The Philippines is increasingly relying on the export market to prop up its GDP and hike per-capita income. For the longest time, the country has relied on electronic products as our top exports, accounting for nearly 30 percent of shipments at any given time. Apart from electronics, the Philippines also exports fresh farm products and processed food, such as pineapples, bananas and canned fruits. As demand for electronics in traditional markets, such as Europe and the United States, started to weaken due to the slowdown in their respective economies, the Philippine government has declared that it is keen on expanding shipments of agricultural products to increase the income of farmers.
Tariffs paid by Filipino exporters would depend on the trade arrangement with importing countries. In the case of the European Union’s Generalized System of Preference Plus scheme, many Philippine-made products enjoy zero duty. Under the Asean Free Trade Area, more than 99 percent of products for export from six Southeast Asian countries, including the Philippines, have preferential zero-percent to 5-percent tariff rates.
But, apart from the tariffs, exporting countries would have to comply with various nontariff barriers (NTBs) imposed by importers. On its web site, the South African Development Community (SADC) defined NTBs as restrictions that result from prohibitions, conditions, or specific market requirements that make importation or export of products difficult and/or costly. SADC said NTBs also include unjustified and/or improper application of nontariff measures (NTMs), such as sanitary and phytosanitary measures, and other technical barriers to trade.
According to SADC, “NTBs arise from different measures taken by governments and authorities in the form of government laws, regulations, policies, conditions, restrictions or specific requirements, and private-sector business practices, or prohibitions that protect the domestic industries from foreign competition.”
The Philippines knows these NTBs well, as it had to deal with rules that prevented exporters from expanding their shipments many times in the past. For one, the Australian market remains closed to Philippine banana exporters for more than a decade now because of the stringent SPS requirements imposed by Canberra.
The Pilipino Banana Growers and Exporters Association (PBGEA) said in 2011 it has difficulty complying with two requirements: Bananas for export should have eight leaves prior to harvest and that nonperforated plastic bags should be used to pack the products. PBGEA had explained to Canberra that farmers do not use nonperforated plastic bags due to the effects of the tropical weather on the ripening and quality of the fruit. The stringent pesticide levels imposed by Japan also caused shipments of Philippine okra to decline in 2002 and 2008.
Unfortunately, the applications of these NTBs are not as predictable as the payment of duties. For instance, banana exporters were taken aback when Chinese authorities destroyed their shipments in March 2016 purportedly because the fruits contained pests. Filipino producers were asked by Beijing to put in place measures to ensure the quality of bananas for export. The destruction of their shipments and the need to comply with Beijing’s requirement have certainly increased the operating cost of Filipino exporters. While there are remedies available at the World Trade Organization, such as the dispute-settlement mechanism, these are time-consuming and costly for the Philippine government.
Unless the Duterte administration is serious in its pursuit to put up a dedicated office that would oversee matters related to trade and set aside money for it, Filipino exporters would always have to say a silent prayer that their shipments would not be withheld in foreign ports.