When the Philippines joined the World Trade Organization in 1995, it removed the import restrictions on most crops except for rice. This was a signal to WTO members that the Philippines was ready to do business with the world within the parameters of the multilateral trade agreement. All WTO members observe the General Agreement on Tariffs and Trade (GATT), which also prescribed safeguard measures that countries may tap to deal with import surges or price falls.
The Philippines is not the only WTO member-country that has availed itself of special safeguard measures to shield domestic producers from import surges. Based on data available on the WTO web site, member-countries filed a total of 331 safeguard notifications from January 1, 1995, to December 31, 2017. WTO figures showed that India was the most extensive user of safeguard measures among member-countries, accounting for some 13 percent of filings during the period. Indonesia followed India with 27 notifications.
Under the rules of the WTO, a member may take a “safeguard” action to protect a specific domestic industry from an increase in imports of any product which is causing, or which is threatening to cause, serious injury to the industry. But unlike antidumping and countervailing measures, the application of safeguard measures does not depend on unfair trade practices. The provisions on safeguard measures apply to all products, including agricultural goods. The Agreement on Agriculture also contains rules for the application of a special safeguard for agricultural goods subject to certain requirements.
The Philippines, therefore, was well within its rights when it slapped the special safeguard duty on imported coffee products. The SSG was slapped on coffee imports starting April 6, 2018, after the value of shipments reached an all-time high of $205.224 million in 2017, according to data from the Philippine Statistics Authority. Figures from the PSA also showed that the volume of instant coffee imported in 2017 reached 93,696.938 metric tons (See, “SSG levels playing field for local coffee makers, farmers” in the BusinessMirror, March 18, 2019).
The surge in shipments would have been negligible if the Philippines did not have its own coffee industry. But cheap coffee imports threaten to displace those manufactured in the country, which would adversely affect local coffee makers. This will eventually hurt Filipino farmers because they will lose their market for coffee beans, as manufacturers would surely slash their purchases.
Industries or companies may request safeguard action by their government. But WTO rules state that a member cannot discriminate against a specific country. This was reiterated by Agriculture Undersecretary Segfredo R. Serrano who said that the Philippines did not target a specific country when it imposed the SSG. There is no such thing as a “preferential SSG.” The measure affected all the trading partners of the country and even local firms importing coffee products.
WTO rules also specify the mechanisms that trading partners or exporting countries may tap if they disagree with the safeguard measure imposed by a member-country. In the case of the SSG of the Philippines, nothing stops the country’s trading partners from challenging this. Also, trading partners may retaliate by raising tariffs on exports from the Philippines. WTO members are not really helpless when it comes to dealing with safeguard measures imposed by any member-country.
Image credits: Jimbo Albano