LATEST PUBLICATIONS
DP 2020-24
The Role of Agrarian Reform Beneficiaries Organizations (ARBOs) in Agriculture Value Chain
DLSU-AKI PEM Report-Q2-2020
Monitoring the Philippine Economy Second Quarter Report for 2020
DP 2020-01
The Role of Fiscal Decentralization in Reducing Poverty and Inequality: Empirical Evidence Using the Regional Authority Index
PN 2020-09
Are Marine-protected Areas Sheltered from Plastic Pollution?
Publication Detail
PJD 2008 Vol. XXXV No. 1-a: Can Imports Discipline Collusive Firms?: The Case of the Philippine Cement Industry

Applying a conjectural variations (CV) model introduced by Haskel and Scaramozzino (H&S model 1997), the paper examines the impact of trade liberalization on the Philippine cement industry where alleged cartel activities have taken place after the entry of the world's Big Three cement firms: Holcim, Cemex, and Lafarge. In the H&S model, the relationship between firm behavior and competition is estimated with price cost margin (price minus marginal costs over price) as indicator of competition and profitability. The model is extended to assess the impact of imports on competition using import penetration ratio as proxy for trade policy. The paper focuses on the following questions: did the removal of import restriction and reduction of tariffs affect competition in the cement industry? Are imports effective in disciplining domestic firms and reducing their market power? The results imply that imports do not seem to affect profitability and competition in the industry. Given the ability of firms to engage in anticompetitive behavior and the absence of an effective competition policy in the Philippines, the gains from trade liberalization are nullified. The country's experience in the cement industry illustrates that trade liberalization is not a substitute for competition policy. For imports to effectively discipline the market, trade liberalization must be accompanied by strict competition policy.

Philippine Institute for Development Studies
Authors Keywords
Aldaba, Rafaelita M.; trade liberalization; competition policy; Philippines; cement industry; imports; collusion;
Download PDF Number of Downloads
Published in 2009 and available in the PIDS Library or can be downloaded as full text Downloaded 4,366 times since September 18, 2012