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of life that countries rely no longer on their own resources and that they depend on
the resources of their neighbors. Gone are the days wherein close door polices are
adopted by nations in order to survive. In this day and age, in order to stay afloat,
most third world countries such as the Philippines are dependent on their
neighboring countries. Whether it be importing raw materials, exporting products or
enticing foreign investors, one thing is for sure, there is an interdependence of
countries in order to be economically stable. International commerce entails a
necessary interaction between nations; trade. Following the havoc caused by World
War II, delegates from Allied nations gathered for a conference to establish rules for
commercial and financial relations among the worlds major industrial states. This is
known as the Bretton Woods Conference. One major goal was to avoid the
recurrence of the closed markets and economic warfare that characterized the
previous decades. This led to the establishment of the International Monetary Fund,
the International Bank for Reconstruction and Development (known as the World
Bank). This was simply the beginning of international trade. Eventually, a
multilateral agreement, the General Agreement on Trades and Tariffs (GATT),
regulating international trade was signed in 1947. This multilateral agreement would
be updated in 1994 and would serve as the foundation of trade policies which the
contracting parties will follow in order to promote international trade.
However, the GATT does not give the contracting parties absolute autonomy
with regard to restricting foreign trade. The twin principles of Most Favored Nation
and National Treatment serve as safeguards in order to ensure that no foreign
country will be subject to discrimination. The notion of non-discrimination is a
principle which the Philippines adheres to. Therefore, it is safe to say that the local
laws in relation to anti-dumping should not be used as a tool to discriminate against
foreign countries. It would be of value to look at the rationale behind the anti
dumping law. According to the Philippine Tariff Commission, there are three basic
reasons to justify the anti-dumping law 9 . The first is to transform the domestic antidumping law into a more workable and simple piece of legislation providing the
safety nets against the inflow of cheap dumped imports. The second rationale is to
strengthen the rules governing the investigation of anti-dumping cases. Finally, the
third rationale is to align the domestic law with the WTO Agreement on AntiDumping Practices. Furthermore, the landmark case of Taada vs. Angara, the
Supreme Court provided that Constitution did not intend to pursue an isolationist
policy. It did not shut out foreign investments, goods and services in the
development of the Philippine economy. While the Constitution does not encourage
the unlimited entry of foreign goods, services and investments into the country, it
does not prohibit them either. In fact, it allows an exchange on the basis of equality
and reciprocity, frowning only on foreign competition that is unfair. 10
2010
2011
2012
2013 (July)
Normal Value
Export Price
$600
$600
$470
$512
$276
$388
$349
$377
Discount given to
the Philippines.
54%
35.3%
25.7%
26.4%
15 Id.
16 Id.
6
and other expenses. The figures given by Chua is contrary to the findings of the
Agriculture Department which declared that Turkish flour sells for around $348 per
metric ton (MT) in the Philippine market, compared with the domestic prices of $470
per MT.
It is also important to note that at the consumer level, bakers pay P700 per 25kilogram bag of Turkish flour against P900 for the locally-milled product.
The implications of the implementation of additional duty on Turkish flour do
not only affect the flour milling industry. The baking industry is directly affected by
the imposition of additional duty on Turkish flour.
Filipino-Chinese Bakery Association (FCBA) said the price of pan de sal
could go up if the government would impose additional duty on Turkish flour.The
group warned that the price of Pinoy pan de sal, other bread products, biscuits and
noodles could go up by 10 percent to 15 percent if additional duty is imposed on
Turkish flour.The group said: Due to cheaper Turkish flour, Filipino consumers
enjoy lower priced breads and other flour-based products such as dry noodles,
biscuits and fishballs. 17
Analysis
Given the background of the party which advocates the imposition of
additional duty on the importation of Turkish Flour as well as the contingencies
which adhere to the notion that the imposition of additional duty on Turkish flour
will be detrimental to the Filipino people, it would be imperative that the act of the
DA imposing additional duty on Turkish flour be scrutinized in order to assess
whether the additional duty on Turkish flour is what is best for the country.
It would be best to analyze the situation in four levels. The first level is to
determine whether the placing of anti-dumping safeguards is the most appropriate
course of action to take. The second level will be a brief comparison with the rice
industry in the country and to determine whether there are certain similarities in
order to assess if the course of action is what is truly beneficial to the country. The
third level is to determine how Turkey can afford to give such a significant discount
and whether that in itself is an unfair trade practice. Finally, there must be an
evaluation of the local industry in order to determine what will be best in order for
the Philippines to progress as a Nation.
