Joseph FranciaEmmanuel Travino

December 2007

REGIONAL/BILATERAL FREE TRADE AGREEMENTS AND PHILIPPINE

AGRICULTURE: ISSUES, PROBLEMS AND OPPORTUNITIES

DISCLAIMER

“The views expressed in this report are strictly those of the authors and do not necessarily reflect those of the United States Agency for International Development (USAID) and the Ateneo de Manila University”.

Abstract This study identifies and discusses the issues, problems and opportunities that may arise from regional and bilateral free trade agreements (FTA), namely the Japan-Philippines Economic Partnership Agreement, and the Association of Southeast Asian Nations (ASEAN)-China, ASEAN-Korea, ASEAN-India and ASEAN-Australia/New Zealand FTAs. Surveyed literature indicates it will be advantageous to the Philippines and ASEAN to enter these agreements. The gains from freer trade will accrue if competition in agricultural markets is promoted by removing governmental price manipulation and dismantling cartels and monopolies, ensuring the mobility of factors of production, and dispersing adequate and symmetric information to all parties regarding subsidies, non-tariff measures and export opportunities.

REGIONAL/BILATERAL FREE TRADE AGREEMENTS AND PHILIPPINE AGRICULTURE: ISSUES, PROBLEMS, AND OPPORTUNITIES EXECUTIVE SUMMARY As has been reported in the media and elsewhere, regional/bilateral free trade agreements/areas or FTAs (the two will be used interchangeably) received a strong impetus due to the failure of the WTO Ministerial Conferences in Seattle (1999) and Cancun (2003). The Philippines, as a member of ASEAN, has entered into two regional FTAs and is negotiating two more. The ASEAN-China Free Trade Area and the ASEAN-Korea Free Trade Area were signed in 2004 and 2005 respectively. The two treaties that are still being negotiated are ASEAN-India and ASEAN-Australia/New Zealand. A bilateral agreement with Japan, the Japan-Philippines Economic Partnership Agreement (JPEPA) is also under negotiation. It is clear to the Philippines’ seasoned negotiators that balanced bilateral trade agreements are more difficult to conclude than multilateral agreements because of asymmetric bargaining power and logistics, which are always in favour of the develop or bigger economy. Thus, a regional trade agreement, where the Philippines negotiates as part of ASEAN, is preferable. The aim of this study is to try to identify and discuss the issues, problems and opportunities that may arise from these FTAs, and come up with recommendations for the Department of Agriculture and for agricultural producers themselves, given the limitations of time and resources. The report focuses on the agricultural sector and does not touch on the implications of these FTAs on the industrial and services sectors, or on investments. There are three parts: (1) a review of the agreements or proposed agreements; (2) identification/discussion of issues, problems and opportunities that may arise from these agreements, and (3) findings and recommendations. I A Review of the Free Trade Agreements ASEAN-China and ASEAN-Korea Free Trade Areas The Agreements on Trade in Goods (ATIGs) between ASEAN and China (ACFTA) and ASEAN and Korea (AKFTA) have similarities but also differences. Both have Normal and Sensitive Tracks, with the latter having a Highly Sensitive List. For the Normal Track, both aim to have zero tariffs by 2010, but Korea has agreed to eliminate tariffs by 01 July 2006 on 70% of its tariffs. Tariffs under the ACFTA Normal Track commenced reduction on 01 July 2005, except for the Philippines, which started to implement it in January 2006. As for the AKFTA, tariff

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reduction is to begin in 01 July 2006. Another difference is that the ACFTA has an Early Harvest Program (EHP), which began in 01 January 2004 while the AKFTA does not. The EHP for the Philippines began in January 2006. Again, both allow flexibilities in the Normal Track, i.e. allowing ASEAN members to reduce the tariff on a number of lines to zero in 2012 instead of 2010. The differences are that, in the case of ACFTA, the number of tariff lines are limited to a maximum of 150 (except for the Philippines, which is allowed more than 150 lines), while the AKFTA specifies 10% and only for Indonesia and the Philippines. Certain commitments under the ACFTA call for follow up. These are (1) the identification, as soon as possible, of non-tariff barriers (NTBs) other than quantitative restrictions (QRs) and a time frame for their elimination; (2) making information available on the QRs of each Party, and (3) a review of the Sensitive Track in 2008. Under the AKFTA, exports to ASEAN members from the Gaesong Industrial Complex, which is located in North Korea, a short distance from the border with South Korea, is allowed under the tariff reduction modalities, under certain conditions. There are only four companies operating in Gaesong, all large south Korean firms, employing cheap North Korean labour. Its exports will compete with industrial products from the Philippines, not with agricultural products. Japan-Philippines Economic Partnership Agreement (JPEPA) The JPEPA is still under negotiation. As far as trade in goods is concerned, the tariff review has been undertaken on a request-and-offer basis. For tariff reduction/elimination, eight modalities are proposed, with one of them being immediate tariff elimination beginning April 2006. The other modalities provide for the maintenance of tariffs with sudden reduction to zero in 2010 and 2011; maintenance of tariff until 2010 with gradual reduction from 2011 and 0% in 2016, and gradual reduction and elimination in 2011 and 2016. There are goods whose tariffs are proposed to be maintained for several years, after which they are to be renegotiated; other commodities will come under TRQs, and still others will be excluded from liberalisation or renegotiation. For agriculture and fisheries, negotiations were basically concluded in November 2004, subject to amendments. Greater access to the Japanese market were obtained for molasses; muscovado sugar; chicken meat; pineapples; tuna; bananas; sausages; pork meat and ice cream. ASEAN India Free Trade Area (AIFTA) Tariff reduction/elimination follow Normal and Sensitive Tracks. The proposed time frames for the Normal Track are:

• ASEAN 5 (Brunei, Indonesia, Malaysia, Singapore, Thailand) and India – 01 January 2006 – 31 December 2011

• Philippines and India – 01 January 2006 – 31 December 2016

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• CLMV and India – 01 January 2006 – 31 December 2016

For the Sensitive Track, a ceiling on the number of tariff lines and the time frame for reduction still have to be agreed upon by the parties. No Highly Sensitive List was proposed.

Negotiations were stalled over disagreements on the Rules of Origin (ROOs) but were

resumed in February 2005, with the 9th

and latest Trade Negotiating Committee (TNC) meeting held in New Delhi on 09 – 11 November 2005. ASEAN-Australia/New Zealand Free Trade Area (AANZFTA) ASEAN and Australia/New Zealand (acting as one under their Closer economic Relations Trade Agreement or CER) issued a ministerial Declaration on the AFTA-CER Closer Economic Partnership on 14 September 2002. The AANZFTA will be referred to as the ASEAN-CER FTA. The Ministerial Declaration refers to a Free Trade Area only obliquely by mentioning the Angkor Agenda prepared by the High level Task force on the AFTA-CER FTA presented to the Ministers in Thailand on 06 October 2000. No mention is made of establishing an FTA in the Ministerial Declaration or in its Annexes. The 4

th TNC meeting was held in Canberra, Australia on 26 -28 October 2005. A time frame

for the establishment of an FTA BY 2010 was agreed on. Modalities of tariff reduction and elimination were discussed based on those being negotiated under the AKFTA, with a longer time frame for the Philippines. The CER countries want a special chapter on SPS measures and also added the topic of government procurement, labour and the environment.

II. Issues, Problems and Opportunities Given the short time (60 working days) and resources allotted to this study, it was thought more useful to identify the issues, problems and opportunities that may arise from these FTAs and prepare for them through 1) a review of some of the literature on these; 2) interviews of agricultural producers in six subsectors: crops, fresh fruits, vegetables, fisheries, poultry and hogs, and 3) a review of trade data with the six Partner countries, namely, China, Japan, Korea, Australia, New Zealand and India. A review of two studies on a free trade agreement between ASEAN and Australia/New Zealand (the CER countries) and of the JPEPA, employing computable general equilibrium (CGE) techniques, indicated that there are positive net gains for the Partner countries from the establishment of an FTA. A study of trade between ASEAN and China over the period 1980-1996 shows growth at a good pace, with the existence of export niches for the Philippines. In general, the same benefits are believed to accrue from FTAs with China, Korea an India. These conclusions provide the impetus for negotiations. The agricultural producers, however, were cautious, to say the least. The small and

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medium producers from the rice, sugar, fisheries, and vegetables subsectors were fearful that they would go out of business if these were liberalised because 1) their sectors were uncompetitive due to poor infrastructure, high power rates, lack of access to credit and marketing assistance, lack of research, high post harvest waste, and harassment by local government officials; 2) prospective Partner countries give subsidies/domestic support to their agricultural sector while the Philippines has none, and 3) these same countries impose unrealistic sanitary and phyto-sanitary and other measures, which effectively serve as non-tariff barriers (NTBs) to trade. The small fishers warned against resource depletion and environmental degradation resulting from intensive capture fishing arising from the impetus given by freer trade, in the absence of resource management measures. The poultry growers and the onion farmers pointed to the existence of cartels in wet markets which dictated low prices to them and high prices to the consumer, in effect negating the putative benefits of free trade to consumers. The medium and large hog farmers, on the other hand, see opportunities for the export of hog meat to Korea, Japan and China with trade liberalization, provided that hog cholera and foot-and-mouth diseases are eradicated in the country. The large sugar producers propose to engage Japan in a gradual reduction of tariffs on raw and refined sugar through a mechanism of tariff rate quotas (TRQs) over 10 years, but see the Korean market as effectively closed to imports of sugar as a result of state policies. A review of the trade data between the Philippines and the six Partner countries for the period 1997-2004 show that Japan was the country’s largest market for agricultural exports among the six with an annual average value of $424.2 million, followed by Korea with $ 90.2 million and China with $59.8 million. However, the Japanese market has remained at a plateau with minimal growth of 0.22% per annum, while the Korean market has been consistently growing at an average of 8.8% per annum. The Chinese market has grown the fastest, but erratically, at 13.7%. With respect to agricultural imports, Australia was the biggest source, averaging $312 million per year, followed by China with a recorded annual average value of $184.0 million and New Zealand with $153.4 million. However, agricultural imports from Australia declined by an average of 2.8% per year, while imports from China grew, again erratically, at 17.9% per year, and those from New Zealand, by contrast, consistently posted positive growth, averaging 7.9% per year. The Philippines posted a positive and huge agricultural trade balance with Japan through the eight-year period, averaging $406.6 million annually, and a positive but smaller balance with Korea during the same period, with a $66.4 million annual average. In contrast, the Philippines exhibited agricultural trade deficits throughout the period with Australia ($291.5 million annual average), New Zealand ($144.4 million), China ($124.1 million), and India ($113.5 million). With respect to the composition of our exports to the six countries, bananas were the Philippines’ top agricultural export in 2004, valued at $234.4 million or 34.7% of the total, almost four times the value of the second top export, frozen shrimps and prawns, valued at $62.6 million. Crude coconut oil was third, with $56.7 million worth of exports.

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Three-fourths of Philippine banana exports were bought by Japan, followed by China, Korea and New Zealand. Japan was also the major export market for shrimps/prawns, crude coconut oil, pineapples, guavas, mangoes and mangosteen, other vegetables, yellowfin tuna, skipjack and bonito. Korea was the major buyer for not frozen shrimps and prawns, ranked seventh top export in terms of value. Milk ranked as the top two agricultural imports from the six countries in 2004, with a combined value of 4220.1 million, comprising one fourth of the value of total imports from the six countries in 2004. Australia and New Zealand supplied the vast majority. Frozen meat of bovine animals ranked third at $ 64.4 million, of which India supplied 94.9%. Rounding out the top ten agricultural imports from the six countries were wheat, tobacco, fresh cheese, malt, buttermilk, wheat used as fee, and live bovine animals.

III. Findings and Recommendations

Given that two FTAs have been signed (ACFTA and AKFTA), that the Philippines is actively involved in ASEAN with negotiating the ASEAN-CER FTA and the AIFTA and is committed to enter into the JPEPA, while at the same time taking cognizance of the reservations of Philippine agricultural producers, one approach would be to manage the process not only so that the agricultural sector does not get the short end of the bargain, but it can also identify and take advantage of the opportunities that may rise from the FTAs.

Managing the process entails both defense and offense. On the defensive side this

means (1) securing a longer time frame for tariff reduction/elimination to reduce the handicaps which agricultural producers face; (2) increase the proportion of tariffs under the sensitive list, and (3) design appropriate modalities for both the normal and sensitive tracks.

The offensive side would entail (1) targeting the early elimination of tariffs on

agricultural products which the country is already exporting, and (2) identifying export opportunities that will be opened up by freer trade. The latter can be done through revealed comparative advantage (RCA) and/or by studying what our Partner countries are importing.

A combination of a defensive-offensive strategy can also be used. Products can be

placed on the sensitive list while conducting market intelligence and determining the adequacy of domestic supply, so that domestic prices do not rise as a result of exporting the product.

Another issue that arises is the distribution of the benefits of increased exports of

agricultural commodities among large, medium and small producers, and within these enterprises, between the owners and the employees/workers.

Another approach is not to enter into an FTA with those prospective Partner countries

with whom the Philippines has consistently experienced a large agricultural trade deficit for

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the past eight years, and which might be insurmountable due to very stringent SPS measures and other NTBs. India and the CER countries fall into these categories, particularly the latter due to their failure to respond favourably to requests by the Philippines to relax their SPS measures.

It is obvious that if free trade will reverse the large agricultural trade deficits of the

Philippines with Australia, New Zealand, China and India, and additionally increase its trade surplus with Japan and Korea, then the Philippines should go for it. But this will happen only if (1) Philippine agriculture is made more competitive; (2) the Partner countries will remove their agricultural subsidies and NTBs; (3) the Philippines will aggressively market its agricultural products, and (4) the country can identify and develop niche markets quickly.

Despite the many handicaps that agricultural producers face, there are farms which are

highly productive and competitive, the result of higher level of input usage and better farm management. The problem is how to increase the number of such farms.

