Reason prevails
EARLY THIS year, the Department of Trade and Industry faced a dilemma: Should it side with the local newsprint industry or with textbook publishers and newspaper companies? This followed a recommendation last Feb. 23 from the Tariff Commission, an agency attached to the DTI, to impose a tariff (technically called a “definitive safeguard measure”) of P2,470 per metric ton on imported newsprint, which it claimed was causing serious injury to the domestic newsprint sector. The duty was to be imposed starting this year until 2018.
According to the Tariff Commission, the recommendation stemmed from its findings that the “domestic newsprint industry suffered serious injury from 2012 to September 2014, as shown in significant impairment in its overall profitability, market position, production, domestic sales, employment and labor productivity.”
However, this so-called domestic industry for newsprint, the raw material used in the manufacture of textbooks, notebooks, writing paper and newspapers, is dominated by only one company—Trust International Paper Corp. (Tipco)—a locally owned firm that has been losing money for several years now. This is the same company that filed the petition for higher duties on imported newsprint at the Tariff Commission in 2012.
Local consumers of newsprint were expectedly up in arms, pointing out that imported newsprint was both cheaper and of higher quality than what was locally made. Tariff protection to Tipco, they warned, would trigger sharp increases in the prices of essential school items such as books, notebooks and writing paper that millions of Filipino students use.
Tipco had claimed that the steady increase in the amount of paper imported into the country caused it to steadily lose its market share from 2007 to 2014. However, this argument was belied in documents gathered by the United Print Media Group (UPMG) from the DTI’s investigation, where several industry stakeholders pointed out that Tipco had been incurring significant business losses since 2002, long before it filed its application for protection under the Safeguard Measure Act or Republic Act No. 8800—a law that allows local fledgling players to seek protection against imports through higher tariffs if the government deems market imbalances are unfair to the domestic industry.
The UPMG also learned that years before it claimed that it was being adversely affected by imported newsprint, Tipco already had staggering financial losses: P607.5 million in 2002, P777.2 million in 2003, P532.8 million in 2004 and P532.8 million in 2005.
One other argument that should have prevented the Tariff Commission from favoring Tipco is that the Safeguard Measure Act was meant for so-called “infant” or “sunrise” industries, not the domestic paper manufacturing sector that has been in operation for many decades, with little to show by way of improved efficiency or higher competitiveness against foreign paper manufacturers.
It was also apparent that Tipco’s losses were incurred not because of the surge or increase in the importation of newsprint in the Philippines, but were more likely self-inflicted business decisions, including a move to invest millions of pesos in a failed real estate venture.
Last week, Trade Secretary Gregory Domingo finally decided to impose a definitive safeguard duty of P980/MT on imported newsprint. (Under the law, the DTI head can only amend a recommendation from the Tariff Commission.) This is much lower than the P2,470/MT recommended by the Tariff Commission. For the second and third years of implementation, the safeguard duty will be further liberalized and reduced to P800/MT and P640/MT, respectively. (The figures are also subject to a review to determine whether there is a need to further change the amount, according to the DTI.)
The DTI decided to impose a much lower safeguard duty as it deemed the Tariff Commission’s recommendation too high that it might have an adverse impact on consumers of newsprint, particularly textbook publishers. The DTI’s Domingo has taken into account the public interest. In fact, for textbooks that will be printed using newsprint and will be used by public schools, the DTI is exempting those importations from the safeguard measure.
The DTI decision seemed to have boiled down to what Sammy Rosario, president of the Association of Paper Traders of the Philippines Inc., asked earlier: “Why should the government penalize millions of schoolchildren just to benefit one local manufacturer?” Reason, in the end, prevailed.
