TARIFF BINDINGS OF THE PHILIPPINES ON INDUSTRIAL PRODUCTS UNDER
1. What does the term "tariff
binding" in international trade mean?
the World Trade Organization, when members open
their markets through the removal of barriers to
trade, they "bind" their commitments.
Thus, when they remove or reduce their tariffs
through negotiations, they commit to bind the
tariff reduction/ elimination at a fixed level
negotiated with their trading partners beyond
which tariffs may not be increased.
2. How does the binding
of tariffs under the WTO work?
WTO process requires that bound tariffs which are
so listed for each country in tariff schedules
which form an integral part of the WTO Agreements
may not be exceeded at any given time. Such bound
tariffs may be reduced but they cannot go beyond
the levels committed in the tariff schedule.
binding of tariffs in the WTO provides a stable
and predictable basis for trade, a fundamental
principle underlying the operation of the
institution. Although provision is made for the
renegotiation of bound tariffs, a return to higher
tariffs is discouraged by the requirement that any
increase be compensated for.
was the outcome of the tariff negotiations in the Uruguay
Uruguay Round achieved an across-the-board
reduction in tariffs of at least a third (33%)
of their 1986 levels. Japan cut its overall
tariffs by a weighted 61%, the European Union by
37% and the U.S. by 34%.
certain sectors such as construction and
agricultural equipment, medical equipment, steel,
beer, distilled spirits, paper, toys,
pharmaceuticals and furniture, industrialized
countries have committed to eliminate tariffs over
5 to 10 years.
semi-conductors, computer parts and chip making
equipment, tariff cuts will be anywhere from 50%
to 100% .
the Philippines cut its tariffs for concessions in the
very few exceptions, the Philippines did not
reduce tariffs. Instead, a commitment to bind
the tariff on some 2,800 industrial tariff lines
at ceiling rates was undertaken. This
represents around 50% of total tariff lines. (If
the commitment to bind agricultural tariff lines
were included, numbering some 744 lines, the scope
of bindings would reach 63%.)
is a binding commitment? tariff ceiling rate?
"binding commitment" is a promise not to
raise tariffs beyond a specified rate, and a
"tariff ceiling rate" is a level that is
higher than the applied (or existing) tariff. As a
general rule, the Philippines bound tariffs on
these tariff lines at a ceiling rate of 10
percentage points above the 1995 applied rate.
only exceptions were for 66 tariff lines (or 0.01%
of total tariff lines): 42 agricultural and 24
textiles and clothing products whose tariffs will
be reduced by the year 2004.
the Philippines’ commitment to reduce tariffs, will the
domestic market be flooded by cheap imports?
Uruguay Round required actual reductions in
tariffs of at least 33% on all tradeable products.
The Philippines, however, negotiated as a
developing country and emphasized that it could
neither reciprocate the tariff cuts of the
industrialized countries nor match the reduction
commitments of other developing but more advanced
tariff binding commitment will not mean that the
domestic market will be flooded by cheap imports.
Neither will the reduction commitments on the 66
tariff lines lead to a deluge of cheap imports
since the reduction rates only range from 10% to
30% of the 1995 applied rates, and will be
effected over 10 years. It may also be said that
the reductions on the 66 tariff lines (out of
5,691) is a small price to pay in exchange for the
tariff concessions the Philippines received on its
are domestic industries affected by the tariff bindings
committed in the Uruguay Round?
the applied rates on imports are already way below
the bound ceiling rates under the WTO because of
the tariff reductions being effected under the
Tariff Reform Program, such commitments have no
effect at all on the competitiveness of local
industries in the domestic market.
insofar as the tariff reductions of the Philippine
trading partners are concerned affecting products
of major export interest to us, the tariff
bindings directly translate into wider foreign
markets for local products and increased export
earnings for the country.
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