The continued grant by Partner countries of state subsidies to agricultural products in

which the Philippines can compete substantially reduces the benefits from free trade. Japan’s and Korea’s protection of its sugar industry is a case in point.

To aggressively sell its agricultural produce in the world market will entail a paradigm

shift in both the Department of Agriculture and agricultural producers. On the part of the DA, it should be more actively involved in the promotional/marketing efforts of the DTI’s Bureau of Export Trade Promotion (BETP) or it could set up its own counterpart. But funding is a problem.

Additionally, the DA can hire more agricultural attaches or, due to funding constraints,

develop instead the capabilities of existing attaches in key cities or regions of the world. It has also been suggested that the agricultural, commercial and tourism attaches work together to be more effective and efficient.

Agricultural producers, organized into NGOs and peoples’ organizations or POs, have

a large role to play in identifying and exploiting export opportunities. They can help each other in conducting market intelligence through the Internet and through visits to Partner countries and participation in trade fairs.

Summing up, the studies reviewed conclude that the benefits of freer trade outweigh

the costs. Therefore, it is to the advantage of ASEAN (and the Philippines) to enter into FTAs. They premise their findings on the existence of the conditions of perfect competition and other prerequisites like the rule of law and the provision of an enabling environment by the government. The experience of the producers themselves indicate that these conditions are not existing in the country, or if existing, need substantial improvement. The fulfillment of these conditions should constitute the road map towards the achievement of the desired results. Joseph H. Francia 03 April 2006

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REGIONAL/BILATERAL FREE TRADE AGREEMENTS AND PHILIPPINE AGRICULTURE: ISSUES, PROBLEMS AND OPPORTUNITIES Introduction As has been well reported in the media and elsewhere, regional/bilateral free trade agreements or areas (the two will be used interchangeably) or FTAs received a strong impetus due to the failure of the WTO Ministerial Conferences in Seattle (1999) and Cancun (2003). The Philippines, as a member of ASEAN, has entered into two regional FTAs, and is negotiating two more. The ASEAN-China Free Trade Area and the ASEAN-Korea Free Trade Area were signed in 2004 and 2005 respectively. The two that are still being negotiated are ASEAN-India and ASEAN-Australia/New Zealand. A bilateral agreement with Japan, the Japan-Philippines Economic Partnership Agreement (JPEPA), is also under negotiation. It is clear to the Philippines’ seasoned negotiators that balanced bilateral trade agreements are more difficult to conclude than multilateral agreements because of asymmetric bargaining power and logistics, which are always in favour of the developed or bigger economy. Thus, a regional trade agreement, where the Philippines negotiates as part of ASEAN, is preferable. The aim of this report is to try to identify and discuss the issues, problems and opportunities that may arise from these FTAs, and come up with recommendations for the Department of Agriculture and for agricultural producers themselves, given the limitations of time and resources. The report focuses on the agricultural sector and does not touch on the implications of these FTAs on the industrial and services sectors, or on investments. There are three parts: (1) a review of the agreements/negotiations; (2) identification/discussion of issues, problems and opportunities that may arise from these agreements, and (3) findings and recommendations. I A Review of Regional/Bilateral Free Trade Agreements of the Philippines ASEAN-China Free Trade Area (ACFTA)

Framework Agreement A Framework Agreement on Comprehensive Economic Cooperation was signed by the leaders of ASEAN and China on 04 November 2002. Its objectives are to (1) strengthen and enhance economic development, trade and investment cooperation among the Parties; (2) liberalise trade in goods; (3) foster closer economic cooperation, and (4) bring about the economic integration of the newer ASEAN member states.

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The measures to achieve the above objectives are: (1) gradual elimination of tariffs and non-tariff barriers to trade in goods; (2) progressive liberalization of trade in services; (3) achievement of an open and competitive investment regime to promote investment in the area, and (4) special and differential treatment for the newer ASEAN member states. The priority areas for economic cooperation are (1) agriculture; (2) information and communications technology; (3) human resource development; (4) investment, and (5) the development of the Mekong River basin. Early Harvest Program (EHP) To accelerate the liberalization of trade in goods, China proposed an Early Harvest Program (EHP) to commence on 01 January 2004, covering chapters 1 – 8 of the Harmonised System (HS) Code. These include live animals, animal products, trees, flowers, vegetables, fruits and nuts. The ASEAN members agreed. All products falling within these chapters were to be included, except for those products falling in the Exclusion Lists of the Parties. The tariff concessions on these products were to be “multilateralised”, i.e. Parties shall enjoy the concession of all the other Parties as long as the product is in the Program. This meant that, where previously one ASEAN member did not liberalise one particular product to other ASEAN members, now, if the product was included in the EHP, it was liberalized, not only for China, but for the other ASEAN members. It was also agreed that products beyond chapter 8 could be included in the EHP. Tariff concessions would apply only to Parties who have extended the tariff concessions. The tariff reduction and elimination modality under the EHP is as follows:

• MFN tariff rates greater than 15% were to be brought down to 10% in 2004, 5% in 2005, and 0% in 2006, all on 01 January of each year.

• MFN rates from 5% to 15% were to be reduced to 5% in 2004 and 0% in 2005 and 2006, all on 01 January of each year.

• MFN rates less than 5% were to be brought down to 0% beginning 01 January 2004.

All products with MFN rates of 0% shall remain at 0%, and all tariff rates reduced to 0% shall remain at 0% With respect to the EHP covering chapters 1 – 8, Brunei, Indonesia, Myanmar, Singapore, and Thailand did not exclude any item. Cambodia excluded 30 8-digit HS Codes; Vietnam excluded 15 9-digit HS Codes, and Laos PDR, Malaysia and the Philippines were to complete negotiations by 01 March 2003.

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With respect to the EHP covering items beyond chapter 8, Brunei and Singapore had no exclusions, while Cambodia, Lao PDR, Myanmar, and Vietnam excluded all tariff lines. Indonesia excluded but liberalised 14 8/9 digit HS Codes including coffee, vegetable fats and oils, soap, vulcanized rubber, anti-dazzle glass for cathode-ray tubes, seats/furniture of cane, bamboo and similar materials. Thailand liberalised only two items: anthracite coal and coke/semi-coke. Malaysia and the Philippines were to have concluded negotiations on this aspect by 01 March 2003. On both aspects, the Philippines concluded negotiations on the EHP on 27 April 2005, with an inclusion of a total of 214 8-digit HS Codes, with 209 falling in chapters 1 – 8 and five items in the other chapters. Tariffs on these would be reduced to 0% on 01 January 2006. Agreement on Trade in Goods (ATIG) An Agreement on Trade in Goods was signed on 29 November 2004 under which gradual tariff reduction would be undertaken on two tracks: Normal and Sensitive. (In what follows, lines in bold indicate portions of the agreement that need to be followed up as to the action taken.) Liberalisation under the Normal Track would commence on 01 July 2005, with tariffs eliminated by 01 January 2010 between China and the ASEAN 6 (Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand) and by 2015 between China and CLMV (Cambodia, Laos, Myanmar and Vietnam). Flexibilities were allowed for ASEAN members to eliminate tariffs on not more than 150 lines by 2012 for the ASEAN 5 and 2018 for CLMV. The Philippines was allowed flexibility for more than 150 lines. Modalities for reduction of applied MFN rates for the ASEAN 6 are as follows:

• Rates equal to or greater than 20% shall be reduced to 20% on 01 July 2005, 12% in 2007, 5% in 2009 and 0% in 2010

• Rates equal to or greater than 15% but less than 20% shall be reduced to 15% in 2005, 8% in 2007, 5% in 2009, and 0% in 2010

• Rates equal to or greater than 10% but less than 15% shall be reduced to 10% in 2005, 8% in 2007, 5% in 2009 and 0% in 2010

• Rates equal to or greater than 5% but less than 10% shall be reduced to 5% in 2005, maintained at 5% in 2007, and brought down to zero beginning 2009

• Rates equal to or less than 5% shall be reduced to 0% starting 2009. The agreement to place thresholds on tariff reductions makes the timetable more demanding than it appears to be. Thus, for the ASEAN 6, 40% of the lines under the Normal Track should be at 0% - 5% not later than 01 July 2005, 60% should be at the same level by 2007 and all tariff lines, except for 150, shall also be 0% - 5% by 2010.

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The Sensitive Track is further subdivided into a Sensitive List and a Highly Sensitive List. Tariffs under the former list are to be reduced to 20% by 2012 for the ASEAN 6 and China, and 0% - 5% by 2018; for CLMV and China, the agreement is 20% by 2015 and 0% - 5% by 2020. Tariffs on the latter list are to be brought down to 50% by 2015 for ASEAN 6 and China, and 2018 for CLMV and China. With respect to the magnitude of tariff lines to be included under the Sensitive Track, the Parties agreed to limit these to 400 at the 6-digit HS Code level, accounting for 10% of import values in 2001 for the ASEAN 6, and 500 lines for the CLMV, with Vietnam to determine the ceiling on import values that these would represent by 31 December 2004. For the Highly Sensitive List, 40% of the Sensitive Track or 100 lines, whichever is lower, are to be included in the case of the ASEAN 6, 40% or 150 lines for CLM, while the allotment for Vietnam is to be determined by 31 December 2004. It is important to note that Article 7 adopts the WTO disciplines on non-tariff measures, technical barriers to trade, sanitary and phytosanitary measures, subsidies and countervailing measures, anti-dumping measures and intellectual property rights. Among the disciplines that are of interest to Philippine agriculture is the Agreement on Agriculture (AOA) in which Members commit to domestic and export support reductions in accordance with the policies and criteria laid out in the Agreement. Article 8 states that “Each Party undertakes not to maintain any quantitative restrictions at any time unless otherwise permitted under the WTO disciplines”. Non-WTO members shall phase out their QRs three years from the effectivity of the ATIG, except for Vietnam, which has four years. Paragraph 2 states that NTBs other than QRs shall be identified as soon as possible and a time frame for the elimination of these NTBs agreed upon by the Parties. Paragraph 3 provides for making information available on QRs of each Party. Article 9 provides for safeguard measure. Article 11 allows the Parties to adopt restrictive import measures if under threat of serious balance of payments and external financial difficulties. Article 14 recognises China as a full market economy. Article 17 of the ATIG provides for a review of the Sensitive Track in 2008 “with a view to improving the market access condition of sensitive products, including the further possible reduction of the number of products…” Issues Specific to the Philippines With respect to the implementation of tariff reduction under the Normal Track, an Executive Order still has to be issued to implement this. It was supposed to have begun

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on 01 July 2005. The delay has partially been caused by a controversy on whether executive action was sufficient to implement the Normal Track or whether the Senate had to ratify the ACFTA before it could be started. The Department of Justice issued a legal opinion in early August 2005, stating that an executive action would suffice. However, the EO is still to be signed by the President. Thus, the tariff reduction under the Normal Track has been held in abeyance. The MOU between the Philippines and China regarding the EHP, signed on 27 2005, during the state visit of President Hu Jintao, contains the following provision, “The Philippines agreed to expeditiously complete the Pest Risk Analyses (PRA) for the importation of vegetables, in particular carrots, cabbages, gingers and potatoes from China, in accordance with the provisions of the WTO SPS Agreement. The relevant authorities and enterprises in China shall provide the necessary information for reference of the Philippine authorities to facilitate the expeditious completion of the Pest Risk Analysis process.” Since the vegetables mentioned in the provision are not included in the EHP, the Program can commence on 01 January 2006, even if the PRA has not been completed by that date. Also 27 April 2005, two other MOUs were signed, one on the promotion of trade and investment cooperation, and the other on special treatment for rice. The first MOU mentions agriculture, mining, infrastructure, ICT, science and technology, energy, services, tourism, customs, quarantine and sanitary and phytosanitary procedures, standards and conformity assessment, and intellectual property rights protection as areas of “vast potential” in which strategic cooperation will be carried out. The same MOU also creates a joint working group on mineral resources cooperation under the Philippines-China Joint Trade Committee (JTC) in furtherance of the MOU on Mining Cooperation signed on 18 January 2005. The second MOU states that China will agree to the Philippines’ request for a seven-year extension, i.e. until 2012, of the special treatment of its rice under Annex 5 of the Agreement on Agriculture of the WTO. In return, when it secures the petitioned extension, the Philippines agrees to provide China with a Country Specific Quota of 25,000 MT yearly, increase the minimum market access of rice to 350,000 MT yearly, and to reduce the in-quota tariff on rice from 50% to 40%. Remaining Issues The unresolved issues are the negotiations between Vietnam and China on the modalities for tariff reduction and elimination; the first package of product specific rules of origin, and the treatment of tariff rate quotas (TRQs). ASEAN-Korea Free Trade Area (AKFTA) Joint Declaration on Comprehensive Economic Cooperation, November 2004

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ASEAN and the Republic of Korea signed a Joint Declaration on Comprehensive Cooperation Partnership on 30 November 2004. It includes (1) political and security cooperation; (2) closer economic relations; (3) narrowing development gaps within ASEAN and between ASEAN and the ROK; (4) enhancing competitiveness, promoting knowledge-based economy, cooperation in education, science and technology; (5) enhancing mutual understanding; (6) coping with global challenges such as food security and safety, climate change, communicable diseases, etc.; (7) cooperation in regional/international arenas, and (8) deepening East Asia cooperation. The establishment of the ASEAN-Korea Free Trade Area (AKFTA) would be the means to achieve the second objective, i.e. closer economic relations, covering trade in goods, services and investment. As the Joint Declaration states, “The objective of the AKFTA is to move towards deeper economic integration…through progressive elimination of all forms of barriers to trade in goods, services and investment; and through trade and investment facilitation and economic cooperation measures. The AKFTA will include provision for flexibility, including special and differential treatment, such as technical assistance and capacity building programmes, especially for the newer ASEAN members….” Framework Agreement on Comprehensive Economic Cooperation On 13 December 2005, during the 11th ASEAN summit in Kuala Lumpur, Malaysia, ASEAN and Korea signed the Framework Agreement on Comprehensive Economic Cooperation which reiterates the sentiments expressed in the 2004 Joint Declaration. However, the Framework Agreement specifically provides for an Agreement on Trade in Goods (ATIG), an Agreement on the Trade in Services, an Agreement on Investment, and an Agreement on dispute Settlement Mechanism. The ATIG shall include (1) detailed rules for the progressive reduction and elimination of duties; (2) rules of origin; (3) modification of commitments; (4) non-tariff measures, sanitary and phytosanitary measures, and technical barriers to trade; (5) safeguard measures, and (5) WTO disciplines and reductionand elimination of non-tariff barriers. Agreement on Trade in Goods

An Agreement on Trade in Goods (ATIG) was signed on the same date as the Framework Agreement but has not been made public until Thailand and Korea settle their differences on the liberalisation of the trade in rice. Nevertheless, an outline of its features follows.

