An analysis of technical smuggling in Philippine imports from China (1994-2004): Do tariff rates and customs modernization play a role?

This paper analyzes the effect of tariff rates with respect to the approximated level of smuggling in some 5 - digit Standardized International Trade Classification (SITC) commodities present between Philippine imports from China with that of the latter\u27s export to the Philippines from years 1994 to 2004. The study examines the magnitude of technical smuggling, which is measured by the ratio of the declared exports of China to the Philippines and declared imports of the Philippines from China, both expressed in US-dollar terms. Using thorough descriptive analysis and time series data regression to identify the relationship between tariff rates and technical smuggling across periods covered, it can be concluded that protectionism through the imposition of tariffs does not drastically impacts the worsening of the illegal economic activity. Commodities with 5-digit SITC commodity sublevel with the highest indices of smuggling were identified. The study also provides policy recommendations that can minimize the problem of smuggling in the Philippines, especially in the country\u27s imports from China