Onslaught of liberalization continues

BIZLINKS - Rey Gamboa () - May 9, 2005 - 12:00am
The country’s agricultural producers are finding themselves in a tight situation again. Come June this year, the minimum access volume (MAV) measure intended to shield domestic farmers and producers from the onslaught of cheap imported agricultural products, will expire. Without new safeguards, producers are seeing impending doom.

With just two months before the MAV measure lapses in June, despite petitions by several affected sectors, the Department of Agriculture (DA) has yet to firm up its position and submit this to the World Trade Organization (WTO).

I hear that the DA is being badgered by several groups, among them the Philippine Association of Broiler Integrators (PABI) that include San Miguel Foods Inc., Swifts Foods Inc. and Tyson AgroVentures, to work on the extension of the MAV. PABI, along with the smaller broiler producers under the United Broilers and Raisers Association, are worried about the adverse implications of the expiration of the MAV.

Rightly so, since poultry products (mostly frozen chicken parts) have about 90 percent utilization of MAV levels since 1996. This is good for the consuming public, but domestic broiler producers are warning that this will cause some serious problems. Free-for-all regime With the lifting of the MAV, expect a free-for-all regime on importations, and with that, more difficulties for local agricultural producers who can barely cope with their highly competitive foreign counterparts.

Expect also smuggling of agricultural produce into the country to become even more brazen. Lifting the MAV is no guarantee that smugglers who have gotten away with this practice for so long, will be encouraged to bring in their products legally and pay the corresponding tariffs, albeit at much lower than the existing levels. With porous borders and weak enforcement, it is easy to see where these smuggled products will be coming from to flood the local markets. MAV allows the importation of all agricultural products except rice at lower tariffs as committed by the Philippines to the WTO. The stipulated minimum volume for affected agricultural products is three percent of domestic consumption in the first year, rising to five percent in 10 years. Beyond the stipulated volume, higher tariff levels are to be imposed.

In corn, however, a higher volume of importation at lower tariff was allowed because of an administrative order that authorizes increasing MAV limits during shortages. This was due to the strong lobby of local end-users like feed millers and livestock raisers who prefer generally lower-priced corn imports.

Since its implementation in 1995, there are at least 15 sensitive agricultural products that are now covered by MAV measures including selected grains, livestock, meat products, sugar, potatoes, onions, coffee and coffee beans.

These items are subject to MAV in-quota and out-quota rates, which means that products within the determined minimum access volume for the year or in-quota‚ are imposed a lower tariff rate while those that exceed minimum access volume or out-quota‚ are charged higher tariff rates.

By June this year the stipulated MAV limits or quotas will be lifted and there will be no differences in tariff levels. ACEF not trickling down to small farmers Proceeds collected from the differences in tariff rates are channeled to the Agricultural Competitiveness Enhancement Fund (ACEF). This Fund is supposedly meant to provide financial assistance to small farmers, fishermen and agri-based entrepreneurs, with the objective of helping them increase their competitiveness and preparedness for the global market.

The sad fact is that except for large-scale and commercial agricultural activities, the smaller farmers have yet to attain that level of competitiveness and economies of scale that could enable them face foreign competition without grimacing and wincing so much.

This failure is not entirely their own making because even while agriculture is the centerpiece program of all government administrations, all that talk is not translated into concrete steps to ensure that incomes and productivity at the farm level are raised.

While the government was quick to embrace WTO prescribed measures such as trade liberalization, it adopted a snail-paced approach in instituting measures that would alleviate the effects of trade liberalization on the majority of small farmers.

For instance, government seems to continue its bias against small farmers. ACEF is supposed to help smaller farmers but records show that it is the big producers with allegedly strong political connections that are actually benefiting from the fund, many of them coming from the local sugar industry. Another example of benefiting from close symbiotic connections is a big Filipino-Chinese vegetable producer in Tagaytay who quickly expanded his operations and now exports temperate climate vegetables to Hong Kong.

In contrast, the loan proposal of Northern Foods Corporation, a government-run tomato paste producer that provides employment to more than 3,000 farmers in Ilocos Norte, was denied despite a solid program to increase the plant’s productivity and realize a turnaround.

Small wonder that the Philippines has the lowest rate of agricultural growth in Southeast Asia. While our foreign counterparts took big steps to ensure their farmers competitiveness by increasing direct and indirect subsidies, our government reduced and even eliminated subsidies for the really needy sectors such as the grains sector. And apparently, political connections play a big role in determining who gets the scarce assistance.

MAV is one of the few remaining protection for farmers and producers as trade liberalization engulfs us all. But it will take more than the extension of the MAV to push the agriculture sector to the forefront of our economic growth. Stopping the rampant smuggling of agriculture products could help. Or, is it just a dream?

Attitude change rather than image polishing For Customs Commissioner Bert Lina, changing public perception about the integrity and credibility of Bureau of Customs will have to start with a change of in the attitude of people in the bureau. For this reason, Commissioner Lina’s focus is in instituting reforms is people.

While the approach is laudable, Lina will have to contend with several external forces to achieve this internal attitudinal change. For one, customs examiners are very vulnerable to pressure from politicians and from more powerful government officials. Oftentimes, it is difficult to say no to someone who you owe your job.

To cleanse the Bureau thoroughly, it must be shielded from politics. And it should start from the selection and hiring of all staff occupying sensitive positions. This is possible but will need the strong commitment and will power not only of the current customs leadership but of the highest official of the land, the president.

What are the major challenges being faced by Commissioner Lina other than the cleansing of Custom’s tarnished public image? How is globalization and trade liberalization affecting the revenue collecting capabilities of the Bureau of Customs? Will the attrition policy work to upgrade the quality and integrity of Customs personnel?

Join us in "BREAKING BARRIERS" on Wednesday, 11th May 2005, IBC-TV13 (11 pm), and gain insights into the views of Customs Commissioner Bert Lina on various issues related to the Bureau of Customs and the impact of the bureau’s role on the Philippine economy. Watch it.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reygamboa@linkedge.biz. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.

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