Like the ACFTA, the programme for tariff reduction and elimination is divided in

the normal and sensitive tracks. The modalities for the normal track are similar to those of the ACFTA, except that Korea has agreed to eliminate tariffs on 70% of its tariff lines on 01 July 2006. For ASEAN members, tariff reduction is to commence on the same

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date, with elimination by 2010. An exception to this deadline was made for the Philippines and Indonesia, who can maintain 10% of their tariff lines that are included in the normal track at non-zero levels until 2012.

The schedule of tariff reduction under the normal track is to be submitted by each

ASEAN member on 25 January 2006 for internal agreement. Between 24 – 28 April 2006, agreement is to be reached with Korea, with the normal track becoming effective on 01 July 2006.

The sensitive track is to cover 10% of all tariff lines at the six-digit level which

account for 10% of latest year for which import values are available. It is subdivided into the sensitive list and the highly sensitive list. The former is to cover 70% of the tariff lines under the sensitive track, with reduction to commence in 2012, reaching 0% - 5% in 2016.

The highly sensitive list is to cover the remaining 30% of tariff lines under the

sensitive track and is further subdivided into five categories. Those under category A will be reduced to 50% in 2016, category B to 20% also in 2016 and category C tariffs will be cut in half in the same year. Category D covers the establishment of tariff rate quotas, which are to be negotiated individually by each ASEAN member, with Korea. Finally, category E comprises an exclusion list of 40 tariff lines whose tariffs will not be reduced at all.

The deadline for submission of the lists to the ASEAN is 25 January 2006, and for

agreement with Korea by 24 – 28 April 2006. Our government negotiators adopted, as part of their negotiating strategy, the elimination of tariffs on the 28% of our total export value to Korea, which still have tariffs, of which 18% is agri-linked and 10% are industry-linked. Among those agricultural exports to Korea which are imposed tariffs are bananas (tariff rate of 30%), not frozen shrimps and prawns (20%), and frozen shrimps and prawns (20%). As part of the ATIG, exports to ASEAN member states from the Gaesong Industrial Complex, located in North Korea, a short distance from the border with South Korea, will be considered as originating from South Korea. However, the following conditions have to be met: (1) exports from Gaesong will be limited to 100 six-digit tariff lines; (2) exports will be subject to special safeguard measures as the need arises; (3) the arrangement will be reviewed after five years, with the possibility of its being rescinded, and (4) South Korea will provide trade statistics annually.

There are only four companies operating in Gaesong, all large South Korean firms, employing cheap North Korean labour. Exports of Gaesong will compete with the following Philippine industries: clothing, footwear, base metals, appliances, cars and auto parts.

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Japan-Philippines Economic Partnership Agreement (JPEPA) The Japan-Philippines Economic Partnership Agreement is still being negotiated. As far as the trade in goods is concerned, eight modalities for tariff reduction/elimination have been proposed, starting in April 2006 and ending in 2016, a period of 10 years and three quarters. The modalities are categorized as follows: A Immediate tariff elimination; base or current rates range from zero to 40% B4* One single installment, i.e. 0%, on 01 January 2010; base rate is 1% B5 Gradual reduction over 4.75 years (April 2006 – 01 January 2010), with 0% in 2011; base rates range from 1% to 15% B5* Gradual reduction over four years beginning 2007 with 0% in 2011; range is 1% to 5%. B5** Maintain tariff until 2011, when it will be 0%; range is 3% to 5% B10 Gradual reduction from April 2006 to 2015; 0% in 2016; range is 1% to 65% B10* Gradual reduction from 2007 to 2015; 0% in 2016; range is 5% to 15% B10** Maintain until 2010; gradual reduction 2011 – 2015; 0% in 2016; range is 3% to 15% There are goods whose tariffs are proposed to be maintained for several years after which they will be renegotiated. An example is petrochemicals, the current 15% tariff of which is proposed to be renegotiated in 2010. Other commodities will be given special tariff treatment, i.e. tariff rate quotas (TRQs). The proposed in-quota rate is 0%, while the out-quota rate proposed is the applied MFN rate at the time of importation or 7%, whichever is less, to be negotiated in the third year after the effectiveness of JPEPA, and every three years thereafter. The proposed quota quantities are 175,000 MT for the first year, 187,500 MT for the second year and 200,000 MT for the third year, with negotiation in the third year and every three years thereafter. No particular commodity was indicated for special tariff treatment. Rice is the only agricultural commodity excluded from liberalisation. For agriculture and fisheries, negotiations were basically concluded in November 2004 but these are still subject to amendments in compensation for concessions by Japan in response to Philippine sensitivities in the industrial sector. Subject to the above proviso, greater access to the Japanese market for agriculture and fisheries were obtained. These are the following: A. Sugar

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1. Molasses – A tariff rate quota (TRQ) will be introduced in the third year of the treaty, amounting to 2000 MT, increasing to 4000 MT the following year, at 50% of the MFN applied rate. 2. Muscovado Sugar – A TRQ of 300 MT will be introduced in the third year, increasing to 400 MT the next year, at 50% of the MFN applied rate, with the product to be retailed in one-kg containers. B. Chicken Meat

1. Meat and edible offal of chicken – Creation of TRQ of 3000 MT in the first year, increasing by 1000 MT annually to 7000 MT in the fifth year, at an in-quota rate of 8.5%, with renegotiation in year five or upon conclusion of current WTO negotiations, whichever comes first.

2. Chicken legs, fresh, chilled or frozen – Renegotiation in the third year or upon conclusion of current WTO negotiations, whichever comes first.

C. Pineapples 1. Fresh Pineapples - Creation of TRQ for small pineapples (less than 900g/pc with crown), beginning at 1000 MT in year 1, increasing by 200 MT yearly to 1800 MT in year 5, with an in-quota tariff rate of 0%, and renegotiation in year 5 or upon conclusion of current WTO negotiations, whichever comes first.

2. Dried Pineapples – Tariff elimination within 10 years.

3. Pineapple Juice – Tariff reduction by 10% annually over five years D. Tuna

1. Yellowfin tuna, skipjack – Tariff elimination within five years 2. Other tuna – Tariff elimination on entry into force of JPEPA 3. Prepared/preserved tuna – Tariff elimination within five years 4. Smoked tuna – Tariff elimination within five years 5. Other tuna – Renegotiation in year 5 or upon conclusion of current WTO

renegotiations, whichever comes first 6. Other fishery products – Either immediate tariff elimination or reduction in five to

seven years, or renegotiation in year 5 or upon conclusion of current WTO negotiations, whichever comes first.

E. Bananas

1. Fresh bananas – Tariff elimination for small bananas from GSP rates in 10 years; tariff reduction over 10 years by 20% of GSP rate for summer regular-sized bananas and by 10% for winter regular-sized bananas, with final rates of 8% and 18% respectively.

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2. Various processed bananas – Either immediate elimination or tariff reduction towards elimination in five to seven years.

F. Sausages - Creation of a TRQ, with starting volume of 100 MT, increasing to 500 MT in the fifth year, with reduction of MFN rate by 20% over five years, including immediate reduction of 10% upon entry into force of JPEPA. G. Prepared/Preserved Pork Meat – Creation of a TRQ, with starting volume of 400 MT increasing to 1200 MT in the fifth year, with reduction of MFN rate by 20% over five years, including immediate reduction of 10% upon entry into force of JPEPA.

H. Ice Cream – Creation of a TRQ with starting volume of 150 MT, increasing to 500 MT in the fifth year, with reduction of MFN rate by 30% over five years, including immediate reduction of 10% upon entry into force of JPEPA.

There have been signs of recent policy shifts in Japan regarding agriculture.

Fujisue and Koike report in the April 2005 issue of the Far Eastern Economic Review, that at the end of 2004, the Ministry of Agriculture, Forestry and Fisheries released a paper on regional market integration in which, for the first time, it examines imports as a means of maintaining a stable level of domestic food supply. This is due in part to two factors: (1) the recognition that Japan needs to improve its “abysmal” self-sufficiency in food, and (2) the fact that the number of workers in the agricultural sector has plummeted to one-third of the level that existed 40 years ago, hence weakening rural political power.

ASEAN-India Free Trade Area (AIFTA) ASEAN and the Republic of India signed a Framework Agreement on Comprehensive Economic Cooperation on 08 October 2003 which has the following objectives: (1) strengthen and enhance economic, trade and investment cooperation between the Parties; (2) progressively liberalise and promote trade in goods and services as well as create a transparent, liberal and facilitative investment regime; (3) explore new areas and develop appropriate measures for closer economic cooperation between the Parties, and (4) facilitate the more effective integration of the new ASEAN Member States and bridge the development gap among the Parties. In general, as a measure for closer economic cooperation, it was agreed to establish an ASEAN-India Regional Trade and Investment Area (RTIA), which includes a Free Trade Area (FTA) in goods, services and investment. Under the FTA regime, as in other FTAs, the products covered by the tariff reduction and/or elimination program are divided into the Normal and Sensitive Tracks. The time frames for goods under the Normal Track are as follows:

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• ASEAN 5 (Brunei, Indonesia, Malaysia, Singapore, and Thailand) and India – 01 January 2006 to 31 December 2011

• Philippines and India – 01 January 2006 to 31 December 2016 • CLMV and India – 01 January 2006 to 31 December 2016

No time frame was set for tariff reduction under the Sensitive Track, nor was there a Highly Sensitive List proposed. The Framework Agreement, however, provided for a maximum ceiling on the number of products listed under the Sensitive Track, to be mutually agreed upon by the Parties. Article 7 of the Framework Agreement provides for an Early Harvest Program (EHP), which was to commence on 01 November 2004 to be completed by 31 October 2007 for the ASEAN 6 and India, and 31 October 2010 for the CLMV. A list of products for the EHP was drawn up. However, due to disagreements on the Rules of Origin (ROO), negotiations have stalled, resulting in the scrapping of the EHP. Negotiations were resumed in February 2005, with the 8th Trade Negotiating Committee (TNC) meeting, followed by the 9th TNC meeting in New Delhi on 09 – 11 November 2005, which narrowed down the options for ROO. ASEAN-Australia/New Zealand Free Trade Area (AANZFTA) Ministerial Declaration ASEAN and Australia/New Zealand (acting as one under their Closer Economic Relations Trade Agreement or CER) issued a Ministerial Declaration on the AFTA-CER Closer Economic Partnership on 14 September 2002 . The AANZFTA will be referred to as the ASEAN-CER FTA. The goals of the Closer Economic Partnership (CEP) are as follows: (1) deepen and broaden cooperation in all economic fields; (2) promote greater trade and investment flows regionally and globally; (3) contribute to trade and investment facilitation through minimizing impediments, reducing costs, and related capacity building; (4) improve business competitiveness; (5) narrow the developmental gap and deliver tanglible benefits to all participating countries, especially for the newer ASEAN Member Countries, and (6) promote transparency of regulations and cooperation among relevant authorities. The Ministerial Declaration refers to a Free Trade Area only obliquely by mentioning the Angkor Agenda prepared by the High Level Task Force on the AFTA-CER Free Trade Area presented to the Ministers in Thailand on 06 October 2000. No mention is made of establishing an FTA in the Declaration or in its Annexes. What the Ministerial Declaration does is specify the Fields of Cooperation and the Initial Work Program. The Fields of Cooperation include, but are not limited to,

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promoting and facilitating trade and investment, capacity building, new economy issues and other areas of cooperation. The development of further cooperative activities could be drawn from the Angkor Agenda and the recommendations of the AFTA-CER Business Council. The new economy issues were further specified in Annex 1 to the Declaration. These are information communications technology, intellectual property rights, and anti-competitive practices. The Initial CEP Work Program will include, but not be limited to, technical barriers to trade and non-tariff barriers, customs cooperation, capacity building, trade and investment promotion and facilitation, standards and conformity assessment, electronic commerce, and small and medium enterprises (SMEs). The fourth Trade Negotiating Committee (TNC) meeting was held in Canberra, Australia, on 26 – 28 October 2005. A time frame for the establishment of a Free Trade Area by 2010 was agreed upon. Modalities of tariff reduction and elimination were discussed, based on the modalities being discussed under the AKFTA, with a longer time frame for the Philippines. The CER countries want a special chapter on sanitary and phytosanitary measures and also added the topics of government procurement, labour, and the environment. Due to the confidential nature of the report on the fourth TNC meeting, no further details are available.

