Philippines. Government wants high tariff to replace rice QR

20.09.2017

The Philippines could impose  a maximum tariff rate of 400 percent on rice imports to give the government enough elbow room to balance the interest of farmers and consumers.

The bound tariff rate of 400 percent was adopted by a technical working group (TWG) of the House Committee on Agriculture and Food and included in the draft of the substitute bill that would amend Republic Act (RA) 8178. RA 8178 allowed the government to regulate the entry of imported rice via the quantitative-restriction (QR) scheme.

During the TWG’s deliberations on Tuesday at the House of Representatives, Rep. Gloria Macapagal-Arroyo of Pampanga said a high bound rate would afford the government flexibilities in imposing tariffs on rice. “We should just specify in the law that it will be a bound rate and just leave it to the President to determine the applied rate,” Arroyo said.

The Pampanga lawmaker earlier said the Philippines must interpret its agreements and commitments to its favor and had made a pitch for a 700-percent bound tariff rate.

Some members of the TWG, however, expressed apprehension that imposing a high tariff rate could encourage smuggling, which could harm rice farmers.

Officials from the National Economic and Development Authority, (Neda) Department of Agriculture (DA), Department of Foreign Affairs (DFA), Tariff Commission and representatives from the private sector attended the meeting of the TWG.

The TWG, chaired by Party-list Rep. Jose T. Panganiban Jr. of ANAC-IP, said the maximum tariff rate should only be slapped on rice imports outside of Manila’s minimum access volume (MAV) of 350,000 metric tons (MT).

Agriculture Undersecretary for Policy and Planning Segfredo R. Serrano said the government should slap a tariff of 35 percent on rice imports from Asean, regardless of volume. Serrano added that a 40-percent tariff rate should serve as the country’s most favored nation (MFN) rate for rice imports within the MAV.

“The MAV will revert back to its 2012 level at 350,000 MT, because under the terms of the waiver of the World Trade Organization [WTO], we can revert back to the original volume as indiciated in the Philippines’s commitment to the WTO,” Serrano said.

“So, we proposed a 35-percent tariff for rice imports from Asean member-states pursuant to the Asean Trade in Goods Agreement and 40-percent MFN rate for imports within the 350,000 MT MAV for WTO member-countries,” he added.

Serrano disclosed the DA’s proposed bound rate for rice imports outside of the MAV was 150 percent, which was calculated based on the formula stipulated under the special-treatment provision of the WTO Agreement on Agriculture (AoA).

The 150-percent bound rate shall only apply to rice imports from other countries that are not members of Asean, according to Serrano.

“We used the formula to calculate for this 150 percent, so it is something that we can support with data. You can go higher than that but we are supporting 150 percent with evidence,” he said.

Annex 5 of the AoA states that the tariff equivalent of converting any nontariff measures shall be based on the difference between the domestic price and international price (cost, insurance and freight unit value, or CIF) of the commodity for 1986 to 1988.

Paragraph 10 of the Annex 5 states that the tariff equivalent coming from the formula “shall be bound in the schedule of the member concerned”. Bound tariffs are maximum tariff rates that a WTO member-country could impose on a certain commodity.

The authority to set bound tariffs is vested in Congress. But under the Customs Modernization and Tariff Act, the President, upon the recommendation of the Neda, has the power to modify the tariffs applied on Philippine imports. The Philippines is now under pressure to convert its QR on rice into ordinary customs duties after its waiver on the special treatment on rice expired on June 30.

The WTO General Council approved the waiver, which allowed Manila to keep its rice QR until June 30, on the condition that the Philippines will subject its rice imports to ordinary custom duties by July 1.

“At the expiration of this waiver, and no later than June 30, the importation of rice shall be subject to ordinary customs duties in accordance with paragraph 10 of Annex 5, Section B, of the Agreement on Agriculture,” the WTO General Council decision read.

In March the Philippines informed WTO members that it is facing delays in converting the QR due to the nonamendment of RA 8178, which imposed the import caps on rice indefinitely. As a sign of “goodwill” to its trading partners, Duterte signed  Executive Order 23 in July, extending the concessions made by the Philippines in securing the waiver in 2014.

The temporary modification of most-favored nation-tariff rates is effective until June 30, 2020, or until such time a law amending certain provisions relating to rice in RA 8178 is enacted, whichever comes first. Panganiban said the TWG is eyeing to conduct its last hearing on October 3 to approve the draft of the substitute bill, which will later be submitted to the House Committee on Food and Agriculture for deliberations.

“I only want one hearing in the committee so that the bill will be ready for plenary debates after the [Halloween break which will start on October 14 and end on November 12],”  Panganiban told the BusinessMirror after the TWG meeting.

He said the House of Representatives is planning to approve the bill on third and final reading before the year ends.



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