IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/1035.html
   My bibliography  Save this paper

How import protection affects the Philippines'motor vehicle industry

Author

Listed:
  • Takacs, Wendy E.

Abstract

The motor vehicle industry in the Philippines is regulated and protected by the provisions of development programs for cars, commercial vehicles, and motorcycles. Each program virtually prohibits the import of completely built-up vehicles, specifies minimum local content requirements for vehicles assembled in the country from imported completely knocked-down kits, and requires that firms assembling kits export to earn foreign exchange to cover the cost of the kits. Similar protective regimes have existed in a number of countries, especially in Latin America. The author develops a model to illustrate the economic impact and welfare cost of import prohibitions, local content requirements, and export requirements. She applies that model to Philippine data. Her results indicate that the protective regime in the Philippines imposes substantial costs on consumers and encourages the allocation of resources to relatively high-cost activities. Eliminating all of the restrictions overnight may lead to adjustment problems, but gradual liberalization could limit these problems. The proportion of domestic content required, the percentage of compensatory exports required for kits, and the tariff rates on kits could be lowered in stages, according to a preannounced schedule, to allow gradual adjustment. The prohibition on imports of assembled vehicles could be replaced by a tariff and phased out gradually. To avoid proportionately more protection of the assembly industry, the tariff on finished autos could be phased out more quickly than the other tariffs, to avoid sending false signals to the domestic industry about the direction of adjustment. To avoid increasing the effective rate of protection on assembly operations during liberalization, elimination of the domestic content and compensatory export requirements should be accompanied by decreases in the tariff rates on assembled vehicles.

Suggested Citation

  • Takacs, Wendy E., 1992. "How import protection affects the Philippines'motor vehicle industry," Policy Research Working Paper Series 1035, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1035
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1992/11/01/000009265_3961003203353/Rendered/PDF/multi0page.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Michael L. Mussa, 1984. "The Economics of Content Protection," NBER Working Papers 1457, National Bureau of Economic Research, Inc.
    2. Gene M. Grossman, 1981. "The Theory of Domestic Content Protection and Content Preference," The Quarterly Journal of Economics, Oxford University Press, vol. 96(4), pages 583-603.
    3. Munk, Bernard, 1969. "The Welfare Costs of Content Protection: The Automotive Industry in Latin America," Journal of Political Economy, University of Chicago Press, vol. 77(1), pages 85-98, Jan./Feb..
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1035. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.