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II. Issues, Problems and Opportunities for Philippine Agriculture Arising from Regional/Bilateral Free Trade Agreements Introduction An identification and discussion of the issues, problems and opportunities of the four regional trade agreements and one bilateral trade agreement for Philippine agriculture will be undertaken by (1) a review of the results of studies already done; (2) interviews with some of the stakeholders representing six subsectors: crops; fresh fruits; vegetables; fisheries; poultry, and swine, and (3) a review of the trade data between the Philippines and the six countries involved. The Framework Agreements themselves and the Agreement on Trade in Goods (ATIG) signed with China and Korea, all hold out the hope that further economic integration among the Parties through increased trade in goods and services, and increased investment flows, will result in increased incomes and employment overall, presumably in all sectors of the economy: agriculture, industry and services. A Review of Studies A review of studies is not meant to be exhaustive. There are two economic studies that are reviewed here on the economic benefits and costs of free trade areas with the countries that are of interest in this study. One is on the ASEAN-Australia/New Zealand FTA (also known as the ASEAN-CER FTA), and another is on the Japan-Philippines Economic Partnership Agreement (JPEPA), which also touches on the impact of several proposed bilateral agreements of the Philippines with the U.S., China, Korea, Australia, and New Zealand. A third study on political and economic relations between ASEAN and China includes trade. ASEAN-CER FTA The Angkor Agenda (2000), the report of the high level task force on the AFTA-CER (Australia and New Zealand Closer Economic Relations Agreement) Free Trade Area, summarises the benefits and costs that free trade areas are thought to bring. The economic gains are enumerated as the following: (1) market enlargement; (2) trade creation; (3) efficiency and enhanced competitiveness; (4) industry relocation; (5) increased foreign direct invest (FDI), and (6) improved growth potential. Market enlargement refers to the fact that an FTA will pool the markets of member economies, resulting in a significant increase in the market size (in the case of the ASEAN-CER, estimated to be a doubling, with a combined total of GNP US$ 1 trillion, excluding Brunei and Myanmar). Taking into account effective demand, the

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Australian Center for International Economics (CIE), using computable general equilibrium (CGE) techniques, estimated that the ASEAN-CER FTA will generate an additional US$ 48 billion in GDP, with more than half to be reaped by ASEAN countries. Trade creation means the increase in trade due to the reduction of tariffs and non-tariff barriers, resulting in welfare gains to consumers in terms of lower prices for a bigger volume of imported goods and their domestic substitutes, with greater variety of goods to choose from. Efficiency and enhanced competitiveness result from market enlargement, leading to economies of scale, and increased competition due to the opening up of markets, stimulating producers to adopt cost-cutting techniques and best practice technologies. Industry relocation means that, with more open trade and capital flows, a more efficient pattern of production will emerge, drawn along the lines of comparative and competitive advantages. Increased foreign direct investment (FDI) encompasses not only the increase due to investment liberalization measures but also that due to increased productivity and income gains due to trade liberalization, leading to higher returns on capital. The CIE study estimated that, by 2010, the ASEAN-CER would experience extra capital inflows of US$ 37.7 billion principally from the US, Japan and Europe, with US$ 30 billion flowing into ASEAN and the balance to Australia and New Zealand. Improved growth potentials refer to the development of export industries, creation of employment, and the growth of small and medium enterprises (SMEs). On the other hand, the Angkor Agenda also points to the following economic costs: (1) trade diversion; (2) decline in tariff revenue, and (3) adjustment costs such as short run displacements. Trade diversion refers to the potential for trade to be diverted from more efficient nonmembers of the FTA to less efficient members. If the trade diversion effect is greater than the trade creation effect, it can lead to welfare loss. No evidence for trade diversion has been found for ASEAN. Decline in tariff revenue is an obvious result of trade liberalization. The CIE study downplays its importance for ASEAN members with MFN tariff rates greater than CEPT rates, citing the stimulus that this gives to governments to search for alternative, more efficient sources of revenue such as a value added tax. Adjustment costs take the form of displacement of workers and rationalisation of some industries and firms which cannot meet the competition from trade liberalisation or will not adopt cost-cutting techniques or best technological practices. The Angkor Agenda report recognises that adjustment costs, “while sort-run in nature, have to be

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addressed effectively in order to ease the burden on the affected sectors and to ensure that the long-run gains may be achieved.” JPEPA

A paper by Kenichi Kawasaki (2003) on the impact of the FTA between Japan and the Philippines, using CGE, indicates that the Philippines’ real GDP will increase by approximately 3 % and export volume will go up by 5%. Kawasaki does not present figures for the impact on Japan’s GDP and export volume. It should also be noted that his paper includes an analysis of the impact of global and regional trade liberalization on Japan and the Philippines. The paper shows that agriculture and agri-based industries are heavily protected in Japan, whereas the industrial sector has very little protection, except for apparel and textiles and leather. Trade protection makes up 382.3% of import prices of grain, 44% of meat, 40.8% in other primary industry, and 36.4% in processed food, compared to 50%, 19.4%, 8.2% and 16.8%respectively for the Philippines. The JPEPA will also lead to slight declines of production in Japan of the grains and other primary industry subsectors, with hardly any change in processed food, but a slight increase in the meat subsector. For the Philippines, these same subsectors will experience increases in production ranging from less than 1% to more than 4%. Overall, the paper reaches the following conclusions regarding the impact of the JPEPA:

• Macroeconomic Benefits - Increase in real GDP significant for the Philippines with equally large welfare improvements

• Balance of Payments – Japan’s trade balance will improve significantly while capital inflows into the Philippines will be a source of long-term economic growth

• Industry Structure - Japan will gain in transport equipment production and exports while the Philippines will gain in various sectors including manufacturing

Kawasaki also estimates the real GDP gains for the Philippines as a result of bilateral FTAs with the U.S. (almost 4%), China (1%), Korea (1%), Australia (very little) and New Zealand (0%). (These are approximations since they are read off a graph rather than a table.) On the ASEAN–China FTA, Kawasaki estimates that China will experience a 0.97% increase in real GDP, Indonesia 1.9%, the Philippines 2.8%, Singapore 5.6%, Malaysia 6.8%, Thailand 10.1%, and Vietnam 11.9%. ASEAN-China A paper on China’s economic growth and its implications for ASEAN and the Philippines was written by Ellen Palanca (2001) using trade statistics from 1980 to 1996.

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While developments have occurred since then, Palanca’s analysis can provide guidelines in assessing the impact of the FTAs on the Philippines, particularly its agricultural sector. Growth of trade between China and the original five ASEAN members (Indonesia, Malaysia, the Philippines, Singapore and Thailand) rose dramatically between 1980 and 1996. The value of ASEAN 5 exports to China increased from $ 539 million to $ 9,553 million in 1996, or an increase of 1,600%. On the other hand, the value of China’s exports to the ASEAN 5 increased 638% from $ 1,196 million in 1980 to $ 8,829 billion in 1996. With respect to particular countries, the growth of Philippine exports to China grew at an average of 13.2% over 1980–1996, the lowest, while that of Indonesia was the highest at 41.6%. However, for the period 1988–1996, the Philippines growth rate of exports to China was the highest among the ASEAN 5 at 22.0% while Singapore was the lowest at 14.0%. On the import side, the Philippines’ growth rate of imports from China was also the lowest at 8.9%, with Indonesia posting the highest growth rate at 30.2% for the 16 year period, 1980–1996. But for the second half of this period, 1988-1996, the Philippines imported goods from China at a higher annual growth rate of 18.1%, being the third highest for that period. (See Palanca, Tables 15 and 16, pp. 127-28.) Giving more specifics on the bilateral trade between China and the Philippines, Palanca identifies export and import niches, based on revealed comparative advantage (RCA) which is measured by the product’s share in a country’s exports relative to its share in world trade. If the former is greater than the latter, this fact reveals that it has a comparative advantage. However, because RCA is based on trade data, it is affected by distortions due to policies. Niches are identified where the RCA of a product is greater than one and significantly higher than the RCA of another country in the same product. Thus, with respect to China, Palanca identifies the following export niches in Philippine agriculture: fresh fruits; dried/fresh nuts; shellfish and fish (fresh and tinned); preserved fruits; sugar and honey; animal feed stuff; unmanufactured tobacco; fuel wood charcoal and vegetable fiber (excluding cotton and jute). China’s export niches to the Philippines in agriculture are: live animals; tinned meat; eggs, fresh/preserved vegetables; tea; spices, and tobacco manufactures. Positions of the Agricultural Producers The CGE models have their value in giving a picture of the overall benefits and costs of free trade agreements. There are constant refinements in these models in order to be as realistic as possible, such as the increase in the number of production sectors included in the models. However, they cannot capture all the realities on the ground, so to speak. Hence, they have to be complemented by the experience of those who know these production sectors intimately.

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Moreover, as those who are the most directly affected, and with the most at stake in the implementation of free trade areas, producers in the crops, fresh fruits, vegetable, fisheries, poultry and hogs subsectors were interviewed regarding their evaluation of the issues, problems and opportunities that will arise from these FTAs. Except for sugar and hog farming, these are small producers. Their position papers were also looked at. Representatives of commercial fishers and large poultry raisers were contacted but were not available for interview. The time allotted for this study and the resources available did not permit a validation of the positions of the agricultural producers whose positions are presented here. For the reasons stated above, however, it is important that their point of view be considered. Without them, there would be no agricultural sector. The validation of their positions could be the subject of a separate study. Crops The Philippines has had to import ten percent of its rice consumption since the 1990’s. This has been attributed to an annual population growth of 2.3% annually from 1990 to 2000, outstripping rice production annual growth rate of 1.8% over the same period (Philippine Peasant Institute, 2003). Because rice is grown by a great majority of farmers, rice importation has become a political issue. Corn is uncompetitive because of high production costs, high post-harvest waste and high shipping costs (basically from Mindanao to Manila). Again, because it is grown by many farmers, liberalizing trade in corn poses the threat of unemployment. Sugar The Sugar Alliance of the Philippines (SAP) has formally requested market access privileges for Philippine raw and refined sugar and muscovado in the Japanese market in the form of a tariff rate quota (TRQ) or minimum access volume (MAV) for a predetermined volume, to increase by 10% annually from 2006 to 2016.

At the same time, the SAP proposes that Japan’s MFN tariff or its equivalent in

non-tariff measures (NTMs) such as fees, liens and levies on refiners, be reduced by 50% outright starting in 2006, to be further reduced by 5% annually until the tariff is zero in 2016.

The rationale for the SAP’s proposal for access to the Japanese market for sugar is

(1) the fact that two-thirds of sugar consumed in Japan is imported; (2) 90% of imports are supplied by Australia, Thailand and South Africa (the JPEPA provides an opportunity for the Philippines to also export sugar to Japan); (3) Philippine sugar exports to Japan will help balance the Philippines’s large trade deficit with Japan, and (4) the Philippine sugar industry can supply the quota it proposes.

With respect to the AKFTA, the Philippine Sugar Millers Association (PSMA) is

for the exclusion of raw and refined sugar in the free trade agreement for the following

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reasons. First, Korea is not a producer of sugar cane or sugar beet but imports raw sugar at dumped prices in the world market at 2.7% tariff rate. The raw sugar is refined by its three refineries.

Second, Korea imposes a 50% tariff based on CIF value on refined sugar and has

not imported any. Third, the three refineries are protected by being the only ones allowed to import raw sugar under an import license system, by a regulated domestic price set in consultation with the Korean Sugar Manufacturers Association, and by being allowed to price their tolling operations at close to marginal costs. These policies are designed to close the Korean refined sugar market to imports and to make Korea a major exporter of refined sugar.

The small sugar farmers, who own ten hectares or less, are also adversely affected

by trade liberalization which has led to the fall in prices from PhP 750 – 800/m.t. in 1995 to PhP 500 in 2003 (PPI, 2003).

Fruits/Vegetables

Manuel Quiambao, President of the Philippine Ecumenical Action for Community Empowerment Foundation (PEACE), points out that an opportunity exists for increased exports of class B bananas which are already being exported to China on a small scale. In fact, bananas are being bartered for Chinese motorcycles in Mindanao. The same can be said for pineapples, but on a smaller scale. Opportunities opened up by freer trade will benefit small farmers and farm workers if agrarian reform is speeded up, and credit and marketing assistance is increased. For other fruits grown locally, freer trade will adversely affect local growers of fruits because of direct competition and because of the substitution effect. Greater government support for research and development, infrastructure, credit and a promotional drive to “Buy Filipino” will help local growers meet competition from imports. Australia’s sanitary and phytosanitary (SPS) measures are seen as a barrier to the Philippines’ export of mangoes. With respect to vegetables, the province of Benguet in the Cordillera Administrative Region is the supplier of most of the semi-temperate vegetables to the rest of the country, such as broccoli, cabbage, carrots, celery, cauliflower, lettuce, potatoes, mushroom, bell pepper, and others. According to John Kim of the Benguet Vegetable Growers Association, the increase in cheap imports of fresh/chilled vegetables by 152%, led by potatoes and carrots, over the period 1991 – 2001, has led to an estimated drop in demand for local vegetables by 40% to 60%. Sales dropped by an estimated PhP 2 billion in July and August of 2002 alone. Most of the cheap imports came from China.

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The Benguet vegetable growers feel that if the erosion of their domestic market share has already occurred even before the ACFTA, the threat will get even bigger with its implementation. A big part of the problem has been the smuggling of Chinese vegetables. Due to this experience, the Benguet vegetable growers lobbied for, and got, the exclusion of fresh and chilled vegetables from the EHP with China. Moreover, a pest risk analysis (PRA) of Chinese carrots shows that they are not disease-free. Benguet carrots are disease-free, and on this basis, can compete with Chinese carrots even in the export market. Capture Fishing Tambuyog, the nationwide organization of small fishers, are, in general, against liberalization of the fisheries sector, whether this be under the aegis of the WTO, or the various regional and bilateral FTAs that have been entered into (in the case of ASEAN-China) or are still in the process of being negotiated.

In the analysis of Tambuyog’s Executive Director, Jose Tanchuling, the top three Philippine fisheries exports, comprising 80% of the total value, are tuna, seaweed and shrimp. The remaining 20% are accounted for by cuttlefish, octopus, blue crab and roundscad (galunggong) used as bait.

Tambuyog’s Escober, Jacinto and Umali, in a position paper (2004) on the WTO Doha Round non-agricultural market access (NAMA) portion, point out that trade liberalization, in the absence of resource management measures, will result in the over-exploitation of pelagic, i.e. migratory, species for fish exporting countries because of the open access situation that prevails in the high seas.

For the Philippines in particular, open access also prevails in the coastal zone.

