DTI urged to nix paper tariff hike

(Last of two parts)

A group of paper importers and printers has asked the Department of Trade and Industry to set aside the recommendation of the Tariff Commission for higher duties on imported newsprint that will translate to increased prices of locally printed books and writing materials used by schoolchildren.

This comes after the commission sided last week with virtual paper monopoly Trust International Paper Corp. (Tipco), which blamed the surge in imported newsprint—used in manufacturing textbooks, notebooks, pad papers and newspapers, among others—for its financial woes that resulted in millions of pesos in losses in recent years.

In its letter to Trade Secretary Gregory Domingo, the Abellera & Calica Law Office pointed out that the DTI chief was required under the Safeguards Measures Act to decide on the Tariff Commission’s recommendation, but was not required to accept it as fait accompli.

Quoting the implementing rules and regulations of the law, lawyers Zardi Abellera, Dan Calica and Rose Andrea Milaor said “clearly, the honorable secretary is not bound by the positive determination of the honorable Tariff Commission and he may decide against its recommendations.

“This is so because, aside from evaluating the validity of the findings and recommendations of the honorable Tariff Commission, the honorable secretary is tasked to ‘establish that the imposition of the safeguard measure will be in the public interest,’” they added.

Industry stakeholders have earlier pointed out that raising import tariffs on newsprint would benefit only Tipco—which controls 87 percent of the domestic paper market—to the detriment of local consumers who would have to pay more for their paper products.

Earlier, as part of the Tariff Commission’s probe into whether it should impose higher duties on imported newsprint, it sought the comment of countries from which Philippine manufacturers buy this key raw material.

Opposition

In a letter to the regulatory body’s chair, Edgardo Abon, the European Union’s head of delegation to Manila Guy Ledoux assailed the move to raise tariffs on imported newsprint, pointing to several weaknesses in the reasoning presented by the petitioner, Tipco.

“The [European] Commission would like to underline that Tipco had been under a court-supervised rehabilitation plan since 2006 … which shows that [the] difficult economic situation of the domestic industry is not a recent phenomenon, but rather a chronic and structural problem which started well before imports began rising in the 2009-2013 period,” the EU official said.

Ledoux added that the domestic paper manufacturing industry, in which Tipco is the biggest player, reported negative financial results during the 2007-2011 period when import levels were insignificant compared to domestic sales.

“It is also clear from the [Tariff Commission’s] report that the domestic industry was suffering from rising costs of production which showed a systematic and significant upward trend since 2007,” he added, indicating that the inefficiency of the local industry—rather than predatory pricing policies of foreign manufacturers—were to blame for Tipco’s woes.

The Russian Federation, another source of newsprint by makers of low-cost paper products, chimed in, saying that Tipco’s arguments in asking for higher tariffs were substantially flawed.

This position was relayed to Abon by the Russian Embassy’s Manila trade counselor Andrey Sapozhnikov, who said that Tipco’s deteriorating finances could be attributed directly to the drop in demand for newsprint from local users.

Weak demand

The trend, he said, was due to the growing use of the Internet, which is leading to the decline in demand for newsprint as a medium of advertising; the drop in circulation rates of newspapers, and the growth of alternatives to advertising in newspapers.

“[Tipco] failed to submit convincing factors affecting its position, including financial standing, in the domestic market,” the Russian official said.

Finally, the Korean government also made itself heard, saying that safeguard measures—unlike antidumping measures —should be used with caution since it is not a tool to retaliate against other countries with unfair trade practices.

“As a supporter of free trade, the Korean government is concerned about the increase in protectionism in global trade after the global financial crisis of 2008,” said a letter to Abon sent by the economic section of the Korean Embassy in Manila.

But the most important arguments were raised by local players, who are also opposing Tipco’s petition.

Several associations of paper importers, traders and printers have warned that any move by the DTI to artificially shore up the local paper-manufacturing business through protectionist policies would eventually backfire on the country’s international competitiveness.

Association of Paper Traders of the Philippines Inc. president Sammy Rosario also pointed out earlier that imported newsprint used for anything from books to notebooks to newspaper production was superior in quality to those produced by Tipco.

Inferior quality

“Why must the government force the public to pay more for lousy paper?” he said.

Rosario pointed out, however, that the Philippines was a signatory to several international free trade agreements and has a policy of encouraging competition to help local industries improve their competitiveness against foreign rivals.

He added that Tipco’s position in requesting for state-sanctioned tariff protection was flawed because local paper importers were bringing in imported newsprint at international market prices.

Speaking to the Inquirer earlier, Rosario lamented that the local paper manufacturing industry failed to keep pace with international developments despite the country having had the first paper mills in Southeast Asia. He said he was in favor of helping local industries become more competitive internationally, but was opposed to artificial tariff barriers that would coddle inefficient firms.

“We should not protect a monopoly,” he said. “If we raise tariffs, millions will suffer, including poor students.”

Back at the Dapitan Market, school supplies seller Julie Levantino was asked about how her business and her buyers would react to an increase in the prices of pad paper and notebooks, especially with the opening of the school year coming in three months.

“Mas magrereklamo ang mga mamimili siyempre kasi kinakaya na nila itong presyong ganito ngayon eh (Buyers will complain more, of course, because they’ve already learned to cope with these prices today),” she said.

Asked what impact any price increase would have on her stall’s sales, she replied: “Ok lang siguro kami kasi kailangan talaga nilang bumili ng papel. Pero kawawa yung mga bata (We’ll be ok because they really need to buy our paper products. But the schoolchildren will suffer).”