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Meat processors to feel pinch of lifting of rice QR

Feb 08 2017

February 06, 2017 ( by Business Mirror )

The impending removal of import quotas for rice traded under the World Trade Organization (WTO) would increase the production cost of processed-meat manufacturers, triggering price spikes down to the level of retailers, according to the Philippine Association of Meat Processors Inc. (Pampi).

Pampi Executive Director Francisco J. Buencamino said the lifting of the quantitative restriction (QR) on rice on July 1 would make mechanically deboned meat (MDM)—the raw material used in making processed-meat products—more expensive. Buencamino said this could cause the price of some of their processed- meat products to go up by at least 12 percent in the second half of the year.

“We are bothered by the raw- material concern, because in July, when the rice QR is lifted, the preferential tariff rate of MDM will go up,” he told the BusinessMirror on the sidelines of a signing ceremony between some Pampi members and Aboitiz Power Corp. held recently in Bonifacio Global City.

“If government reverts MDM tariff back to 40 percent, that will move prices up by 12 percent to 17 percent. We are talking about the price of processed-meat products from the supplier to the outlets. Therefore, the suggested retail price of processed-meat products could even be higher,” Buencamino added.
The Philippines’s rice quota waiver to the World Trade Organization is set to expire on June 30. As part of its concession for the second extension of its rice quota in 2012, the Philippines lowered its tariff on MDM to 5 percent, from 40 percent, for the duration of the extension.

Under Executive Order (EO) 190, signed by former President Benigno S. Aquino III, the Philippines will restore its tariff on MDM to the original rate of 40 percent starting July 1 this year.
“The volume of MDM that we are using, the volume we consume, is huge. So the rate from 5 percent will become 40 percent, which is stated in the EO. So we have a problem with that—on how to handle that,” Buencamino said.
Latest data from the Bureau of Animal Industry (BAI) showed that from January to October last year, chicken MDM imports reached 134,630 metric tons (MT), slightly higher than the 133,027 MT imported in 2015.

BAI data also showed that MDM pork purchased abroad during the 10-month period jumped to 2,425 MT, from 703.28 MT imported in January to October 2015.

Earlier, Dr. Rolando T. Dy, executive director of the University of Asia and the Pacific’s Center for Food and Agri Business, told the BusinessMiror that the lifting of the QR on rice would cause poultry meat imports to become more expensive. This would result in an increase in the prices of processed- meat products, like hot dogs.

“But other poultry products, such as chicken-leg quarters, would not become expensive, as these are heavily discounted [by the US],” Dy said.

In 1995 the Philippines, upon its accession to the WTO, was allowed to implement a rice QR for 10 years. Under the QR, rice imports within the minimum access volume of 805,200 MT were slapped with an in-quota tariff of 35 percent, while all imports in excess of the MAV were assessed with a higher 50-percent tariff.

In 2004 Manila applied for a seven-year extension of the QR. In December 2006 the request was approved by the WTO, subject to tariff concessions on certain agricultural products for member-countries. Among those concessions was a reduction in tariffs for MDM and mechanically separate meat of poultry.

After securing another extension of the rice QR in 2012, Manila retained prior concessions. The government also had to grant new concessions, which include a reduction in the tariffs for dairy products, oil-seed meals and frozen potatoes.