Thus, in the face of greater competition from imports, small fishers will simply intensify their fishing effort, leading to resource depletion and environmental damage. On the other side of the coin, shrimp farmers, responding to the incentive of greater exports due to greater access to foreign markets, will also intensify their farming, and further inflict environmental damage by using up mangroves and by poisoning the rivers and seas with their discharge of antibiotics and other chemicals, etc. This in turn will adversely impact on the communities around the aquaculture farms and their livelihood. Together, resource depletion and environmental damage will imperil food security. For the reasons given above, plus the fact that the fisheries of developed countries are heavily subsidized, the small fishers are against trade liberalization under the Non-Agricultural Market Access (NAMA) part of the WTO Doha Development Round.

They advocate the grant of government subsidies to improve technology and facilities for production, post-harvest and marketing. Tuna hand-liners, estimated at

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20,000, and municipal fishers, being the most vulnerable, need direct financial support to make them competitive and avoid economic dislocation. Tambuyog point out that the Philippine Fisheries Code of 1998 mandates an import licensing system. This implies that liberalization of the fisheries sector is illegal, an example of conflicting state policies. They also point to the existence of smuggling of tuna into the country, from Taiwanese vessels that dock at General Santos. This has led to a reduction in local prices in the wet markets, already causing economic dislocation of small fishers.

Regarding the Early Harvest Program of the ACFTA, Tambuyog state that sole (HS 0302.2300), yellowfin tuna (HS 0302.3200), skipjack (HS 0302.3300), sardines (HS 0302.6100), mackerel (HS 0302.6400; 0303.7400) are sensitive items for small fishers and should not have been included in the list of zero tariffs scheduled for 01 January 2006. For the AKFTA, fish should be included in the sensitive list. A provision on technical assistance for resource management should, however, be included in the agreement. Tambuyog are against the inclusion of the Philippine fisheries sector in the JPEPA because of highly subsidized fish from Japan. However, tariffs on imports of post-harvest machinery should be zero. Regarding opportunities for export that would become available if the fisheries sector is liberalised, Tambuyog maintain that it would be difficult to compete in the world market because of the lack of subsidies, and because of the high post-harvest wastage (estimated at 40%) due to poor handling, lack of refrigeration facilities, and lack of preservatives such as salt. However, opportunities exist in the creation of market niches through branding. The blue crab, whose cultivation is environment friendly, is a candidate. Aquaculture While no representatives of the aquaculture sector were interviewed, a National Congress on Aquaculture was held on 27 October 2005. A number of points brought up in the Congress are apropos of the discussion of free trade areas. First of all, aquaculture can offer an alternative livelihood for small fishers (as distinguished from fish farmers) threatened by the liberalisation of pelagic species. More fundamentally, the landed catch of capture fisheries (municipal and commercial), while growing at average annual rate of 3.35% in the last five years, has been exceeding the minimum sustainable yield (MSY). In 2004, the catch of 2.2 million MT was 16% higher than the MST of 1.9 million MT, as established by scientific studies. Hence, even if export opportunities exist in the area of capture fisheries, the expansion of this sector can no longer be sustained. (Cruz, Yap and Tech, 2005)

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Secondly, export opportunities in the relatively capital-intensive and technology-

intensive aquaculture products could be more accessible to small fishers if the government support program included in the aquaculture component of the Comprehensive National Fisheries Industry Development Plan (CNFID) is carried out. Thus, Cruz, Yap and Tech note the biased development of aquaculture towards large integrated ventures, discouraging entry of small players.

In response to this problem, the CNFIDP includes, among the aquaculture sector

programs, the empowerment of fishers in aquaculture. The program recognizes that fishers lack the financial capability, economies of scale, technical know-how, market access, skills, and the understanding and appreciation of the potential benefits of aquaculture.

To address this, the program proposes, among others, the establishment of

aquaculture livelihood parks for fishers, with financial, technical, marketing and management support . This will be achieved by setting up the legal framework for private institutions, NGOs and cooperatives to invest in the development and operation of these parks; tapping the support of financial institutions for soft loans; the BFAR, SEAFDEC and DOST for technical support, and private seafood companies for marketing contracts. The good news for small fishers is that a low cost technology of growing fish in tanks is now available.

The CNFIDP recognises that the irresponsible development and expansion in

aquaculture has resulted in environmental degradation, which has been caused by, among others, ambiguity in the bureaucratic jurisdiction over environmentally critical mangrove resources. Thus, it includes a program on the institutionlisation of best aquaculture practices, quality standards and farm-based HACCP.

Macaraig (2005) identifies business opportunities in marine aquaculture, for both

the domestic and international markets. He believes that “the future is bright for Philippine aquaculture to grow food fish and still export high-value aquaculture products…’, particularly milkfish (bangus), tilapia, indigenous finfishes such as groupers (lapulapu), other crustaceans such as the blue crab (alimasag) and other shellfishes. Livestock Hog Farming Albert Lim, President of the National Federation of Hog Farmers, Inc. (NFHFI), sees opportunities in exporting hog meat to Japan, Korea and even China, whose demand cannot be satisfied by domestic suppliers. The biggest obstacle to exports lies in the fact that the whole Philippines are not hog cholera free. With respect to foot-and-mouth disease (FMD), the problem may be more tractable because the Visayas and Mindanao are FMD-free while Luzon is not.

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Despite this, there exists a demand by Korea for Philippine pork bellies. To make sure that these are disease free, the Koreans inspect the Philippine hog raisers’ facilities. Japan has an excess demand for pork. It imports pork from as far away as Canada and the U.S. However, Japanese SPS measures are seen as a trade barrier because of their too high standards. Hog raisers from Mindanao are gearing up to export hog meat. However, they need to follow the protocols of Japan, Korea and China regarding FMD and hog cholera. So far, they have been unable to secure copies of these protocols.

Poultry Farming Elias Jose Inciong, President of the United Broiler Raisers Associations (UBRA) states that the organisation is against the liberalization of the poultry sector for the following reasons.

First, competitor countries grant subsidies to chicken farmers, whether overt, e.g.

in the form of lower prices for feeds, or covert, e.g. inclusion in the U.S. defense budget of an allocation for the local procurement of chicken for its military bases.

Second, domestic reforms in order to reduce costs have not been undertaken. For

the poultry industry, these high costs arise from (1) high energy rates; (2) higher costs of feed relative to competitors, and (3) increased taxation due to the imposition of local taxes.

Third, there is a heightened sense of political uncertainty on the part of chicken

farmers resulting from the proposal to have a federal system of government, which will give local government units more power over business firms, with the implied threat of increased harassment.

The higher cost of feeds relative to competitors is blamed on the fact that the

latter have low or zero duties on imports of corn and soya, major ingredients in chicken feed. There also exists a local tariff distortion between chicken meat (HS 0207.1100 - 0207.1490) with MFN/CEPT duty of 40% and corn (HS 1005.9090) which has an MFN/CEPT duty of 50% on out-quota imports.

The poultry sector recommends liberalization when it is ready to compete. The

Philippines should adopt China’s strategy of sequencing, i.e., it opened up its markets, one sector after another, only after they made sure that trade conditions were fair. This requires that the country should undertake the domestic reforms that will make the poultry industry globally competitive.

The reason for the survival so far of the poultry industry is the fact that it has

attained a high level of efficiency in terms of harvest rate and feed conversion. However, this efficiency is undermined by expensive inputs, largely feed ingredients.

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An important consideration is the fact of cartelization among retailers in the wet markets. Farm gate prices of dressed chicken average PhP 50/kg at present. Distribution costs and reasonable retailers’ margins should add up to PhP 35/kg. Thus dressed chicken should retail at PhP 85/kg. However, the current retail price ranges from PhP 100 to PhP 110/kg. Hence liberalization may not really result in lower prices to consumers unless the retail industry is made competitive.

Currently, there is a glut of dressed chicken. Production has slipped 7% but demand has fallen even further due to reduced consumer spending as a result of higher oil prices pushing up the prices of other products and services, such as transport fares. Situations like this will only be exacerbated by import liberalization. An Analysis of Trade Data With the Six Countries In order to give some realism and more particulars to our discussion, it will be instructive to take a look at (1) the total value, share, and growth rates of Philippine agricultural trade with these six countries, and (2) the top agricultural exports and imports with them. Table 1 and Figures 1 and 2 present a comparison of Philippine agricultural exports and imports with the six countries from 1997 to 2004. Table 1 also shows the balance of agricultural trade for each country for the same period. It will be noted that the Philippines’ biggest export market among the six was Japan with an average annual value of $424.2 million during the period. It was followed by Korea with an annual average export value of $90.2 million and China with $59.8 million. Australia was the Philippines’ biggest source of agricultural imports with an average annual value of $312 million, except in 1998 when imports from China shot up 205.6% from $145.2 million in 1997 to $444.9. In terms of annual average value during the eight-year period, China was the second biggest source of agricultural imports with $183.9 million, followed by New Zealand tallying $153.4 million. However, China was displaced from the number two spot by New Zealand from 2001 to 2004. As was noted above, agricultural imports from China suddenly surged to US $ 444.9 million in 1998. It just as suddenly contracted in 1999 to $ 185 million and remained below that level. It would be interesting to find out the reasons for the import surge and the equally dramatic decline. One possibility is not really a surge or decline in imports. Evidence of substantial illegal imports are documented in a paper by Abola (2004), who compares total imports of the Philippines from the rest of the world with total exports of the rest of the world to the Philippines. The data show an increasing gap, from $961 million in 1989 to $12 billion in 2001. What could have happened with respect to agricultural imports from China in 1998 was a drastic reduction of smuggling, for one reason or another, and an equally abrupt resumption in 1999.

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A more recent experience of smuggling of onions and carrots from China has been cited by Philippine vegetable farmers. However, due to their efforts, combined with the assistance of the Anti-Smuggling Task Force, this has gone down substantially. Nevertheless, there is always the danger of its resumption. The balance of agricultural trade with Japan remained consistently positive and large ranging from $388.4 million to $437.4 million. There has also been a consistent trade surplus with Korea but on a smaller scale.

For the other four countries, the agricultural trade balance has been consistently negative and large for most of the period. The biggest trade deficits were incurred with Australia. In addition to the value of agricultural exports and imports, it will also be instructive to know the relative share of each of the six countries in Philippine agricultural trade; annual average growth rates for the period, and the top ten exports and imports of the Philippines from each country in 2004. As seen in Tables 2 and 3, Japan had the largest share of total Philippine agricultural exports among the six countries, averaging 20.9% for the period. However, export growth was negligible at 0.22% annually, remaining within the $400 - $450 million range as indicated by Figure 1. With respect to share of agricultural imports, Japan had the lowest average share at 0.7%, with value of imports declining by 11.1% per year (Figure 2). Korea averaged 4.4% share of Philippine agricultural exports, growing at an annual average of 8.8%. Its share of Philippine agricultural imports averaged 0.9% annually, while value increased by 5.9% annually. China’s share of Philippine total agricultural exports averaged 2.9% from 1997 to 2004. On the import side, China’s share has been larger, averaging 6.7%. Agricultural exports to China grew by 13.7% yearly while imports from it grew by 17.9%. For the period 1999 – 2004, the data show that imports declined by an average of 9.0% annually. Due to smuggling, it is widely believed that the imports of goods from China, including farm products, have increased rather than decreased. The share of Australia, New Zealand and India in total Philippine agricultural exports averaged less than 1% during 1997-2004, remaining at less than $30 million, with India in particular only importing a peak of $3.52 million in 2004. However, exports to the three countries exhibited positive growth rates, with 1.6%, 7.5% and 13.9% respectively for the period. In contrast, the share of agricultural imports from the three countries were much larger, with Australia averaging 12%, followed by New Zealand with 5.8% and India with 4.4%%. Imports from Australia declined by an annual average of 3.2%, while those from New Zealand and India increased at an average of 7.9% and 17.6% year

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Type of Agricultural Commodities Traded In order to have a better appreciation of the type of agricultural products the Philippines exported and imported, a brief comparison across the six countries for 2004 follows. Table 4 shows that bananas were the top export in 2004, valued at $234.4 million or 34.7% of the total value of agricultural exports to the six countries in 2004. It was almost four times the value of the second top export, frozen shrimps and prawns, which were valued at $62.6 million. Crude coconut oil was number three, with $56.7 million worth of exports. Rounding off the top ten exports were fresh/dried pineapples, oil cake from coconut, fresh/dried guavas, mangoes and mangosteens, raw can sugar, fresh or chilled other vegetables, and seaweeds and other algae. Frozen yellowfin tuna and prepared/preserved tuna, skipjack and bonito ranked eleventh and twelfth. Three-fourths of Philippine exports of bananas were bought by Japan, followed by China, Korea and New Zealand. Japan was also the major export market for shrimps/prawns, crude coconut oil, pineapples, guavas, mangoes and mangosteen, other vegetables, yellowfin tuna, skipjack and bonito. (See Table 4.) Korea was the major buyer for not frozen shrimps and prawns, ranked seventh in terms of value of exports. Milk ranked as the top two agricultural imports (Table 5) of the Philippines in 2004, with a combined value of $220.1 million, comprising one fourth of the value of total agricultural imports from the six countries for 2004. Australia and New Zealand supplied the vast majority. Frozen meat of bovine animals ranked third, with a value of $64.4 million of which India supplied 94.9%. Rounding out the top ten agricultural imports from the six countries were wheat, tobacco, fresh cheese, malt, buttermilk, wheat used as feed, and live bovine animals.