17 Philippines are split into two on flour import from Turkey, available at
http://en.millermagazine.com/philippines-are-split-into-two-on-flour-import-from-turkey/(last accessed October
9, 2014).
At the very onset of the problem that involves unfair trading, what needs to be
determined is the proper course of action a Country should take. As previously
mentioned, international trade is a tool that can be used to alleviate poverty. While
professing support for trade liberalization, trade policy makers often insist that
international trade should at the same time be fair. 18
In WTO law, dumping is not prohibited 19 . However, dumping is condemned if
it causes injury to the domestic industry of the importing country. The essence of the
WTO rules on dumping is that members are allowed to take certain measures , which
are otherwise WTO-inconsistent, to protect their domestic industry from effects of
dumping. 20
The importation of Turkey of flour to the Philippines is a clear case of
dumping. There is a similarity in the product as well as there is a discrepancy
between the import price and the normal value. That being said, when a foreign
country dumps a product in the Philippines, it does not ipso facto mean that a case
of anti-dumping should be filed against the foreign country. The dumping of the
product in certain instances may even be beneficial for the economy of the
Philippines. There are certain factors that should first be considered. In Thailand
H-Beams, the Appellate Body referred to article 3.1 as an overarching provision that
set forth a members fundamental, substantive obligation with respect to the
determination of injury. 21 These obligations concern the following:
The determination of the volume of dumped imports and their effect on prices
(Article 3.2)
Investigations of imports from more than one country (Article 3.3)
The impact of dumped imports on the domestic industry (Article 3.5)
The assessment of the domestic production of the like product (Article 3.6)
and
The determination of the thereat of material injury (Article 3.7 and 3.8) 22
Turkey is the volume of dumped imports and the effect of the dumped imports on
prices in the domestic market for like products.
Pinca noted that while imported flour also comes in from countries like
Indonesia, Vietnam, Australia and even India, PAFMIL never raised the issue of
dumping nor safeguards or countervailing duties because they are not dumping their
flour in the Philippines. They play fair, he said 24 . To this extent, it should be noted
that according to a news article posted by the Manila Bulletin, Gardenia Bakeries
Philippines Inc. is now using cheaper priced Indonesian flour for the production of
Pinoy Tasty after several attempts to use the locally-produced Harinang Pinoy failed
due to quality issue. 25
Gardenia president and general manager Simplicio Umali Jr. told reporters that
while Indonesian flour, which they bought at P840 per bag delivered, is more
expensive than Harinang Pinoy, which they got at P770 per bag delivered,
Indonesian flour has been able to meet its desired quality because it is high-protein. 26
''We are now buying 20-30 container loads of Indonesian flour a month for Pinoy
Tasty production because we cannot use Turkish flour because it is of low protein
although we understand that Turkish flour has improved its quality a lot,'' Umali
said. Imported Turkish flour is the cheapest source of flour in the market. It is being
sold for P720 to P750 per bag delivered. According to Umali, they tried to patronize
Harinang Pinoy, which is produced by RFM Corporation, starting November last
year but they gave it up last May because it has a higher rejection rate. 27
Based on the actions of Gardenia, it is clear that there are other sources of flour
which local bakeries, which is the number one consumer of flour in the country, get
their flour from aside from turkey. The presence of Turkish flour at a relatively
cheaper price in the local market does not mean that it causes damage to the local
flour industry. Factors such as the quality of the flour are critical to the major local
bakeries. Countries such as Indonesia, Vietnam, Australia and even India all import
flour into the country. These countries, which import flour, also have and effect on
the price of flour in the country because Turkey does not have the monopoly of
importing flour into the Philippines.
Based on the abovementioned facts, it is eveident that after examining both
the volume of the dumped imports of Turkey and the effect of the imported flour on
prices in the domestic market for locally produced flour and the consequent impact
24 Anti-dumping case vs Turkish flour, Malaya, September 19, 2014. available at
http://www.malaya.com.ph/business-news/business/anti-dumping-case-vs-turkish-flour (last accessed October 9,
2014)
25 Gardenia shifts to Indonesian flour, Manila Bulletin, July 22, 2013, available at
https://ph.news.yahoo.com/gardenia-shifts-indonesian-flour-164112169.html (last accessed October 9, 2014)
26 Id.
27 Id.
10
the most widely used trade policy instruments in agricultural trade. The issue of
whether TRQs are efficient trade policy instruments for improving market access has
been widely debated. Some believe that TRQs impose an extra barrier to trade,
circumvent the reforms sought under the General Agreement on Tariffs and Trade
(GATT) and World Trade Organization (WTO) and may not be as attractive as
initially envisioned. Others believe that the TRQs are useful and facilitate trade and
liberalization. Any expansion in quota, or decrease in tariffs, or combinations of the
two, has the potential to liberalize trade in a specific industry. 32 The article written
by Gerrardo Sicat provides for a perfect summary of the rice situation in the
country.33
The tensions felt by the nation in the scandal of rice
smuggling is a symptom of what underlies the current state of
economic policies pertaining to the food production sector.
