• by Marwaan Macan-Markar (cha-am, thailand)
• Sunday, October 25, 2009
• Inter Press Service

Rice, the staple dish across South-east 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 South-east Asian (ASEAN) leaders, which ended here Sunday, is still in want of a solution, according to trade and diplomatic sources.

'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. The Philippines has agreed to let 50,000 tonnes of tariff-free Thai rice enter its market, but Thailand wants more — an annual quota of 360,000 tonnes of premium grade rice.

Thailand is the world’s sixth largest producer of rice, following China, Indonesia, Bangladesh and Vietnam. Yet with the 10 million tonnes of rice it exported in 2008 — and an estimated eight million tonnes to be exported this year — Thailand leads the world, followed by Vietnam, which has been recently exporting close to six million tonnes a year, and India.

In 2008, Thailand exported 500,000 tonnes of rice to the Philippines, but that number has sunk to 80,000 tonnes of rice this year. Filling that void has been rice from Vietnam, which supplied the bulk of the 1.7 million tonnes of rice the Philippines has imported this year. That figure is expected to rise next year, when media reports estimate that the Philippines will import two million tonnes of rice.

The inauguration of AFTA is part of ASEAN’s march to becoming, by 2015, a rules-based regional body along the lines of the European Union. Intra-regional trade already on the rise is expected to get a boost. In 2007 it was valued at 404 billion U.S. dollars, up from 352 billion U.S. dollars in 2006.

The summit’s closing statement revealed that the region had made better progress on cutting tariffs for goods that are less sensitive than rice. Tariffs that account for 87.2 percent of total intra-ASEAN imports 'would be eliminated.'

Yet the grain that unites this regional bloc remains beyond that list. 'Both the Thais and the Philippines will have to strike a deal to avoid rice tariffs undermining the spirit of ASEAN’s new free trade area,' a South-east Asian diplomat told IPS on condition of anonymity. 'It will be a test of ASEAN solidarity.'

© Inter Press Service (2009) — All Rights Reserved. Original source: Inter Press Service

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