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Philippines Safeguard Measures Act and Its Impact: A Case Study of the Philippine Ceramic Tile Industry

Philippines Safeguard Measures Act and Its Impact: A Case Study of the Philippine Ceramic Tile Industry

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ACKNOWLEDGEMENT I would like to thank first of all the Almighty God for helping me complete this work in one piece. My deepest appreciation goes to my advisor, Professor Kyung Ho Lee, who had helped me in fulfilling this work. Also, I am thanking my two co-advisors, Professor Hee Gab Choi and Professor Kyu Sang Lee, who had contributed for the improvement my work. To all my advisors, I am truly grateful. Special thanks to my family who had shared my sacrifices and their continued love and support. Additional thanks to my son, Glenn Ryan, for being my life and inspiration. Dear son, this is for you. I want to extend my sincerest thanks to the Tariff Commission (TC) for giving me this opportunity. I want also to extend my deepest gratitude to KOICA for the financial support and to the professors and staff of GSIS of Ajou University for the knowledge and support. To TC, KOICA and Ajou, thank you for being the instruments in my search for personal and career development. To fourth batch KOICA scholars and friends here in Korea, thanks for being my companions at all times. Without you guys, life here would be very difficult. Many thanks to all my friends in my beloved country, the Philippines, for all the encouragements and faith in me. ABSTRACT Safeguard mechanism under Article XIX of GATT 1994 and WTO Agreement on Safeguard (SGA) aims to encourage structural adjustment on the part of industries adversely affected by increased imports, thereby enhancing competition in international markets. Safeguard Measure Act or Republic Act 8800 (RA8800) was enacted in 2000 in accordance with SGA. Being relatively new, RA 8800 consistency to SGA is put into question. The effectiveness of its application and its impact was also of general concern. Evaluation of RA 8800 and its comparison with its WTO counterpart was reported here. The case of ceramic tile industry was used to assess the impact of safeguard measure. The result of study shows that RA 8800 has provided more clarity, guidance to investigating authorities and aim to improve the effectiveness of agencies involve. Considering the negative impact of the measure to competition, it has been effective to minimize imports from causing serious injury to the industry under study. The measure also has been aiding the industry in putting in place the adjustment plan to be competitive with imports. However, competitiveness of the industry can not be ascertained after the imposition lapsed. To date, it may be said that the Philippine used this instrument reasonably. This study aims to assist and provide guidance to policy makers and investigating authorities in their future investigation and implementation.

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TABLE OF CONTENTS

Acknowledgement i
Abstract ii
Table of Contents iii
List of Tables v
List of Figures v
Abbreviations vi

CHAPTER 1: INTRODUCTION 1
1.1 Methodology 3
1.2 Limitation of the Study 3
1.3 Overview of Chapters 4

CHAPTER 2: SAFEGUARD MECHANISM UNDER GATT/WTO SYSTEM 5
2.1 Historical Overview of Article XIX of GATT 1947 5
2.2 Agreement on Safeguard (SGA) 8
2.3 Scope of Safeguard Regime 11

CHAPTER 3: THE PHILIPPINE SAFEGUARD MEASURE 13
3.1 The Birth of the RA 8800 13
3.2 Substantive and Procedural Requirements of RA 8800 17
3.2.1 Determination of Like Product 18
3.2.2 Determination of Increase Imports 20
3.2.3 Determination of Serious Injury or Threat of Serious
Injury 23
3.2.4 Determination of Causal Linkage 26
3.3 Safeguard Actions 27

CHAPTER 4: CASE STUDY: SAFEGUARD ACTION AGAINST
IMPORTATION OF CERAMIC FLOOR AND WALL TILES 32
4.1 The Application of Safeguard Measure 32
4.2 Impact of Safeguard Action 34
4.2.1 On Volume of Imports 35
4.2.2 On Domestic Industry 37

