PCC defends DTI’s safeguard measures, but …

Published March 2, 2021, 6:00 AM

by Bernie Cahiles-Magkilat

The Philippine Competition Commission (PCC) has defended the Department of Trade and Industry’s imposition of safeguard measures and non-tariff barriers (NTBs) on certain imports to protect domestic industries, but the country’s anti-trust watchdog also equally stressed that such legitimate measures can be challenged if the injury caused is born out by inherent inefficiencies of processes that incumbents have gotten used to. 

PCC Commissioners led by Chairman Arsenio Balisacan, and Commissioners Johannes Bernabe and Emerson B. Aquende made this point during a press conference at the 4th Manila Forum on Competition in Developing Countries amid increasing number of safeguards and non-tariff measures being imposed by Asian countries, especially during the pandemic year. 

“We have to make a distinction between what is allowed under the law under given specific conditions and those which are lobbied for by business participants sometimes simply to protect their market share and their revenue stream,” said Bernabe.

Bernabe explained that if the conditions are such that there is really an increase or surge in imports that it is harming a domestic industry and that can establish a causality between the increase and injury suffered by domestic industry participants then the imposition of safeguard measure is justified. 

He said this as he called for caution in assessing whether or not the injury is really suffered because of the surge in imports and there is really causality.  “Sometimes the injury suffered is really borne out by inefficiencies inherent in the processes that domestic players have gotten used,” he observed. In that sense, he said, “Those safeguard measures can be rightfully challenged as impeding competition and is in fact not based on the intent of the law as well as international treaties. In this kind of instance, I think there is valid reason to challenge them, those safeguard measures may not be rightful.”  

“Technical barriers to trade, sanitary and phyto-sanitary measures are all in place for legitimate policy objectives, but the question is when those measures are used not to attain policy objectives but simply to protect existing incumbents then that is something contrary to competition principles and PCC, on all occasions advocated for which preserve competition in the market than simply protecting domestic incumbents,” he said.

Commissioner Aquende also stressed that safeguard and non-tariff measures are meant to protect legitimate economic interests of a country and in accordance with regulations, which may be pursued. 

But, he also emphasized, that if it is only for purposes of protecting incumbents then it does not match or align with competition law because the essence of the competition law does not distinguish domestic or foreign market participants. “That is going to the wrong direction to think that we should favor Philippine firms for the sake of favoring them. That does not bode well for competition law and it has been proven by experience that it does not result in consumer welfare, but benefit only a few, not spread, or not benefit the greater majority of Filipinos,” he pointed out.

Apart from non-tariff measures, Bernabe also noted of the increasing level of subsidization that has started to occur in the last 12 months in the region. While these are allowed in this pandemic period in the ASEAN framework on trade as well as the Regional Comprehensive Economic Partnership to allow subsidies in favor of local supplies to help weather the recession and economic difficulties, Bernabe urged the need to look into the timeframe of subsidies.

He said that if these subsidies that are meant to champion domestic industries would still continue in three to five years that could be detrimental to foreign competition. He explained that imposition of subsidies on a longer basis could mean “uneven playing field not only on the entry of subsidized competition harming domestic players but a situation where we cannot penetrate the markets of other trading countries because the market participants in those host countries are so entrenched that it becomes so difficult for us to compete on an equal playing field with those subsidized entities.”

Thus, he said, the PCC has advocated that whatever economic stimulus packages are passed it should ensure that subsidies that are being put forward are criteria-based and time-bound and to the extent possible take into account competition disciplines.

At the forum, Asian Development Bank Institute (ADB) Chief Executive Director Tetsushi presented the increasing number of safeguard measures, indicating a general tendency in Southeast Asia towards protectionism. As of 2020, non-tariff measures imposed on Asia have reached 12,000 from only 10,000 in 2015 and 6,000 in 2010. 

Although in some case these safeguards are accompanied by trade facilitation measures, he said that in general the number of safeguards exceeds the trade facilitation measures. There is general tendency is southeast Asia towards protectionism, he said.

Meantime, PCC Chairman Balisacan noted that compared to its neighbors, the Philippines over the last three decades has been  faster in liberalizing and integrating with the region. The problem in the Philippines, he said, is not so much in tradable sectors of the economy but in the services sector or utilities where these are not governed so much by world prices but by domestic supply and demand. He cited competition issues in the telco, logistics, water that demand a lot of attention from Philippine leaders