Abstract
The motor vehicle industry in the Philippines is protected by a virtual embargo on the importation of new vehicles but operates under the burden of domestic content and compensatory export requirements that protect Philippine producers of automotive components. This article develops a model to assess the net impact of this complicated protective regime. Estimates indicate substantial benefits to the assembly and components industries and losses to vehicle purchasers. Reform of the system to eliminate the embargo as well as the domestic content and compensatory export restraints at current tariff rates would benefit vehicle purchasers but would increase the effective rate of protection to assembly operations by decreasing prices of components. Reform measures to eliminate the domestic content and compensatory export requirements should be accompanied by simultaneous reductions in tariffs on assembled vehicles.
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