The World Trade Organization’s (WTO) expansion of the Information Technology Agreement (ITA-II) will significantly increase the Philippines’s participation in the global value chain of IT products, and will further boost the country’s trade and exports of these high-value goods, according to the Tariff Commission (TC).
Further, the TC sees little or no opposition to the reduction of import duties under the WTO ITA-II, as the existing average tariff rate for most of the 201 products covered by the agreements is already low.
“We’re net exporter; we’re very competitive in the global market when it comes to technology
products. We’re a big chunk of the global value chain, so we’re positive in growing our participation in it and our exports will increase,” said TC Chairman Edgardo B. Abon in an interview on Thursday after a public hearing on the ITA.
“For most of the products covered, the average is 1 percent to 3 percent [tariff rate]. There are those with 15 percent, but these are few,” Abon added.
According to Board of Investments (BOI) Governor Lucita P. Reyes, the Philippines’s current participation in the global value chain is already substantial at 56-percent “engagement rate” due to the ITA I. This will improve with the ITA II.
“The semiconductor and electronics industry in the past, and until now, is in assembly and most of the parts used in assembling a particular product are being imported. That is where the Philippines will benefit from participating in the ITA—we basically produce the intermediate products that can be used in making a finished product,” Reyes said.
The original ITA I agreement, which the Philippines joined in 1997, helped the country become the 13th-largest exporter of IT products among WTO member-economies, and the 17th-largest importer-economy, based on WTO’s 2012 data.
The Philippines recorded a net export of around $3.5 billion for IT products, according to WTO data in 2012. In 2013 total trade of the Philippines in the covered product lines amounted to almost $26 billion.
According to a study commissioned by the BOI, of the 201 lines identified by the WTO, 167 are not locally produced, while 18 are produced locally but not in sufficient quantity. This means only a few products will be competing with locally manufactured items.
Reyes, who is part of the Philippine delegation to the WTO-ITA II talks, said a staging period is next on the
WTO’s agenda.
The period will be used to determine the specific schedule of the reduction of tariffs, which should be done over a three-year period starting July 2016.
“By July 2019, the tariffs should be down to zero for all the products covered, but we will still determine the base year. The base year is important because that’s where we determine the starting rate of the products which will be reduced,” Reyes said.
Abon added that the tariff reduction should be done on a gradual rate over the three-year period. WTO economies that are party to the ITA-II are required to submit the draft schedule of concession and commitments by October 30.
The 201 products identified by the WTO were determined using the Harmonized System 2007 tariff nomenclature, up to the six-digit classification.
The Philippines is using a more specific nomenclature for commodity classification–the Asean Harmonized Tariff Nomenclature (AHTN) that uses eight digits.
Under the AHTN, the 201 products lines covered totaled 713 products.
According to Abon, the IT sector takes up 7 percent of global trade and, as a lone sector, contributes more than the automotive, iron and steel and garment exports combined. Global trade in these IT products has been pegged at $1.3 trillion.