RP to raise sugar tariff from 65% to 80%

The Philippine government has notified the World Trade Organization (WTO) of the country’s intention to raise the bound rate for sugar to 80 percent from the current 65 percent.

Trade and Industry Secretary Mar Roxas told the local sugar industry that the country’s representatives in Geneva personally hand-carried the notification to the WTO as early as June.

The notice enables the Philippines to maintain its MFN (most-favored-nation) applied rates at current levels.

Under the WTO tariff schedule, the bound rate is supposed to go down to 50 percent from 65 percent. Bound rates refer to the maximum tariff that a country can impose on specific commodities it has pledged or committed to liberalize.

"Moving the tariff rate to 80 percent … will allow the government to keep it as 65 percent when the time to reduce it to 65 percent is due," said Roxas.

Following the WTO rules, other WTO members were given three months from the date of notification to comment on the issue.

Philippine negotiators said the country has complied with all of Thailand’s request "in exchange for the support for our tariff adjustment," said Roxas.

Thai sugar businessmen are expected to meet with their Philippine counterparts on the fringes of the WTO Ministerial Meeting in Cancun, Mexico which starts today, and ask for more preferential treatment for their sugar exports to the Philippines.

Thailand, a principal exporter of sugar, agreed to back the Philippine position to maintain its high tariff walls for the commodity but asked that it be allowed to export sugar to the Philippines.

The local sugar industry however, is enjoying a record-high production this year and refused to allow Thai sugar to come in since this will tend to dampen domestic prices of sugar.

As a concession to Thailand, the Philippine government agreed to import 200,000 metric tons (MT) of rice from Bangkok this year.

The government has also kept the high tariff walls on sugar under the Common Effective Preferential Tariff (CEPT) scheme of the ASEAN Free Trade Area (AFTA).

Malacañang issued last month Executive Order 230 which formalized the transfer of raw and refined sugar from its CEPT temporary exclusion list to the sensitive list, a move approved by the ASEAN (Association of southeast Asian Nations) Ministers in 2001.

Under EO 230 signed by President Arroyo, sugar tariff was reduced by two percent to 48 percent from 50 percent last year. The new rates will apply this year.

The modified rates will be imposed following the decision last May of the Tariff and Related Matters Committee to grant the tariff concession on imports of raw and refined sugar from ASEAN members, in exchange for the Philippines’ request to transfer the commodities to the sensitive list.

Had the Philippines not gotten the approval of the ASEAN, the import tariff for sugar would have gone down to zero to five percent last January, from the current or existing 50 percent tariff.

The government batted for the continued protection of the domestic sugar industry and pushed to move the sector to the highly sensitive and sensitive lists of the CEPT, the main vehicle in the implementation of the ASEAN Free Trade Area.

If the AFTA Council denied the Philippines’ petition, Thailand, a principal sugar supplier, will largely benefit from lower Philippine tariffs on sugar.

The country’s decision to maintain high tariffs on sugar for several more years before phasing it down to a maximum of five percent in 2010 is intended to buy more time for the sector to shape up and be more competitive in the global arena.