditions which shall allow the continued viability and market competitiveness of the soap and detergent industry. Had the safeguard measures been imposed, the prices of locally produced detergents would have most likely soared, making it more logical to simply import the said detergents than produce them locally. Had that happened, the same would constitute a serious blow to the local soap and detergent industry (which contributes largely to the national coffers by way of its taxes paid) and threaten the livelihood of some 20,000 Filipino workers (as compared to the local STPP company’s employment of a mere 60 workers). This is on top of the fact that by having cheaper STPP, we get cheaper soaps. Soaps being a basic commodity, its lowered prices could only be good (i.e., for health and sanitation) for millions of Filipinos, most of whom are within poverty levels.

    The threat of predatory pricing mentioned by FPI in its Statement perhaps should be examined further. It must be borne in mind that having a broader range of offshore suppliers of raw materials is definitely a more economically sound business strategy that would guarantee the lowest prices. Compare this to a situation whereby there is only one, sole, exclusive supplier of STPP.

    Clearly, the DTI’s decision to reject the safeguard measures on imported STPP is laudable for the simple reason that it is right.

    Finally, I am all for helping Filipino industries get a better shake in the multilateral trading system. However, resorting to safeguard measures, particularly in this case, may not be the best way to go about it.

    Thank you all.

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  2. 2 Group protests DTI stand on safeguard measure « Fair Trade Alliance (FairTrade)

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  • Founded in 2001, the Fair Trade Alliance (FairTrade) of the Philippines is a broad multisectoral coalition of formal and informal labor, industry, agriculture, NGOs and youth pushing for trade and economic reforms.
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