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III. Findings and Recommendations

The free trade agreements already signed and those being negotiated have in common three basic parts: agreement in trade of goods, agreement in the trade of services and agreement with respect to investments. This paper is primarily concerned with the agreements on trade in goods. As was noted above, the small producer sectors interviewed are against the establishment of free trade because they believe that this will be disadvantageous to them. They are quite fearful that they will lose their livelihood and have no alternative means of earning income. Those who are growing food crops and catching fish are afraid that they will go hungry. The Philippine sugar industry point to the protection given by Korea to its sugar industry. Japan is equally protective of its sugar industry. Despite this, the PSMA has requested for the establishment of a tariff rate quota for exports of Philippine sugar to Japan, with concomitant liberalization on its part. Thus, the Philippine sugar industry can be said to give a conditional assent to free trade with Japan. The hog farmers want to export hog meat provided the government helps them to wipe out diseases of swine in the country, so they can take advantage of the export opportunities opened up by freer trade. Given the serious misgivings of small agricultural producers, they do not want to have any free trade because they do not believe that their fears will be addressed any time soon. However, since the ASEAN-China and the ASEAN-Korea ATIGs have been signed, and the other FTAs are actively being negotiated, one approach would be how to manage the process not only so that the Philippine agricultural sector does not get the short end of the bargain, but so that it can also identify and take advantage of the opportunities that may arise from the FTAs. In the case of Japan and Korea, because of the differences in climate which allow each to grow non-competing agricultural products (except for sugar beets), the Philippines will have the opportunity to further increase its agricultural trade surpluses, which greatly offset its deficits with the other four countries. In the case of these latter countries, an FTA can help reduce its agricultural deficits if not turn them into surpluses, if managed well. Another approach would be to be not to sign any agreement with India and with the CER countries (Australia/New Zealand) because of the huge agricultural trade deficits the Philippines has with them which seem insurmountable. In the case of the CER countries, this can be attributed, partly, to the continuing overly strict SPS measures on exports of fruits, despite protests already lodged by the Philippines. In fact, the Angkor Agenda chides them on this point. Also, Kawasaki’s study indicates that the

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GDP gains for the Philippines, from an FTA with Australia and New Zealand, are either negligible or non-existent. In the case of India, their request to exclude 40% of their tariff lines from the FTA, and the long-standing disagreement between ASEAN and India on rules of origin might be signs that, any way, no agreement will be reached or it will still take a long time. Thailand has set a precedent for not signing even though the rest of the ASEAN members signed the trade deal with Korea, because Korea did not want to liberalise rice. So too, the Philippines can refuse to sign any pact with the CER countries if they will not give clear indications that they are moving to resolve the issue of SPS measures, such as relaxing standards and setting a timeframe for implementation. At the moment, the Philippines is still actively negotiating three FTAs (excluding the Philippines-U.S. FTA), plus the specifics of the normal and sensitive tracks under the ASEAN-Korea FTA, which was signed on 13 December 2005. The following are the recommendations that can be offered, based on the discussion in the previous section. The first set of recommendations refer to trade negotiations; the second set have to do with the larger overall situation. On the Defensive Side The first important consideration is the time frame within which free trade is to be achieved, as signalled by the elimination of tariffs and of NTBs. Given the handicaps the Philippine agricultural sector faces, especially the small producers, a longer rather than a shorter time frame is desirable. This, in fact, was what the Philippines achieved in the ACFTA when it was allowed to eliminate tariffs on more than 150 lines in 2012 rather than 2010, whereas other ASEAN members were allowed flexibility up to 150 tariff lines only. And this is what the Philippines is doing with respect to the other agreements such as the AIFTA, which has a 2016 as a target date for tariff elimination, except for AKFTA, which also has the same target date as ACFTA, 2010. 1 The second consideration is the proportion of tariff lines which fall under the sensitive list. Under ACFTA, it has been agreed that this will be 10% of 2001 import values, using 6-digit HS codes to specify the tariff lines. The same proportion was more or less being agreed to under AKFTA, but whether it is at the 6- or 8-digit level has to be clarified. For ACFTA, the sensitive list will be reviewed in 2008. Philippine negotiators should try to increase the proportion under the sensitive list for the other FTAs that are being negotiated. This may be possible with India, which has said that it would like 40% of its tariffs lines to be excluded from the negotiations. Where the agricultural producers do not have any idea of the opportunities for export, their produce can be placed in the sensitive list while they, with the assistance of government, study the market, even visiting the Partner countries, so that they can determine if they can compete and provide an adequate supply if the market is opened up.

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If, after gathering market intelligence, the producers of a particular product decide that they can compete and can supply the market adequately, then the product can be removed from the sensitive list and placed in the normal track. The ACFTA allows for individual Partners to remove items from the sensitive list and transfer them to the normal track. The third consideration would be the design of the modalities under the normal track. While the major constraint is the time period over which tariffs are to be reduced and/or eliminated, Philippine negotiators could consider maintaining tariffs as they are at present, and then reducing them on the target year. While a gradual tariff reduction will expose the agricultural sector to import competition more slowly than a sudden elimination in the last year, a “sudden death” arrangement can give more breathing space within which to gear up for global competition, or in the case of the government, to put in place the reforms which will reduce the costs of production and of doing business in general. On the Offensive Side The first strategy is something which Philippine negotiators are using. However, it is worth repeating that with respect to those agricultural products that the country already exports, the strategy is to target the early elimination of tariffs and removal of non-tariff barriers on these exports, including the unreasonably high standards set by SPS measures. For instance, on the matter of tariffs alone, Korea’s tariff on bananas is 30%; on shrimps and prawns, whether frozen or not, it is 20%. These three commodities are among the top ten Philippine agricultural exports. This approach should not be limited to the top agricultural exports but should include all items which are being exported, in order to maximise exports and to increase the likelihood that small producers will benefit. At this juncture, it is appropriate to recall that trade is undertaken to promote human development. The following is not a strategy for negotiators but an answer to the criticism that freer trade has not benefited the lower income classes; that in fact freer trade has brought about greater inequality. While working to increase exports, especially the large ticket items, efforts should be made so that a bigger share of the increased export earnings are captured by workers in terms of higher wages and benefits and small producers in terms of market access and earnings.

At the same time, the bigger market for big ticket items that will be created by freer trade will require greater supply. This will give an opportunity for small producers to sell more as the already existing big producers may quickly reach full production capacity. The government should encourage a tie-up between the big producers and the small ones to meet the expected increase in demand.

In the case of banana, which is the Philippines’ biggest agricultural export to the

six countries, a big majority share of exports is accounted for by a few large producers located in Mindanao. However, the Department of Agriculture is promoting the export of

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non-cavendish bananas, including the bite-sized ones (senorita), which are non-traditional exports and planted by cooperatives of small producers. According to Undersecretary Serrano, these bite-sized bananas command a high value in the export market. The second strategy would be to identify export opportunities that will be opened up by freer trade. This will require the gathering of market intelligence and visits to the markets of Partner countries by agricultural producers, especially the small ones, whose trips and accommodations could be subsidised by the government. However, the organizations of small producers exemplified by NGOs and Pos, should initiate efforts to access information on export markets through the Internet. There are NGOs and POs with the capability to do this. They can assist others who may not have the capability. An example of the above strategy is the entry into force of the AKFTA on 01 July 2006. A sensitive list of both industrial and agricultural goods is to be agreed upon with Korea on 24 – 28 April 2006. Before this, the lists are to be given to ASEAN on 25 January 2006 for discussion and coordination. With respect to agricultural goods, the list of sensitive items can be subjected to market intelligence gathered through the Internet, through the commercial attache in Korea, and through market visits. Undersecretary Segfredo Serrano of the Department of Agriculture indicated that he would support representatives of small producers in the six subsectors – crops, fresh fruits, vegetables, fisheries, poultry, and livestock – to visit Korea to look into the possibility of exporting their products there, if they are not already doing so. If it is determined that there are export opportunities and that domestic producers can meet the demand, then these items can be taken off the sensitive list and either marked for immediate liberalisation or for a gradual reduction of tariffs.

The study of Palanca, using RCA, identified export niches for the Philippines to China, including agricultural products. The Department of Agriculture, with the cooperation of large, medium and small producers, could do the same for all the six Partner countries. The study might reveal that, even if recent export figures for some items are relatively small, these may have potential for high growth.

More directly, the products that are beginning to be in demand in the international

market, which the Philippines is not yet producing or exporting, should be given attention. The agricultural imports of our neighbours, for example, should be examined to see what there is a market for and what the country can supply, if it is not yet doing so. The domestic demand of these neighbours is growing and they cannot meet the increased demand. Priority should be accorded to labour-intensive, high-valued commodities.

Cashew nuts are a case in point. These have great potential but the Philippines has

not developed it. Other examples are tropical vegetables such as zucchini (summer squash) and eggplants which are very much in demand in Japan, supplied by New Zealand and Thailand. These can be grown in the Philippines but to supply Japan, it has to invest in a system which will comply with the required standards. Hence domestic support by the government, especially for small producers, is essential. However, the

29

small and medium producers who have invested in increasing their productive capacity have experienced harassment from local government officials. Overall Recommendations

The question can be posed whether free trade in agriculture will reverse the Philippines’ agricultural trade deficits with China, India, Australia and New Zealand, or at least significantly reduce them, and enlarge its trade surpluses with Japan and Korea. The answer will depend on (1) whether Philippine agriculture can be made more competitive; (2) whether the Partner countries will eliminate their agricultural subsidies, covert or overt, and remove their NTBs; (3) whether the Philippines can aggressively market its agricultural products in the Partner countries, and (4) how fast the Philippines can identify and develop niche agricultural products.

The need to improve the competitiveness of the Philippine economy is well known. In agriculture, the vegetable, fresh fruits, fish and poultry sectors point to high production costs including power rates and transport costs; lack of infrastructure; slow pace of agrarian reform; high post harvest waste; lack of credit and marketing assistance, and lack of research and development which make them uncompetitive. The solutions to the lack of competitiveness are well known and will not be belaboured here. It is instructive, nevertheless, to point out that there are agricultural producers that are efficient and competitive despite the handicaps enumerated above. A study by Dy (2000), using the competitive advantage approach, compared benchmark farms with typical farms for 16 agricultural products and showed that the former had much greater productivity than the latter, owing mainly to the greater level of input usage and better farm management practices employed. The products covered by the research are rice, corn, rubber, banana (lakatan and saba), durian, mango, calamansi, onion, cut dendobrium, hogs, chicken broiler, chicken eggs, tilapia, seaweeds, carageenan (no distinction between benchmark and typical farms), and banana chips. The study concludes that there are opportunities to improve farm productivity by the application of best practices and identifies four key strategies that it believes will achieve this. First is the establishment of a cohesive agricultural body, the Philippine Agribusiness Inc. (PAI), to address fragmentation and limited united actions. Second is the Food Baskets-Agribusiness Superhighway Axis which entails the creation of strategic production centers. The third is competitive intelligence to ensure the flow of up-to-date global and domestic information. Finally, capacity building for the Department of Agriculture in the many aspects of competitiveness and benchmarking, including application at the local level. All sectors interviewed claim that agricultural produce in the Partner countries are subsidised . This makes their exports cheap and also prevents competition in their own markets. Australia’s very strict SPS is hampering the growth of Philippine export of mangoes and pineapples. At the end of its report, the high level task force that wrote the Angkor Agenda chides Australia on this issue.

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An example of a subsidy for agricultural products is Japan’s Adjustment of Sugar Price Law (ASPL) of 1965, which provides for a sugar price adjustment mechanism (SPAM). If the average import price is below the domestic raw sugar price, the ASPL obliges sugar importers to sell all of their imported sugar at the import value to the Agriculture and Livestock Industries Corporation (ALIC) and immediately re-purchase the sugar from the ALIC at a higher price. Importers are allowed to sell imported raw sugar to refiners, at the higher price plus a margin, only after the compulsory transaction with ALIC. The ASPL also directs the ALIC to re-distribute the profits from the compulsory transaction to the domestic support programs for approved regional domestic sugar cane and beet producers. In order to be eligible for subsidy, these approved producers must, in turn, buy from sugar growers at a minimum price set by the Ministry of Agriculture, Forestry and Fisheries (MAFF).

The PSMA estimates that it could export sugar to Japan equal to the amount of its proposed TRQs, comprising six eight-digit tariff lines, if the SPAM is dismantled. In 2006, the proposed TRQs total 275,000 metric tons. Of this amount, 200,000 MT represent raw cane sugar. In 2004, the Philippines did not export any raw cane sugar to Japan, although it exported $8.8 million worth to Korea and $2.9 million to China. It should also be noted that the price of refined sugar in the Japanese market is currently PhP 50/kg compared to PhP 28 – 30/kg for the Philippine market. The difference can be attributed to the domestic Japanese subsidy.

It will not be surprising if a similar arrangement exists with respect to other agricultural, forest and fishery products in Japan. More such subsidies could be uncovered in all the Partner countries. It is important for the Philippines to know what are the reduction commitments for both domestic and export support of these Partner countries, if any, under the WTO AOA. The ASEAN-China and the ASEAN-Korea ATIGs adopt the WTO disciplines regarding subsidies, NTMs, etc.

Having identified such subsidies and whether there are commitments to reduce them under the AOA, the Philippines should insist on their removal or adherence to the schedule of reduction, or even to hasten the schedule of reduction, while keeping in mind that AOA Article 6.2 exempts developing countries from reduction commitments on “government measures of assistance, whether direct or indirect, to encourage agricultural and rural development, …investment subsidies…and agricultural input subsidies generally available to low-income or resource-poor producers….”

The third plank in the strategy is to aggressively sell more of existing agricultural exports in the markets of Partner countries. In this respect, the Philippine government’s capacity to assist agricultural producers in marketing their products abroad has to be looked into. Should the Department of Agriculture have a bureau similar to the Bureau

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of Export Trade Promotions (BETP) of the Department of Trade and Industry or should it just work together with the BETP and the Board of Investments in this matter, as is being done at present? A second question is, no matter what the administrative set-up, does the DA have the funds to undertake market intelligence abroad by (1) hiring more agricultural attaches, and (2) subsidizing the participation of small agricultural producers at agricultural fairs, or where these are long in coming, subsidizing their market visits to the Partner countries? An alternative to hiring more agricultural attaches is strengthening the logistical capabilities of attaches in selected countries or cities/provinces such as Dubai for the Middle East and Beijing and Guangzhou for China. The attaches themselves could be businessmen with stature in the business community and access to high government officials in the target country. Such a businessman with the desired credentials has been in fact recruited to serve in China as an agricultural attaché. In order to duplicate this, the Foreign Service Law has to be applied with greater flexibility and not interpreted with rigidity. Another approach is, in the same mission or embassy, to group together the agricultural, tourism and commercial attaches who have common or overlapping interests in order to better utilize their skills, talent and experience. The non-government organizations (NGOs) and people’s organizations (POs) that represent small producers, because of their negative experience of trade liberalization, are understandably in the defensive mode. Nevertheless, they have a large role to play in identifying and exploiting export opportunities that will be opened up by free trade agreements. In the second half of 2005, Undersecretary Serrano initiated the establishment of a Committee on Trade Negotiations under the National Agriculture and Food Council (NAFC). The Committee met twice in 2005. During the second meeting, the body agreed to become the Committee on International Trade, thereby widening its scope and functions, which include the fashioning and implementation of positions regarding international trade treaties on agriculture. The DA can use this Committee as a venue for building up the capacities of member NGOs and POs. Equally important, these NGOs and POs can help each other in building up their capacities. The more organized, more experienced and better funded organisations can share their expertise and resources with the others. Additionally, in the light of the rationalization of the Department of Agriculture, the NGOs and POs can take the lead in setting up barangay kiosks where agricultural small producers can access, not only market intelligence but technical updates as well. Hopefully, as the negotiations for new FTAs enter their final phases, a synergy among NGOs and POs will develop faster.

