Domestic downstream plastic products manufacturers have warned the government of dire repercussions should the petition for safeguard duty on imported raw materials High-Density Polyethylene (HDPE) and Low Linear Density Polyethylene (LLDPE) is approved, stating this would affect 417 downstream plastic enterprises employing more than 23,000 workers and higher prices on consumer goods.
The Philippine Plastics Industry Association (PPIA), which is composed of affected industries, retailer groups, and the MSMEs sector, expressed strong opposition to safeguard measure following the inconclusive findings in the preliminary determination by the Department of Trade and Industry (DTI).
In two separate decisions on Sept. 17, 2021, the DTI preliminary determination finds that a causal link exists between increased imports of both products (HDPE and LLDPE) under consideration and serious injury to the domestic industry. However, the findings also showed that petitioners led by the country’s lone integrated petrochem company JG Summit Petrochemical Corp. failed to establish “critical circumstances” to warrant the imposition of provisional safeguard measure. The period of investigation covers the period 2015 to 2019.
As such, the DTI refused to approve provisional safeguard duty on the HDPE and LLDPE, both raw materials for the downstream manufacturers of plastic products. Instead, the DTI referred the matter to the Tariff Commission for a thorough public hearing and study.
“No safeguard duty. We would like first to have full blown hearing in TC among stakeholders in the case. We have to be very careful because of the impact to downstream industries,” said DTI Secretary Ramon M. Lopez said.
PPIA President Danny Ngo warned that should a safeguard duty is implemented on these imported raw materials it will result in a serious domestic injury in triggering additional price increases on local commodities with its spawning impacts over a wide spectrum of basic consumers’ goods from food, beverage, cosmetics, personal and home care, medicines, and a lot more.
According to Ngo, about 417 plastic downstream enterprises catering to more than 23,000 workers will be severely affected should the government decide in favor of the sole giant company JG Summit Petrochemical Corp.
Ngo further said that a favorable decision for the petitioner will affect 23,000 consumer products manufacturers, with an aggregate 343,262 workers, contributing about P1.79 trillion of national output, and the 110 million Filipino consumers will be deleteriously affected by this additional cost.
He said that such move would be very untimely amidst the pandemic devastation where local industries and businesses at present are still recovering from losses, and while the majority of Filipinos are battering from the wounds and scars brought about the series of lockdowns following health protocols and mobility restrictions forced many livelihood activities to stop.
“Per WTO, safeguard measure is a remedy by imposing an additional tariff duty on imported commodities if an import surge of such commodity caused serious injury to a competing domestic industry or enterprise,” Ngo pointed out.
The PPIA leader said the real issue is not from them but originated from the petitioner itself when JGSPC commercially operated its naphtha cracker plant in 2016 to also produce PP and other petrochemical additives, and when they started failing to deliver the HDPE and LLDPE raw material supplies orders of the downstream sector.
JGSPC contends for their reason that their cracker plant suffered a series of shutdowns due to its complex technical problems. This predicament has caused even some orders partially delivered only a year after.
Ngo said that the lapses have created a severe shortage of raw materials that significantly disrupted the entire supply chain in the downstream plastic sector— where to source such a huge deficit. This alarming situation inadvertently compelled the local plastic converters to source their raw material from stable and steady foreign suppliers so that their production plants will continue to operate, as many have already stopped or been partially operated given the severe raw material shortage, he added.
Technically, Ngo said what happened was not an import surge per se as intended by the WTO to protect players against unfair trade practices. Neither there was any bad intention or manipulation on the part of the downstream sector to create a supply abruption. Rather, he said, “It it was all due to the ill consequences arising from the petitioner’s internal problem itself, and the natural reaction of an industry user deprived of raw material supply.”
“We badly need to find a solution to survive our industry, which for years are stiffly competing against more than 70 percent import volume share of cheaper products from China. We need a stable supply of raw materials both quantity and quality to be competitive so that our remaining market share will not be engulfed. Otherwise, our existence will be doomed,” he added.
Following the free market principle, any enterprise is not precluded procuring 100% of its raw material requirement from a single source to ensure continuity of operation in the best possible situation.
Ngo said the imposition of an additional duty to HDPE and LLDPE even on provisional period would make our local industries very uncompetitive against the huge influx of cheaper foreign goods. Worst, it may consequently shut down operations because 95 percent of the companies affected are SMEs that have no capacity to absorb such unnecessary costs. Import surge on the flooding of cheaper packed-products will be triggered that would further aggravate the losses incurred by our domestic food, cosmetics, beverage, pharmaceutical industries, and much more in the local market.
As downstream players, Ngo said, “We are very much dependent on the support of the upstream sector. Worldwide, the upstream and midstream sectors maintain a healthy relationship in the integration by steadily providing the much-needed raw materials by their downstream sector. Countries like China, Japan, and most ASEAN countries particularly Thailand, Malaysia, and Indonesia observed this kind of healthy integration. In the Philippine Petrochemical Industry, it is paradoxically a reverse. The existing up to downstream integrated roadmap seems useless with the prevailing one-sided interest.”
He said they cannot be blamed for the current situation because the increased importation was a consequential action to address the domestic shortage problem they created.