Lobbying for the removal of concessionary tariff rates for meat products has intensified, with the local producers of meat now pressing the government not to heed Washington’s recommendation for Manila to retain the lower duties on certain farm products even with the imminent tariffication of rice trade.
Trade Secretary Ramon M. Lopez said he will push for the permanent enforcement of the reduced rates under Executive Order (EO) 23 which will make permanent the 5-percent tariff on mechanically deboned meat (MDM).
Meanwhile, segments of the meat industry—represented by the United Broiler Raisers Association (Ubra), Pork Producers Federation of the Philippines (ProPork), Meat Importers and Traders Association (Mita) and Philippine Association of Meat Processors Inc. (Pampi)—have started voicing their contrasting views, as Manila commits to enact the law that will finally end its era of quantitative restriction (QR) for rice.
While the rice-tariffication bill is pending and the Philippines continues to use the QR scheme way beyond the deadline set based on World Trade Organization (WTO) commitments, the country was forced to set lower tariff rates for certain farm products as a trade-off, including meat products.
While Ubra and ProPork understand the need to set temporary concessionary rates, they expressed alarm over the United States government’s call on President Duterte to make the lower rates permanent.
‘Unfair’
In an interview with the BusinessMirror, Ubra President Elias Jose M. Inciong said it would be unfair if the Philippines would retain the concessionary rates on agricultural goods even with the end of QR regime. “If what they mean is we all go back to the original agreement [that] everything is 40 percent, we are in a complete agreement. But if they mean the concessions for extending the QR or the special treatment on rice will become permanent, we will not have an agreement,” he said.
“Precisely, those concessions were made in consideration for the QR. Without that extension for the QR, what is the sense of the Philippines maintaining those rates?” Inciong added.
In the 2018 National Trade Estimate Report on Foreign Trade Barriers of the US Trade Representative, Washington is asking Manila to consider making the most-favored nation (MFN0 rates of duty under EO 23 permanent. The EO issued in May of last year prolonged for another three years the reduced rates on farm products as part of the Philippines’s tariff commitments to the WTO.
One product that had lowered duties under EO 23 was mechanically deboned meat, known as MDM. It was slapped with a tariff of 5 percent, and is bound to remain at that rate until 2020 before reverting to 40 percent in 2021.
The US wants the Philippines to keep the tariff on MDM at 5 percent, along with cheese at 1 percent. This does not play well with Inciong.
“That is unfair to us in the poultry sector, as well as to the Philippines. It will be unfair to the Philippines because we will be giving away something for nothing. For what? That is imperialism. They want something and it is not clear what do we get in return,” Inciong said.
His sentiments were shared by ProPork President Edwin G. Chen, who, like Inciong, does not see any logic for Manila to keep the lower tariffs for good. “In the pork sector, we are requesting the Tariff Commission to bring back the rates to its original rate [40 percent] in 1996. Our government uses pork and chicken to get rice quantitative restrictions from its trading partners, but we are not renewing the QR on rice, therefore, the concessions granted by our government will no longer be needed,” he told the BusinessMirror.
“We are asking our government to bring back the duty of offals, fats and skin to the rates of prime cuts. This will simplify tariffication and prevent misdeclaration and technical smuggling,” Chen added.
If he is to be asked, Chen said the government should now revert the tariff on MDM to 40 percent. He also warned that if the recommendation of the US is heeded, local meat producers will be at the short end of the stick.
“We want the tariff rate back to 40 percent and not what the US wants at 5 percent. If our government agrees to what the US wants, most of our small and medium farm enterprises will not be able to compete with the US pork producers. They are highly subsidized by their government, while in our case, we have little to no government
support,” he said.
‘Good for consumers’
But if meat producers are resistant to the United States’s policy proposal, meat importers and processors, on the other hand, are backing the measure. The Mita and Pampi support Washington’s call to the President to keep the current concessionary rates for good.
For Mita President Jesus C. Cham, permanently enforcing the lower duties will benefit the buying public, as it will affect the prices of goods that are reliant on MDM. This is particularly favorable to what Cham labeled as the “lower classes,” who he claimed to be major purchasers of processed meat.
“The Philippines granted these concessions fully aware that they are not produced locally in sufficient quantities anyway. All the more so now that these products—MDM in particular—are the source of low-cost proteins to the lower classes,” Cham told the BusinessMirror.
Pampi Executive Director Francisco J. Buencamino is also of the view that lowered tariff on MDM will benefit not only meat processors, but also consumers. He said meat processors will only be able to “hold down prices” of their products if the reduced rates of duty are maintained.
“Because we use MDM extensively for economy products of processed meats, such as hotdogs, luncheon meat and meat loaf, the advantage of lowered prices will be affected when we revert to 40 percent. We will be unable to hold down prices of our products as we have successfully done in the last 15 years,” Buencamino told the BusinessMirror.
He said his group will be pushing for the decoupling of the treatment on MDM from the treatment on rice. “We, therefore, will be submitting a request to detach the treatment of MDM from rice for the interest of Filipino consumers,” Buencamino added.
Lopez agrees
“Yes,” Lopez said when asked if he is in favor of keeping the rates. “In fact, we were the ones who extended that. Even before the tariffication of rice, we see it as an important support to the local industry so that there will be a good entry of raw materials here.”
“That means we are expecting prices of meat to not go up if we keep the tariff at 5 percent, especially on MDMs. If you ask the DTI [Department of Trade and Industry], we will continue to support that policy,” Lopez said in English and Filipino. “That is why we are saying that if we are to be asked, we would like to keep it at that. It doesn’t have to be reverted back to higher tariff,” the trade chief said.
“MDM is not directly competing. That is why it makes sense for us to keep it because there will be no injured local industry and there are a lot of users—our canned meat products and manufacturers. As of now, there are more users, beneficiaries, than the affected local competition, local industries,” he added. “You put it as part of the tariff-reform program. The tariff reform is continuing, meaning, there is a gradual lowering of tariff rates. So you keep it there, put it there, to include it. Then we have to undergo the process wherein there will be a Tariff Commission hearing, hearing with all the stakeholders in that particular product to make it permanent.”
Legislators have yet to convert the expired QR on rice of the Philippines into tariff. Until such time the agricultural tariffication law is amended, or until June 30, 2020—whichever comes first—the concessionary rates indicated under EO 23 will be implemented.
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