Beneath the problem lurks the policy of protectionism that the
government has put in place to help entrenched producers in
the agricultural sector.
I will explain why smuggling, corruption and protectionism come
together as a single package. In fact, they almost become one and
the same thing! This was the bane of past setback in Philippine
industrialization. And this could be the lynchpin for a setback in
food production even as we move forward economically.
The industry watchdog in the private sector, the Philippine
Federation of Industries, has estimated, based on discrepancies in
Philippine import data and the export data of major trading
partners, that the volume of smuggling is astounding, exceeding
P300 billion alone in 2010 and 2011.
A recent internal report in the Finance Department has
categorically stated that a long history of backroom deals,
institutionalized theft and impunity has made the Bureau of
Customs one of the most prominent faces of corruption in the
government.
Rice smuggling in the news and in the Senate hearing. High
domestic demand for rice and the high cost of production in the
country relative to low-cost rice production elsewhere in
Southeast Asia Thailand and Vietnam in particular are two
major factors that have contributed to continued rice importation
by the Phillippines.
In addition , the country has been unable to produce sufficient
rice for the nations needs , despite rising yields. This has
32 IMPLEMENTATION OF TARIFF RATE QUOTAS IN THE PHILIPPINES byPRECELES HERNANDEZ
MANZO (last accessed October 9, 2014)
33 http://www.philstar.com/business/2014/02/05/1286658/rice-smuggling-corruption-protectionism-almostsame-thing (last accessed October 9, 2014)
11
Quota had an adverse effect in the rice industry. It is therefore evident that not all
acts of the government to promote fair trade and acts which are intended to be for
the protection of the local industry actually help the intended industry. The same
case can be made for the imposition of additional duties on flour being imported
from Turkey. The imposition of additional duties may lead to more smuggling cases
and higher prices.
The third level to be analyzed is how Turkey is able to give such a great
discount without suffering losses. The main reason behind the discrepancy between
the import price and normal value is the subsidy the Turkish government gives to the
flour industry in Turkey. It must be noted that certain types of subsidization in itself
constitute unfair trade. In particular, the SCM agreement provides for the prohibited
subsidies which are a) export subsidies and import substitution subsidies. Based on
the case filed by Pafmil, there is no concrete evidence showing that the subsidies
granted by the Turkish government falls under any of the prohibited forms of
subsidization. Therefore, it safe to conclude that the there is no unfair practice of
subsidization occurring.
Republic flour mills (RFM) the first milling company in the Philippines
started its operations in 1958. It was established to address the need of the country to
be self-sufficient in a basic food commodity like flour. RFM was the pioneer of the
flour-milling industry in the Asian region and it evolved from a single company
producing bags of flour, to a multi-company enterprise managing a chain of branded
products. Its first flour mill is located on a seven-hectare land in Mandaluyong,
Metro Manila. Because of the success of the Republic Flour Mills, competitors were
attracted to join the flour milling industry. At present, there are twelve companies
engaged in the manufacturing of flour which is affiliated with two industry
organizations namely the Philippine Association of Flour Millers (PAFMIL) and the
Chamber of Philippine Flour Millers (CHAMPFLOUR). PAFMIL is composed of
RFM, Liberty Flour Mills, Wellington Flour Mills, Pilmico Foods Corporation,
General Milling Corporation, Universal Robina Corporation and the Philippine Flour
Mills. CHAMPLOUR on the other hand is composed of San Miguel Mills, Philippine
Foremost Milling Corporation, Morning Star Milling Corporation and Delta Milling
Corporation. 34
Despite the reliance of the country in the importation of flour, Nestor
Constancia, president of the Philippine Baking Industry Group, said two new
flourmills have been operational Asia Grains in Cebu and Atlantic Grains in Laguna.
34 Global Forum on Competition Prepared by Victorio Mario A. Dimagiba, Director, Bureau of Trade
Regulation and Consumer Protection, Department of Trade and Industry, Philippines.
14