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PHL seeks more elbow room in setting rice tariffs

The Philippines could set the maximum tariff rate on rice at a range of 50 percent to 700 percent, reflecting the government’s intent to have a wide policy space in balancing the interest of farmers and consumers.

This was evident in the stance of the Executive and the Legislative branches during the meeting of the House Committee on Agriculture and Food Technical Working Group (TWG) on the amendment of Republic Act (RA) 8178, or the Agricultural Tariffication Act, on Tuesday.

Rep. Gloria Macapagal-Arroyo of Pampanga noted that the Philippines is under pressure to convert the quantitative restriction (QR) on rice into tariffs, as it is the lone country that continues to implement it after South Korea and Japan have tariffied their import caps.

However, Arroyo said the Philippines should invoke its independent foreign policy and should consider binding its rice tariff at 700 percent to protect local farmers.

“We have an independent foreign policy, so we should interpret our agreements and commitments to our favor. These two other countries [South Korea and Japan] are violating the World Trade Organization [WTO] formula, and they are getting a range of 500 [percent] to 700-percent and are not yet sanctioned up to now,” she added. “Why are we now going to be so strict in the interpretation of   ‘commitment’? Let’s also be liberal, that’s why I’m proposing a 700 percent bound rate,” Arroyo said.

The lawmaker added she would include her bound-tariff proposal under a bill seeking to amend RA 8178, which she authored.

The Department of Agriculture’s (DA) had recommended a much lower bound-tariff rate for rice at a range of 50 percent to 125 percent. Agriculture Undersecretary Segfredo R. Serrano said the figures were based on the DA’s initial estimates.

“We have had calculations using the formula, and we shall provide an updated document with these calculations for the information of the committee in agriculture and food and the TWG [technical working group],” Serrano added during the meeting on August 1. “I think the numbers are ranging from 50 [percent] to around 100 [percent] to 125 percent,” Serrano said, referring to the tariff-equivalent formula provided under Annex 5 of the WTO Agreement on Agriculture (AoA).

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 National Economic and Development Authority, has the power to modify the tariffs applied on Philippine imports.

During the meeting of the TWG, Serrano also urged lawmakers to prioritize the conversion of the QR into tariffs so as not to prolong the period that the Philippines is in breach of its commitment to the WTO.

“Even though the executive order [EO] of the President has removed the motivation from our negotiating partners, that doesn’t guarantee that no member of the WTO will sue because we are in breach of our obligation,” he said. “Therefore, the No. 1 priority would be tariffication, and we may have to postpone other peripheral issues for later legislation or bills.”

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, 2017, 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.

However, in an earlier COA meeting in Geneva 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  EO 23 last month, 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.

“The EO of the President is good, because we will preserve the concessions so there would be no motivation for our negotiating partners to sue us,” Serrano said in an earlier interview.

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