Rice tariffs snarl ASEAN single market
By Marwaan Macan-Markar
CHA-AM, Thailand - Rice, the staple dish across Southeast Asia, has emerged as
an apt symbol of the region's commitment - or lack of it - to unveiling a
free-trade area for its 10 members when the new year dawns.
A trade deadlock between Thailand and the Philippines that was to have been
resolved during the 15th summit of the Association of Southeast Asian Nations
(ASEAN) leaders, which ended in Cha-am on Sunday, is still in want of a
solution, according to trade and diplomatic sources.
"This summit was to have resolved this issue," a senior official from
Thailand's Commerce Ministry told Inter Press Service. "We were hoping for
figures from our Philippine counterparts to be
placed on the table that would have been acceptable. That did not happen."
"But the summit gave both countries a window to discuss the matter at a
bilateral level than seeking to resolve it through a trade dispute mechanism,"
he added. "What was discussed - to get a win-win outcome - was better than not
having a deal on rice."
With the clock ticking for the ASEAN Free Trade Area (AFTA), which comes into
force on January 1, talks to strike a deal between Bangkok and Manila on the
touchy subject of rice tariffs will be tackled by a "working group at the
senior official level", the official said. "They will start work immediately."
Thai Commerce Minister Porntiva Nakasai described her exchange with Philippine
Secretary of Trade and Investment Peter Favilla at the summit's venue, in this
resort town south of Bangkok, as "candid" and "friendly".
"We need to find a way out in the next two months leading up to AFTA becoming a
single market," she said during a closing press conference. "This issue is very
crucial."
Philippine officials were more reticent when pressed if Manila would give in to
Bangkok's push that all the AFTA and those of the related ASEAN Trade in Goods
Agreement (ATIGA) commitments should be met. "The rice issue was not discussed
at the summit," Enrique Manalo, under secretary for policy at the Philippine
Foreign Ministry, told Inter Press Service (IPS). He declined to comment on
discussions between Porntiva and Favilla.
ATIGA, an amendment to the AFTA Common Effective Preferential Tariff scheme,
spells out what tariff reductions apply to specific goods, in particular goods
classified as sensitive agriculture products such as rice.
The concluding statement from the summit hinted at the deadlock on rice
tariffs. "We look forward to the implementation of the ASEAN Trade in Goods
Agreement. We adhered to the principle specified in the agreement and urged
member states to resolve the differences at the earliest opportunity," said the
statement by summit host, Thai Prime Minister Abhisit Vejjajiva.
The dispute between Thailand, the world's largest exporter of rice, and the
Philippines, one of the world's leading importers of the food stuff, stems from
Manila's reluctance to slash import tariffs for Thai rice, consequently
undermining the principles of AFTA.
Under AFTA, which has been steadily implemented since 1993, the six countries
comprising ASEAN at the time had to bring down their import tariffs to between
zero and 5% for all ASEAN products by January 2010. These countries were
Brunei, Indonesia, Malaysia and Singapore, besides Thailand and the
Philippines.
Myanmar, Cambodia, Laos and Vietnam, which joined the 10-member regional bloc
in the mid-1990s, have until 2015 to cut their import tariffs to boost
intra-regional trade.
Yet where rice is concerned, which was classified as "Sensitive Agriculture
Product" in AFTA, Thailand wants the Philippines to slash the import tax from
the current 40% to 25% by 2015. That would bring the Philippines close to the
cuts in rice tariffs by Indonesia, which has agreed to slash them to 25% by
2015, and Malaysia, which has decided to cut tariffs from 40% to 20% by 2010.
The Philippines, however, is reluctant to make such cuts. Besides this barrier
coming in the way of Thailand's quest to make a large presence in the
Philippine rice market, Bangkok is also being denied its push for Manila to
compensate for its violation of AFTA by increasing the former's quota. The
Philippines has agreed to let 50,000 tonnes of tariff-free Thai rice enter its
market, but Thailand wants more - an annual quota of 360,000 tonnes of premium
grade rice.
Thailand is the world's sixth-largest producer of rice, following China,
Indonesia, Bangladesh and Vietnam. With the 10 million tonnes of rice it
exported in 2008 - and an estimated eight million tonnes to be exported this
year - Thailand leads the world in overseas sales, followed by Vietnam, which
has been recently exporting close to six million tonnes a year, and India.
In 2008, Thailand exported 500,000 tonnes of rice to the Philippines. That
number has sunk to 80,000 tonnes this year. Filling that void has been rice
from Vietnam, which supplied the bulk of the 1.7 million tonnes the Philippines
has imported this year. That figure is expected to rise next year, when the
Philippines will import two million tonnes of rice, media reports estimate.
The inauguration of AFTA is part of ASEAN's march to becoming, by 2015, a
rules-based regional body along the lines of the European Union. Intra-regional
trade already on the rise is expected to get a boost. In 2007, it was valued at
US$404 billion, up from $352 billion.
The summit's closing statement revealed that the region had made better
progress on cutting tariffs for goods that are less sensitive than rice.
Tariffs that account for 87.2% of total intra-ASEAN imports "would be
eliminated".
Yet the grain that unites this regional bloc remains beyond that list. "Both
the Thais and the Philippines will have to strike a deal to avoid rice tariffs
undermining the spirit of ASEAN's new free-trade area," a Southeast Asian
diplomat told IPS on condition of anonymity. "It will be a test of ASEAN
solidarity."
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