Rice Tariffs Snarl Asean Single Market

CHA-AM, Thailand — Rice, the staple dish across Southeast Asia, has emerged as an apt symbol of the region’s commitment—or lack of it—to unveiling a free trade area for its 10 members when the New Year dawns.

A trade deadlock between Thailand and the Philippines that was to have been resolved during the 15th summit of the Association of Southeast Asian leaders, which ended here Sunday, is still in want of a solution, according to trade and diplomatic sources.

Karen villagers residing in in Om Koi district, Chiang Mai province northern Thailand use elephants to plow a rice field during a demonstration to promote tourism in August. (Photo: AP)

"This summit was to have resolved this issue," a senior official from Thailand’s commerce ministry told IPS. "We were hoping for figures from our Philippine counterparts to be placed on the table that would have been acceptable. That did not happen."

"But the summit gave both countries a window to discuss the matter at a bilateral level than seeking to resolve it through a trade dispute mechanism," he added. "What was discussed—to get a win-win outcome—was better than not having a deal on rice."

With the clock ticking for the Asean Free Trade Area (AFTA), which comes into force on Jan. 1, 2010, talks to strike a deal between Bangkok and Manila on the touchy subject of rice tariffs will be tackled by a "working group at the senior official level," the official revealed. "They will start work immediately."

Thai Commerce Minister Porntiva Nakasai described her exchange with Philippine Secretary of Trade and Investment Peter Favilla at the summit’s venue, in this resort town south of Bangkok, as "candid" and "friendly."

"We need to find a way out in the next two months leading up to AFTA becoming a single market," she said during a closing press conference. "This issue is very crucial."

Philippine officials were more reticent when pressed if Manila would give in to Bangkok’s push that all the AFTA and those of the related Asean Trade in Goods Agreement (ATIGA) commitments should be met. "The rice issue was not discussed at the summit," Enrique Manalo, undersecretary for policy at the Philippine foreign ministry, told IPS. He declined to comment on discussions between Porntiva and Favilla.

ATIGA, an amendment to the AFTA Common Effective Preferential Tariff scheme, spells out what tariff reductions apply to specific goods, in particular goods classified as sensitive agriculture products such as rice.

The concluding statement from the summit hinted at the deadlock on rice tariffs still awaiting a breakthrough. "We look forward to the implementation of the Asean Trade in Goods Agreement. We adhered to the principle specified in the Agreement and urged Member States to resolve the differences at the earliest opportunity," said the statement by Thai Prime Minister Abhisit Vejjajiva, host of the 15th summit.

The dispute between Thailand, the world’s largest exporter of rice, and the Philippines, one of the world’s leading importers of rice, stems from Manila’s reluctance to slash import tariffs for Thai rice, consequently undermining the principles of AFTA.

Under AFTA, which has been steadily implemented since 1993, the six countries comprising Asean at the time had to bring down their import tariffs to between zero and five percent for all Asean products by January 2010. These countries were Brunei, Indonesia, Malaysia and Singapore, besides Thailand and the Philippines.

Burma (or Myanmar) Cambodia, Laos and Vietnam, which joined the 10-member regional bloc in the mid-1990s, have till 2015 to slash their import tariffs to boost intra-regional trade.

Yet where rice is concerned, which was classified as ‘Sensitive Agriculture Product’ in AFTA, Thailand wants the Philippines to slash the import tax from the current 40 percent to 25 percent by 2015. That would bring the Philippines close to the cuts in rice tariffs by Indonesia, which has agreed to slash them to 25 percent by 2015, and Malaysia, which has decided to cut their tariffs from 40 percent to 20 percent by 2010.

The Philippines, however, is reluctant to make such tariff cuts. Besides this barrier coming in the way of Thailand’s quest to make a large presence in the Philippine rice market, Bangkok is also being denied its push for Manila to compensate for its violation of AFTA by increasing the former’s quota.