Revenue loss from free trade with Australia, NZ feared

Business World | Thursday, July 2, 2009 | MANILA, PHILIPPINES

Revenue loss from free trade with Australia, NZ feared

THE GOVERNMENT could lose as much as P600 million annually in foregone revenues if tariffs on dairy products are removed under the Association of Southeast Asian Nations-Australia-New Zealand Free Trade Agreement (AANZFTA), an industry group said yesterday.

"The Philippines stands to lose tariff revenues collected on milk and dairy products that would not necessarily result in a decline in prices of these goods," Danilo V. Fausto, chairman of the Dairy Confederation of the Philippines, said in a position paper.

"If possible, [the AANZFTA] should not be approved because there were talks that the Trade department will sign it this week," Mr. Fausto said in a phone interview.

He added that the P65-billion local industry stands to lose as much as P221 million a year due to the influx of cheap milk powder.

The Web site of the Australian Department of Foreign Affairs and Trade showed that, under AANZFTA, the Philippines will cut to zero percent its tariff on milk powder from current 1%-3%, and retain the 3% duty on liquid milk.

Other ASEAN countries that will drop their tariff rates on milk powder to zero are Malaysia, Singapore an Brunei Darussalam.

Thailand will cut its rate to 18%, Indonesia to 5%, Cambodia to 15% and Vietnam to 10%-15%.

For liquid milk, Singapore and Brunei will impose 0% duty; Vietnam, 20% (to cut further to 0% by 2017-2019); Indonesia, 4%-5%; while Malaysia will impose 45% on out-of-quota imports and 20% on in-quota imports.

Thailand and Cambodia are exempted from this tariff cut commitment.

"To date, the Trade department has not presented a full account of the expected costs of and gains from the AANZFTA," Mr. Fausto claimed. "No formal consultation with the local dairy industry players were conducted on the terms of agreement."

Negotiations on the agreement were concluded last February, and the deal now awaits ratification by each party.

Asked to comment on the industry’s concerns, Agriculture Undersecretary Segfredo R. Serrano, said only that "the negotiations were already concluded."

The Philippines, which provides only 1% of its milk requirement, slightly raised production last year to 13.81 million liters from 13.43 million liters in 2007 and 12.79 million liters in 2006, official data show. To meet milk demand, the country imported 1.618 billion liters last year, 1.739 billion liters in 2007, and 1.773 billion liters in 2006. — Neil Jerome C. Morales

source: Business World