CHAPTER 5: ANALYSIS 43
5.1 Evaluation of Safeguard Mechanisms in GATT/WTO 43
5.2 Evaluation of RA 8800 44
5.3 Evaluation of Impact of Safeguard Measures 48

CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS 56
6.1 Conclusions 56
6.2 Limitations and Further Recommendation 58
6.3 Policy Recommendation 58

REFERENCES 60

Annex 1 Main Stages of Dispute Settlement Process 63
Annex 2 Safeguard Investigation Process 64
Annex 3 Applicant Companies and Other Domestic Producers 64

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LIST OF TABLES

Table 1 Safeguard Cases (2001-2008) 28
Table 2 Definitive Duties of Safeguard Cases 29
Table 4 Total Volume of Ceramic Tile Imports (‘000 SQM)(1997-2006) 35
Table 5 Country Suppliers: Volume and Share (2002-2006) 36
Table 6 Country Suppliers: Growth Rates (2002-2006) 37
Table 7 Apparent Domestic Consumption of Ceramic Tiles And Market
Shares (1996-2006) 39
Table 8 Production, Sales and Ending Inventory (1996-2006) 40
Table 9 Annual Rated Capacity, Actual Production and Capacity Utilization
of Applicant Companies (1996-2006) 41
Table 10 Exchange Rate 54

LIST OF FIGURES
Page
Figure 1 Ceramic Tile Imports (‘000 SQM) 35
Figure 2 Apparent Domestic Consumption and Market Share (1996-2006) 38
Figure 3 Philippine GDP Per Capita and Growth Rates (1996-2007) 39
Figure 4 Production, Sales and Inventory (1996-2006) 40
Figure 5 Combined Income Statement of Applicant Companies (1996-2006) 42
Figure 6 Domestic Product Prices and Cost of Production and Import Prices
(in Peso) (2001-2006) 54
Figure 7 Domestic Product Prices and Cost of Production and Import Prices
(in US Dollar) (2001-2006) 55
Figure 8 Flow Chart of Dispute Settlement Process 60
Figure 9 Flow Chart of Safeguard Investigation Process 67

ABBREVIATIONS AND ACRONYMS

AA Agreement on Agriculture
AB Appellate Body
ACWL Advisory Center on WTO Law
AGP Asahi Glass Philippines
BIS Bureau of Import Services of the Philippines
BOC Bureau of Customs of the Philippines
BPS Bureau of Product Standards of the Philippines
BSP Bangko Sentral ng Pilipinas
CCCN Customs Cooperation Council Nomenclature
CIF Cost, Insurance and Freight
CITAC Consuming Industries Trade Actions Coalition
CMO Customs Memorandum Order
COP cost of production
DA Department of Agriculture of the Philippines
DDA Doha Development Agenda
DOJ Department of Justice of the Philippines
DSB Dispute Settlement Body
DSU Agreement on Understanding of Dispute Settlement
DTI Department of Trade and Industry of the Philippines
EC European Community
EU European Union
fig. figure
FOB Free-on-Board
GATS General Agreement in Trade and Services
GATT General Agreement on Tariff and Trade
HS Harmonized System
IRRs Implementing Rules and Regulations
kg kilogram
Lepanto Lepanto Ceramics, Incorporated
Mariwasa Mariwasa Manufacturing, Incorporated
MFN Most-Favored-Nation
MT Metric Ton
Order DTI Department Order
para paragraph
Peso or P Philippine Peso
PHILCEMCOR Philippine Cement Manufacturers Association
QRs Quantitative Import Restrictions
RA Republic Act
RA 8800 Philippine Safeguard Measure Act
SC Supreme Court of the Philippines
SG safeguard
SGA Agreement on Safeguard
SQM or sq.m. square meter
SSG Special Safeguard Measures
TC Tariff Commission of the Philippines
UNCTAD United Nations Conference on Trade and Development
US United States of America
USD or US$ US Dollar
VAT Value-Added Tax
VERs Voluntary Export Restraints
WTO World Trade Organization

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