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Import tariffs causing a stir

World Cement,

In the current climate, many countries are producing more cement than they need. Years of capacity expansion have collided with a worldwide economic downturn and resultant sluggish demand, leaving the supply-demand balance distinctly…unbalanced. Cheap imports are causing problems for countries around the world, with two areas in particular making the news this week.

The East African Community’s displeasure over reduced import tariffs has been reported previously. This week, according to The EastAfrican, the local cement industry is concerned for its future survival if the 35% tariff is not restored.

At the onset of the EAC in 2004, cement was classified as a sensitive product due to the high costs involved in its production, which are very much wrapped up in the high price of energy and transportation in the region as compared with other areas of the world. The fact is that countries such as China and Pakistan are able to produce cement more cheaply thanks to government subsidies on energy costs. This cheap cement is then exported to countries like Uganda, Kenya and Tanzania, where it can be sold for as much as 50 – 60% below the local market price.

In January 2005, with the establishment of the East African Community Customs Union protocol, cement had a duty rate of 55%, made up of 25% common external tariff (CET) and 30% suspended duty. It was agreed that the CET would be reduced by 5% each year for four years, ending up with a target rate of 35% total in 2009. Last summer, however, the sensitive status of the cement industry was revoked, bringing the import tariff down from 40% to 25%.

The East African Cement Producers Association wants the tariff restored to 35%, as previously agreed, to ward off dumping of cheap cement. The association argues that domestic producers are more than able to meet demand, which is currently estimated at 6 million t (compared with capacity to produce 9.5 million t).

The cement import tariff in the Philippines was lifted in mid-2009 in a bid to increase competition in the market and stabilise prices. It was due to last for 6 months, ending in January 2010, and its extension beyond that date is currently being considered. President of the Cement Manufacturers Association of the Philippines (CEMAP), Ernesto Ordoñez, is arguing that its extension is unnecessary, claiming the domestic industry can cope with demand. 'We have more than enough supply and our price is good. If we have high prices then the imports would have already come in,' he told national daily, Business Mirror.

This week, the Trade and Industry Secretary, Peter Favila, has announced that he will not be endorsing the extension of the zero duty on imported cement. There will be a public hearing on 4 December to decide the fate of the cement import tariff.

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