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The program for the empowerment of fishers in aquaculture, as contained in the CNFIDP, should be realized as soon as possible, so fishers can take advantage of the opportunities for export of milkfish, tilapia, lapulapu, blue crab and other shellfish. The Philippines did not export any hog meat to any of the six countries in 2004. It only imported (in quota) $372,367 worth of frozen ham, shoulders and cuts, and only from Korea. Whether this has been true of the past few years can be looked into. The fact that the country is not yet free from swine diseases may have prevented this export opportunity from being exploited. With the removal of this obstacle, which should be done as soon as possible, exports of hogs and hog meat should materialise.

As export demand will create a strain on domestic supply, which will lead to higher prices domestically, the NFHFI, with government assistance, should hasten the development of small hog raisers to fill in the expected demand-supply gap, thus creating more income and employment in the countryside.

Summing Up

Putting all these together, the very fact that the CGE models predicate their

positive results on the assumption of perfect competition implies that, if these prognostications are to be fulfilled, then the Partners should work towards bringing more and more of the conditions of perfect competition into existence.

First, perfect competition requires that in both the domestic and export markets, there are many buyers and many sellers, with no one buyer or seller able to influence prices. It also assumes that government’s role is to ensure the enabling environment where production and trade can take place. The movement towards trade liberalization essentially requires government to give up its power to tax imports by which it can make imports more expensive than domestic products. This movement should carry over into the government’s ability to influence prices through domestic and export support programmes and through non-tariff barriers. Trade liberalization implies minimal government.

The problem in the concrete is how to get the free trade Partners to agree to be

transparent about their subsidies and non-tariff measures (NTMs), as well as bringing their subsidies to a minimum level, if not zero, faster than the schedule agreed to under the WTO AOA.

Government exists to ensure that there is competition in markets. Aside from

getting out of the market, it must also ensure that there are no private monopolies/cartels in the market.

As mentioned in Part II, the poultry farmers revealed the lack of competition in

the domestic retail market for chicken, that would effectively prevent consumers from benefiting from trade liberalization. Onion growers from Central Luzon also attest to the

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same situation in their industry, where farm gate prices are PhP 45/kg in contrast with retail prices of PhP 72/kg.

This was also the case when imports of cement surged in 2001 and 2002 , leading

to a fall in the landed cost of imported cement but which translated into very minimal reduction of the retail price.

Second, the Philippines should examine closely the government’s ability to ensure

mobility of the factors of production, namely, that when a particular sector is liberalized, the ensuing adjustments, which may result in the closure of enterprises (including small fishers, vegetable growers), lay offs of people and the sale of assets can be accomplished in the shortest possible time, with the least pain and hunger.

Unfortunately, the track record of government in this regard does not inspire

confidence. For instance, the accession of the Philippines to the WTO in 1995 was premised on the provison of certain safety nets, including PhP 500 million for the retraining of workers that would be displaced by trade liberalisation. It is not clear what happened to this program, whether it was executed and what were the results.

Manufacturers whose plants closed down due to a combination of trade

liberalisation and the effects of the Asian financial crisis, did not find a sympathetic ear in government to help them sell their machinery and equipment.

Thirdly, there is the condition of perfect information available to all buyers and sellers in markets. Transparency among Partners regarding subsidies and NTMs will contribute towards this goal. Building up the capacity of agricultural producers to access information regarding possible export opportunities (as well as opportunities to source their inputs at competitive prices) is another important aspect. In the case of the Philippines, government should shepherd domestic agricultural producers, especially the small ones, to investigate opportunities that may result from trade liberalization. This will go a long way to lessen the trepidation with which they regard freer trade.

There are two other realities which are not touched upon by CGE models which can cancel the gains from freer trade. One is the issue of smuggling of both industrial and agricultural products; the other is resource depletion and environmental damage.

It should be noted that, from the study by Abola and the experience of vegetable growers and fishers, there are substantial quantities of these commodities being smuggled in from China and Taiwan. The vegetable growers experienced a large amount of carrots and onions smuggled in from China, flooding the local markets and depressing prices. The fishers have complained about the smuggling of tuna from Taiwanese fishing vessels having the same effect. Rice smuggling has also made the headlines.

Freer trade, with its reduction if not elimination of tariffs, has always been seen as

an administrative tool to render smuggling unprofitable. However, this is only part of the solution. It does not consider the 12% VAT that has to be paid domestically, nor the

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requirement of meeting SPS measures. Even with zero tariffs, the lax enforcement of the VAT and SPS measures provides an incentive to smuggle in agricultural products, in effect realising a greater increase in trade than the models would predict, but with a resulting fall in income and employment without any compensating creation of jobs through opportunities opened up by freer trade. The fishers point to an additional cost of liberalization given the prevailing practice of open access in capture fishery, namely, resource depletion and environmental damage, which could lead to food insecurity. They recommend resource management, which has to be defined operationally by law, and enforced. Given that the actual landed catch of pelagic fishes has exceeded the maximum sustainable yield (MSY) for the past five years, as pointed out in the Comprehensive National Fisheries Industry Development Plan, serious thought should be given to assisting small fishers to move into fish farming or aquaculture. But even there, the CNFIDP warns against environmental degradation unless certain programs and administrative reforms are put in place, and executed. The existence of both these problems highlights another assumption that theoretical economic models make, which is that individuals seek their enlightened interest, leading to everyone being better off, within a framework where laws are enforced and where government provides an enabling environment.

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Figure 1. Philippine Agricultural Exports to Six Countries, 1997-2004

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50

100

150

200

250

300

350

400

450

500

1997 1998 1999 2000 2001 2002 2003 2004

FOB

Val

ue in

Mill

ion

US$

CHINA JAPAN SOUTH KOREAINDIA AUSTRALIA NEW ZEALAND

Figure 1. Philippine Agricultural Exports to Six Countries, 1997-2004

-

50

100

150

200

250

300

350

400

450

500

1997 1998 1999 2000 2001 2002 2003 2004

FOB

Val

ue in

Mill

ion

US$

CHINA JAPAN SOUTH KOREAINDIA AUSTRALIA NEW ZEALAND

Figure 2. Philippine Agricultural Imports from Six Countries, 1997-2004

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50

100

150

200

250

300

350

400

450

500

1997 1998 1999 2000 2001 2002 2003 2004

China Japan South KoreaIndia Australia New Zealand

Table 1. Comparative Agricultural Trade of the Philippines with Six Countries, 1997-2004

A. EXPORTS (US $)

COUNTRY 1997 1998 1999 2000 2001 2002 2003 2004CHINA 37,607,114 64,198,436 37,846,698 68,489,240 66,919,096 59,758,272 84,362,598 59,461,218 JAPAN 436,601,892 422,823,069 423,993,999 451,086,542 408,140,938 408,966,931 402,517,195 439,247,186 SOUTH KOREA 77,391,800 59,069,132 66,450,504 73,174,406 85,612,709 96,475,257 123,116,664 140,489,730 INDIA 3,075,062 3,116,602 1,901,550 1,911,781 2,854,394 1,407,906 3,505,317 3,522,817 AUSTRALIA 23,103,015 18,242,283 18,186,057 14,692,454 14,799,850 25,802,220 20,862,890 20,334,292 NEW ZEALAND 8,879,045 5,990,029 6,085,068 5,785,278 5,127,542 7,773,002 12,342,439 11,973,367

B. IMPORTS (US $)

COUNTRY 1997 1998 1999 2000 2001 2002 2003 2004CHINA 145,153,501 444,930,568 185,032,480 132,682,661 102,571,494 135,190,398 179,048,920 146,714,254 JAPAN 35,024,669 26,750,234 15,343,875 13,627,208 11,178,002 13,148,353 14,087,170 11,506,424 SOUTH KOREA 13,272,280 16,443,874 27,669,751 32,107,111 43,650,886 23,745,286 21,475,322 12,437,481 INDIA 113,926,280 77,708,655 55,807,164 56,782,532 104,001,809 290,203,481 117,806,919 113,308,378 AUSTRALIA 357,791,209 316,466,241 373,507,644 366,468,594 307,214,033 297,402,170 212,359,950 256,605,117 NEW ZEALAND 139,699,576 105,159,257 100,412,239 120,086,408 171,271,690 159,961,111 199,128,215 223,570,291

C. Balance of Trade (US $)

COUNTRY 1997 1998 1999 2000 2001 2002 2003 2004CHINA (107,546,387) (380,732,132) (147,185,782) (64,193,421) (35,652,398) (75,432,126) (94,686,322) (87,253,036)JAPAN 401,577,223 396,072,835 408,650,124 437,459,334 396,962,936 395,818,578 388,430,025 427,740,762SOUTH KOREA 64,119,520 42,625,258 38,780,753 41,067,295 41,961,823 72,729,971 101,641,342 128,052,249INDIA (110,851,218) (74,592,053) (53,905,614) (54,870,751) (101,147,415) (288,795,575) (114,301,602) (109,785,561)AUSTRALIA (334,688,194) (298,223,958) (355,321,587) (351,776,140) (292,414,183) (271,599,950) (191,497,060) (236,270,825)NEW ZEALAND (130,820,531) (99,169,228) (94,327,171) (114,301,130) (166,144,148) (152,188,109) (186,785,776) (211,596,924)

Source: National Statistics Office

Value % Share % Growth Value % Share % Growth Value % Share % Growth Value % Share % Growth Value % Share % Growth Value % Share % Growth1997 38 1.68 — 437 19.56 — 77 3.47 — 3 0.14 — 23 1.04 — 9 0.40 —1998 64 3.00 70.71 423 19.74 (3.16) 59 2.76 (23.68) 3 0.15 1.35 18 0.85 (21.04) 6 0.28 (32.54)1999 38 2.20 (41.05) 424 24.65 0.28 66 3.86 12.50 2 0.11 (38.99) 18 1.06 (0.31) 6 0.35 1.592000 68 3.60 80.96 451 23.67 6.39 73 3.84 10.12 2 0.10 0.54 15 0.77 (19.21) 6 0.30 (4.93)2001 67 3.60 (2.29) 408 21.77 (9.52) 86 4.57 17.00 3 0.15 49.31 15 0.79 0.73 5 0.27 (11.37)2002 60 3.14 (10.70) 409 21.52 0.20 96 5.08 12.69 1 0.07 (50.68) 26 1.36 74.34 8 0.41 51.592003 84 3.76 41.17 402 17.94 (1.58) 123 5.49 27.61 4 0.16 148.97 21 0.93 (19.14) 12 0.55 58.792004 59 2.47 (29.52) 439 18.25 9.13 140 5.84 14.11 4 0.15 0.50 20 0.84 (2.53) 12 0.50 (2.99)

Average 60 2.93 13.66 424 20.89 0.22 90 4.36 8.79 3 0.13 13.88 20 0.96 1.60 8 0.38 7.52

SOURCE: National Statistics OfficeNote: No growth rate for 1997 is calculated due to the fact that data for 1996 are categorised according to the Philippine Standard Commodity Classification (PSCC) and have not been converted to the Harmonised System (HS) Code.

Value % Share % Growth Value % Share % Growth Value % Share % Growth Value % Share % Growth Value % Share % Growth Value % Share % Growth1997 145 5.51 — 35 1.33 — 13 0.50 — 114 4.33 — 358 13.59 — 140 5.31 —1998 445 17.40 206.52 27 1.05 (23.62) 16 0.64 23.90 78 3.04 (31.79) 316 12.38 (11.55) 105 4.11 (24.72)1999 185 7.37 (58.41) 15 0.61 (42.64) 28 1.10 68.27 56 2.22 (28.18) 374 14.88 18.02 100 4.00 (4.51)2000 133 5.56 (28.29) 14 0.57 (11.19) 32 1.35 16.04 57 2.38 1.75 366 15.36 (1.88) 120 5.03 19.592001 103 4.11 (22.69) 11 0.45 (17.97) 44 1.75 35.95 104 4.17 83.16 307 12.32 (16.17) 171 6.87 42.622002 135 4.95 31.80 13 0.48 17.63 24 0.87 (45.60) 290 10.62 179.04 297 10.88 (3.19) 160 5.85 (6.60)2003 179 6.92 32.44 14 0.54 7.14 21 0.83 (9.56) 118 4.56 (59.41) 212 8.21 (28.60) 199 7.70 24.492004 147 5.05 (18.06) 12 0.40 (18.32) 12 0.43 (42.08) 113 3.90 (3.82) 257 8.83 20.83 224 7.69 12.27

Average 184 7.11 17.91 18 0.68 (11.12) 24 0.93 5.86 116 4.40 17.59 311 12.06 (2.82) 152 5.82 7.89

SOURCE: National Statistics OfficeNote: No growth rate is calculated for 1997 due to the fact that data for 1996 are categorised according to the Philippine Standard Commodity Classification and have not been converted to the Harmonised system (HS) Code.

