Sugar group presses to keep tariff level

AN INDUSTRY group is seeking to retain tariffs for sugar in a bid to protect local producers from the influx of cheaper imports, despite the scheduled reduction in tariffs by 2010, as agreed upon by members of the Association of Southeast Asian Nations (ASEAN).

The Sugar Alliance of the Philippines, an umbrella organization for sugar millers’ and planters’ groups, asked the Tariff Commission late last week to transfer sugar to the "highly sensitive list" from the inclusion list under the ASEAN Free Trade Area Common Effective Preferential Tariff (AFTA-CEPT) scheme.

The proposed move will exempt sugar imports, whose tariffs currently stand at 38%, from reduction to 5% by 2010, Zenaida C. Lacar, acting director of the Commission’s research and investigation department, said in a telephone interview yesterday.

The duration of the exemption will have to depend on negotiations between the Philippines and its ASEAN partners, Ms. Lacar stressed.

ASEAN member states are allowed to make "temporary exclusions" from the AFTA-CEPT to protect certain sensitive products, the Tariff Commission said on its Web site.

Tariff reduction will pose a great disadvantage to the local sugar industry as it faces high production costs and has no subsidies, data presented by the industry group to the Commission late last week showed.

The group claims to represent 90% of the industry.

Rising fertilizer, labor and fuel costs have prevented the industry from becoming more competitive, the group’s materials read.

If sugar remains in the inclusion list, imported refined sugar will cost P28.60 per kilo in 2010, the group said. Domestic sugar, meanwhile, is higher-priced at an average of P38.63 per kilo as of Oct. 8, data from the Sugar Regulatory Administration show.

The group also pointed to the subsidies, higher tariffs, and smaller import quotas Thai sugar producers enjoy, and thus make Philippine sugar unable to compete.

"That argument is valid," University of Asia and the Pacific George N. Manzano, himself a former Tariff commissioner said in a phone interview yesterday. "But if you exempt sugar, other industries will be at a disadvantage."

Retaining tariffs will lead to "negative protection" wherein food manufacturers’ inputs will be protected but their pricier final product will have to compete with imports that have low tariffs, Mr. Manzano said.

"How to create a balance is a political decision," he added. "[Exemption] comes at a price. Policy makers will have to weigh [varying effects]."

International trade lawyer Jeremy I. Gatdula, for his part, said that the group’s proposal should be reexamined, especially as there is a need to combat the rising prices of basic commodities like sugar.

The country will need to explore cheaper sources of sugar as domestic production of ethanol and China’s large appetite for the good is competing with local demand, Mr. Gatdula said in a telephone interview yesterday.

Also, asking ASEAN for an exemption will mean a trade-off at the expense of another agricultural good. "If we ask for an exemption for sugar...other products will be used for a concession. We will be trading the [welfare] of other farmers," he said.

The Sugar Alliance further cited that employment of farm and mill workers in Negros province will significantly drop if tariffs are reduced and cheaper imports take away their market share. The industry currently employs 600,000 workers in 19 provinces, the group said.
source:bworldonline