The Tariff Commission said that the imposition of a 10-year safeguard duty has saved the domestic steel angle bar manufacturing industry, which generates P6 billion in annual revenues, and as such the 21 steel manufacturers must build its resilience and not waste the gains from the tariff protection.
This was the conclusion of the Tariff Commission in its evaluation report on the effectiveness of actions taken by the Philippine steel angle bars industry following the imposition of safeguard measure for 10 long years to keep imports at bay.
The Commission said that had it not for the safeguard measure, the country would completely rely on imported steel angle bars and allowed the domestic industry to completely disappear, that could mean a loss for the economy of a local industry that generated average annual sales of around P5.8 billion from 2014 to 2019.
It also saved hundreds of workers that would have been unemployed and the billions in assets and capital that would have been left unproductive if there were no more local industry.
“Simply, the value gained by society in exchange for the consumer welfare losses due to the safeguard duty is the preservation of a billion-peso local industry that has also grown more efficient and competitive, allowing consumers to purchase locally produced steel angle bars products at prices relatively lower than before the imposition of the safeguard measure,” the TC report stated.
In its Final Monitoring Report, the Commission found that majority of the 19 measures committed by the 21 domestic steel angle bars manufacturers in their adjustment plans for 2015 to 2018 had been completed and/or are being implemented.
With the restored competitiveness, the TC stressed “It is imperative that the domestic industry build its resilience and manage well its response to the 2020 pandemic to sustain its competitiveness and growth and not waste the gains from the imposition of the safeguard measure.”
Similarly, TC said that government must do its part in creating conditions that will lead to a more stable and predictable business environment for a balanced a collaborative approach to policy making especially after the pandemic and the changes brought about by the adoption of digitalization.
During the ten-year safeguard duty, which was terminated in 2019, the TC said that actions that the steel angle bars industry undertook, to improve production efficiencies and expand output, were “effective and the domestic industry has attained a level of efficiency that will allow it to compete successfully against imports after the termination of the safeguard measure.
The positive outcome of its adjustment plans is evident in terms of the domestic industry’s increased production and sales, improved utilization rates, enhanced price competitiveness, and dominant market position.
For instance, imports continued to decline in 2019 (to 157 MT from 732 MT in 2018) shows that the domestic industry has prepared for and is currently better able to face international competition following the lifting of the temporary safeguard measure. Following termination of the safeguard measure in March 2019, imports fell further to 11 MT for the period covering January to November 2020, the lowest since 2003.
The TC also found out that the domestic industry was able to ramp up its production to meet the higher demand for steel angle bars. In particular, average annual production more than doubled from 64,639 MT in 2003-2008 to 158,815 MT in 2009-2019.
From 2017-2019, the share of domestic production in the market has reached around 99%, which was the level before the surge in steel angle bar imports drove domestic share to its lowest level, 42.5 percent in 2007.
The increasing volumes of production of steel angle bars resulted in corresponding increases in utilization rates, from 61.54 percent in 2017 to 63.02 percent in 2019.
From 2003 to 2008, the highest annual sales volume attained was 91,230 MT. In the succeeding eleven 11 years, however, sales breached 100,000 MT, peaking at 222,748 MT in 2016.
“It may be concluded that the uptrend in utilization rates, even after termination of the safeguard measure in 2019, indicates the effectiveness of the measures adopted by the industry to improve production efficiencies and expand output and thereby strengthen its ability to compete with imports,” the TC said.
As the industry has finally adjusted after 10 years of tariff protection, TC warned that any intervention that increases the prices of imported goods, such as the imposition of an additional safeguard duty, is expected to initially affect consumer welfare.
“This is because, through the imposition of additional and higher duties, consumers are precluded from purchasing the same product at cheaper prices from abroad. Thus, trade remedy measures bring about improvements to welfare for local producers only as it shields them from increased levels of lower-priced products coming from abroad,” the TC said.
“As the ten-year maximum implementation of the safeguard duty on steel angle bars came to an end, consumers of the subject article should begin to see improvements in their welfare.”
First, with the end of the imposition of safeguard duty on steel angle bars, importing will once again become less costly as importations will only be subject to regular import duties. Second, the domestic industry is also welcoming foreign competition from a more confident position.