South KoreaJapanTable 2. Share and Growth of Philippine Agricultural Exports to Six Countries, 1997-2004 (million US $)

China Australia New ZealandIndia

Table 3. Share and Growth of Philippine Agricultural Imports from Six Countries, 1997-2004 (million US $)China Japan South Korea India Australia New Zealand

RANK HS Code Commodity Description Total China Japan South Korea India Australia N. Zealand

1 08030000 BANANAS, INCLDG PLANTAINS, FRESH/DRIED

234,424,253 28,117,208 176,278,728 23,638,426 6,389,891

2 03061300 FROZEN SHRIMPS & PRAWNS 62,601,425 54,249,785 8,351,640 3 15131900 OTH COCONUT CRUDE OIL & ITS 56,665,161 4,611,660 35,128,115 16,925,386 4 08043000 PINEAPPLES, FRESH/DRIED 37,984,221 32,966,894 4,261,844 755,483 5 23065000 OIL-CAKE & OTH SOLID 19,982,423 18,435,207 822,669 724,547 6 08045000 GUAVAS, MANGOES &

MANGOSTEENS, FRESH/DRIED19,404,095 19,404,095

7 03062300 NOT FROZEN SHRIMPS & PRAWNS

19,362,008 19,362,008

8 17011110 RAW CANE SUGAR NOT CONTAINING ADDED FLAVORING/COLORING MATTER, IN SOLID FORM [IN-QUOTA]

11,774,043 2,948,391 8,825,652

9 07099090 OTHER VEGETABLES, FRESH OR CHILLED, N.E.S.

11,482,962 11,482,962

10 12122000 SEAWEEDS & OTH ALGAE, FRESH/DRIED, WTR/NOT GROUND, USED FOR DYEING, TANNING, IN PERFUMERY, IN PHARMA

8,070,238 3,177,974 4,286,132 606,132

11 03034210 YELLOWFIN TUNA (THUNNUS ALBACARES)EXCLDG LIVERS & ROES, FROZEN, EXCLDG FILLETS & OTH MEAT OF HDG. NO

7,650,069 7,650,069

12 16041400 PREPARED/PRESERVED TUNAS, SKIPJACK & BONITO (SARDA SPP.), WHOLE/ PCS., BUT NOT MINCED

6,842,393 1,192,490 5,433,158 216,745

Table 4. Philippine Agricultural Exports to Six Countries, 2004

13 20089900 OTH FRUITS/EDIBLE PARTS OF PLANTS,PREPARED/PRESERVED,N.E.S.

6,489,865 5,899,463 590,402

14 20089200 MIXTURES OF OTH FRUIT & EDIBLE PARTS OF PLANTS OTH THN SUBHDG.NO.200819, OTHWS PREPARED/PRESERVED, W

6,318,874 6,318,874

15 03074900 CUTTLE FISH (SEPIA OFFICINALIS, ROSSIA MACROSOMA, SEPIOLA SPP.) & SQUID (LOLIGO/ NOTOTODARUS/OMNASTR

6,069,285 6,069,285

16 08011100 DESSICATED COCONUTS, FRESH/ DRIED, WTR/ NOT SHELLED/ PEELED

5,173,660 4,538,121 635,539

17 21069090 OTH FRUIT&OTH EDIBLE PARTS OF PLANT OTH THN SUBHDG.NO.200819 OTHWS PREPARED/ PRESERVED, WTR/NOT CONT

4,934,114 4,934,114

18 13023910 CARAGEENAN, WTR/ NOT MODIFIED, DERIVED FROM VEGETABLE PRODUCTS

4,581,842 321,162 3,671,360 589,320

19 20079990 OTH COOKED PREPARATIONS, OTH THN FRUIT PUREE & FRUIT PASTE, WTR/NOT CONTAINING ADDED SUGAR/OTH SWEET

4,304,931 3,730,004 574,927

20 20081100 GROUND-NUTS, OTHWS PREPARED/PRESERVED, WTR/NOT CONTAINING ADDED SUGAR/OTH SWEETENING MATTER/SPIRIT,N

3,197,713 3,082,213 115,500

21 20094000 PINEAPPLE JUICE, UNFERMENTED & NOT CONTG ADDED SPIRIT, WTR/NOT CONTGADDED SUGAR OTH SWEETENING MATTE

2,472,814 124,124 2,140,686 208,004

22 20082000 PINEAPPLES, OTHWS PREPARED/PRESERVED, WTR/NOT CONTAINING ADDED SUGAR/OTH SWEETENING MATTER/SPIRIT

2,063,180 58,557 1,617,348 387,275

23 09101000 GINGER 1,868,360 1,868,360 24 19041000 PREPARED FOODS OBTAIN BY

THE SWELLING/ ROASTING OF CEREALS/CEREAL PRODCTS

1,322,193 1,322,193

25 15131100 COCONUT CRUDE OIL, WTR/NOT REFINED, NOT CHEMICALLY MODIFIED

1,278,891 1,278,891

26 19059000 OTH BAKERS' WARES, WTR/NOT CONTG COCOA

676,923 676,923

27 21069060 PREPARATIONS REFFERED TO AS "FOOD SUPPLEMENTS",BASED ON EXTRACTS FR. PLANTS, FRUIT CONCENTRATES,HONE

665,432 665,432

28 22021000 WATERS, INCLDG MINERAL&AERATED WATERS, CONTAINING ADDED SUGAR/OTH SWEETENING MATTER/ FLAVOURED

505,699 505,699

29 08013100 CASHEW NUTS, FRESH/DRIED, IN SHELL

458,800 458,800

30 21039000 OTH SAUCES & PREPARATIONS THEREFOR, MIXED CONDIMENTS & MIXED SEASONINGS;MUSTARD FLOUR & MEAL & PREPA

422,132 422,132

31 24012000 TOBACCO,PARLTY/WHOLLY STEMMED/STRIPED

420,227 420,227

32 21011210 PREPARATIONS W/ A BASIS OF EXTRACTS,ESSENCES/CONCENTRATES/ W/ A BASIS OF

338,550 338,550

33 23099090 OTH PREPARATIONS USED IN ANIMAL FEEDING

251,325 251,325

34 23099010 PREPARATIONS USE IN MAKING COMPLETE FEEDS/SUPPLEMENTARY FEEDS(PREMIXES), FEED ADDITIVES, TRACE MINER

204,449 204,449

35 23099020 PRAWN FEEDS 89,400 89,400

1 04021010 MILK, IN SOLID FORM, OF A FAT CONTENT,BY WT.,NOT EXCEDG 1.5%,IN BULK CONTAINERS OF A

152,877,858 1,870,161 76,582,578 74,425,119

2 04022110 MILK & CREAM, IN SOLID FORM, OF A FAT CONTENT, BY WT, EXCEDG 1.5%, NOT CONTAINING ADDED SUGAR OT OTH

67,190,515 14,274,967 52,915,548

3 02023000 MEAT OF BOVINE ANIMALS, BONELESS, FROZEN

64,350,848 61,077,359 3,273,489

4 10019090 OTH WHEAT & MESLIN OTH THN DURUM WHEAT

46,730,386 24,396,308 6,883,802 15,450,276

5 24012000 TOBACCO,PARLTY/WHOLLY STEMMED/STRIPED

33,393,848 24,624,390 2,594,047 6,175,411

6 04061000 FRESH (UNRIPENED/UNCURED) CHEESE, INCLDG WHEY AND

31,003,172 7,998,037 23,005,135

7 11071000 MALT, NOT ROASTED 20,033,560 20,033,560 8 04039010 BUTTERMILK WTR/NOT

CONCENTRATED/CONTG ADDED SUGAR/OTH SWEETENING

18,917,626 7,834,667 11,082,959

9 10019010 WHEAT USED AS FEED OTHER THAN DURUM WHEAT

17,670,408 9,361,084 8,309,324

10 01029000 LIVE BOVINE ANIMALS OTHER THAN PURE BRED

17,341,231 17,341,231

11 04012000 MILK & CREAM, NOT CONCENTRATED/CONTG ADDED SUGAR/OTH SWEETG MATTER, OF FAT CONTENT, BY WT.EXCEEDG 1%

13,655,506 13,655,506

12 04059000 OTHER FATS AND OILS DERIVED FROM MILK

11,720,269 11,720,269

India Australia N. ZealandRank

Table 5. Philippine Agricultural Imports from Six Countries, 2004

HS Code Commodity Description Total China Japan S. Korea

13 04041000 WHEY & MODIFIED, WTR/NOT CONCENTRATED/CONTAINING ADDED SUGAR/OTH SWEETENING MATTER

9,881,419 259,200 9,622,219

14 23040000 OIL-CAKE & OTH SOLID RESIDUES, WTR/NOT GROUND/IN PELLETS, RESULTING FROM EXTRACTION OF SOYABEAN OIL

6,879,147 6,879,147

15 08081000 APPLES, FRESH 5,797,268 5,797,268 16 19011000 FOOD PREP. FOR INFANT

USE,PUT UP FOR RETAIL SALE,OF FLOUR,MEAL,STARCH/MALT EXTRACT(NOT CNTNG COCOA P

5,511,204 5,511,204

17 10051000 MAIZE(CORN) SEED 4,440,907 4,440,907 18 12022000 GROUND-NUTS, NOT

ROASTED/OTHWS COOKED, SHELLED, WTR/NOT BROKEN

3,890,974 3,890,974

19 19019030 FILLED MILK 3,761,305 3,761,305 20 07032010 GARLIC, FRESH/CHILL [IN-

QUOTA]3,712,474 3,712,474

21 20041000 POTATOES PRE/PRES OTHWS THN BY VINEGAR OR ACETIC ACID, FROZEN, OTH THN PRODUCTS OF HDG. # 2006

3,702,231 3,702,231

22 12129900 OTH VEGETABLE PRODUCTS(INCLDG UNROASTED CHICORY ROOTS VAR. CICHORIUM INTYBUS SATIVUM) FRESH/DRIED, W

3,693,348 3,693,348

23 17023000 GLUCOSE & GLUCOSE SYRUP IN SOLID FORM, NOT CONTAINING FRUCTOSE/CONTAINING IN DRY STATE LESS THN 20%

3,585,098 3,585,098

24 22072000 ETHYL ALCOHOL & OTH SPIRITS, DENATURED, OF ANY STRENGTH

3,428,031 3,428,031

25 03061300 FROZEN SHRIMPS & PRAWNS 3,143,670 3,143,670 26 17049090 OTH SUGAR

CONFECTIONERY(INCLDG WHITE CHOCOLATE), NOT CONTAINING COCOA

3,137,271 3,137,271

27 04051000 BUTTER 3,101,782 3,101,782 28 12010000 SOYA BEANS, WTR/NOT BROKEN 2,446,291 2,446,291

29 23064000 OIL-CAKE & OTH SOLID RESIDUES, WTR/NOT GROUND/IN PELLETS, RESULTING FROM EXTRACTION OF RAPE/COLZA SE

2,368,440 2,368,440

30 11081200 MAIZE(CORN) STARCH 2,022,540 2,022,540 31 17019910 OTH BEET/CANE SUGAR, IN

SOLID FORM, NOT CONTAINING ADDED FLAVORING/COLORING MATTER, N.E.S., IN-QUOTA

1,997,409 1,997,409

32 12099100 VEGETABLE SEEDS USED FOR SOWING, UNDER PRIOR AUTHORIZATION OF THE B.P.I., AS NECESSARY IN THE INTERE

1,495,365 1,495,365

33 03037410 MACKEREL(SCOMBER- SCOMBRUS/JAPONICUS/ AUSTRALASICUS)EXCLDG LIVERS&ROES,FROZEN EXCLDG FILLETS&OTH MEA

1,383,112 1,383,112

34 24022000 CIGARETTES CONTAINING TOBACCO

1,076,823 1,076,823

35 02064900 OTH EDIBLE OFFAL OF SWINE, FROZEN

1,043,682 1,043,682

36 23099020 PRAWN FEEDS 753,786 753,786

37 02032991 OTHER MEAT OF SWINE, FROZEN [IN-QUOTA]

708,199 708,199

38 14049000 OTH VEGETABLES PROD NOT ELSEWHERE SPECIFIED/INCLUDED

703,628 703,628

39 21039000 OTH SAUCES & PREPARATIONS THEREFOR, MIXED CONDIMENTS & MIXED SEASONINGS;MUSTARD FLOUR & MEAL & PREPA

673,480 673,480

40 02090000 PIG FAT FREE OF LEAN MEAT & POULTRY FAT (NOT RENDERED), FRESH, CHILL, FROZEN, SALTED, IN BRINE, DRIE

508,676 508,676

41 02064100 LIVERS OF SWINE, FROZEN 482,920 482,920 42 18069090 OTH CHOCOLATE & OTH FOOD

PREPARATIONS CONTAINING COCOA, IN BLOCKS, SLABS/BARS

473,214 473,214

43 11010000 WHEAT/MESLIN FLOUR 437,427 437,427 44 23099010 PREPARATIONS USE IN MAKING

COMPLETE FEEDS/SUPPLEMENTARY FEEDS(PREMIXES), FEED ADDITIVES, TRACE MINER

395,279 395,279

45 21069030 CREAM SUBSTITUTES, NON-DAIRY

374,137 374,137

46 02032210 HAMS, SHOULDERS & CUTS THEREOF W/ BONE, OF SWINE,FROZEN [IN-QUOTA]

372,367 372,367

47 21069090 OTH FRUIT&OTH EDIBLE PARTS OF PLANT OTH THN SUBHDG.NO.200819 OTHWS PREPARED/ PRESERVED, WTR/NOT CONT

276,864 276,864

48 22084000 RUM & TAFIA 259,312 259,312

582,804,307 84,878,942 7,038,425 8,658,995 100,760,452 180,824,150 200,643,343181,337,638 61,835,312 4,467,999 3,778,486 12,547,926 75,780,967 22,926,948

764,141,945 146,714,254 11,506,424 12,437,481 113,308,378 256,605,117 223,570,291

TOTAL TOP AGRICULTURAL PRODUCTSOTHER AGRICULTURAL PRODUCTS

GRAND TOTAL

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