Agri sector not ready for trade lib

The agriculture sector is ill-prepared for a further opening of the country’s doors to cheap agricultural products from competitors once the ASEAN-China Free Trade Pact starts this year and the most-favored-nation (MFN) rates are applied.

"The agriculture sector is already beset with problems of rampant smuggling and it cannot afford at this stage to further liberalize trade and cut tariffs on imported commodities that are highly-subsidized by their respective governments," an official of the Department of Agriculture (DA) said, echoing the sentiments of various subsectors of the industry.

The official said local producers will have difficulty keeping their heads above water as cheap products flood the domestic market.

The DA is holding consultative talks with industry representatives to be able to come up with the final list of agricultural products that will be included in the so-called "early harvest package" or list of commodities that will be subjected to zero tariff under the ASEAN-China free trade scheme.

In the recent hearing conducted by the Tariff Commission, local producers, especially those from the livestock and poultry and vegetable sectors, objected to the inclusion of their products. These groups are seeking exemption from the early harvest package.

The DA official said this program is scheduled to take effect ahead of a fully-liberalized trading arrangement under the ASEAN Free Trade Agreement (AFTA) which starts in 2010.

"We should be more cautious in opening up the local market, while our competitors are buying time and pleading for higher tariff rates, we have been rather accepting these developments without really establishing adequate protection for our producers," the DA official added.

On the other hand, local farmers’ lot will be aggravated if the country’s trading partners invoke that the MFN rule of the World Trade Organization (WTO) be applied not only a bilateral basis, but to include all countries doing business in the Philippines.

The DA source said that if local producers ask for an increase in MFN rates that exceed what the Philippines committed to the WTO, the country’s trading partners will likely demand a renegotiation of the country’s bound rates.

Applied rates or MFN rates are the actual duties imposed on non-ASEAN imports while bound rates refer to the highest tariff that a country can impose on a certain product in line with its commitment to the WTO.

"If the Philippines for instance wants an increase in tariff rates to protect specific products, it will have to face the risk of other countries asking for an adjustment in bound rates," noted the DA source.

Earlier, the DA pushed for an increase in the tariff rates imposed on imported vegetables from seven percent to 40 percent.

DA Undersecretary Arsenio Balisacan said the increase in tariff rates is critical to the ailing domestic vegetable industry which is reeling from the influx of cheap vegetable imports and uncurtailed smuggling of goods that have found their way into wet markets.

"The tariff rates can spell the industry’s survival and at this point, can seriously affect its growth prospects," said Balisacan.

The DA’s proposal if approved, would jack up the applied seven percent tariff on a number of imported vegetables and rootcrops to the maximum WTO bound rate of 40 percent.

Agriculture Assistant Secretary Segfredo Serrano said this move if approved, should be good for the agriculture sector, especially wit the proposal of the US to impose new tariffs abased on the applied or current rates rather than the bound rates.

"If we are able to get approval to apply the bound rates now, that should still give us room when the developed countries’ proposal to further break down tariff walls is imposed. We will still have protection unlike if the applied or current rates are the starting point for the implementation of proposed new tariffs, then that would really wipe us out because our tariffs are already very low," Serrano said.