Recently, the durian imported from Thailand is 16
Yuan (or 126 pesos) a kilo on fruit markets in Beijing,
China, whereas the same fruit cost twice as much last year.
A RP banana exporter may also wonder why his export of
banana to China has to pay 16% tariff while other ASEAN
exporters need only to pay 10%. Well, may I say, the answer
is the Early Harvest.
1. What is an Early
Harvest Program?
The Early Harvest Program is a
free trade arrangement under the framework of China-ASEAN
Free Trade Area (FTA) and is designed to accelerate the
implementation of China-ASEAN Economic Cooperation Framework
Agreement. By reducing the tariffs of some products,
agricultural products in particular, including livestock,
meat, fish, dairy products, live plants, vegetables, fruits
and nuts, the ASEAN countries can attain early access to
Chinas huge domestic market prior to the establishment
of the FTA.
The establishment of China-ASEAN
FTA and the initiation of the Early Harvest Program were
unanimously endorsed by the ASEAN countries. By the end of
2003, nine of them except the Philippines have signed the
Early Harvest Agreement with China.
2. The
Early Harvest Program enables the Philippines to be in a
better position to export more competitive agricultural
products to China. As a result, the local farmers will be
the direct beneficiaries.
Firstly, Early
Harvest means that your tropical fruits will enjoy more and
easy access to Chinese market. With a population of 1.3
billion, China has a tremendous demand for tropical fruits.
As one of the largest tropical fruits suppliers to China,
the Philippines exported more than 300 thousand metric tons
of fruits to the mainland of China in 2003, accounting for
30% of Chinas total fruit import, and showing an
increase of 21% over that in 2002. Your fruit export to
China last year generated an avenue of US$82 million,
representing a 30% increase over that of the year before. At
present, The Philippine banana export to the Chinese
mainland last year accounted for 89% of Chinas import
of bananas. Other Philippine fruits such as mango, papaya,
and pineapple are also popular on Chinese market. Now,
Chinas MFN tariff rates for imported mango, papaya and
pineapple are 16%, 27%and 15.2% respectively. By
participating in the Early Harvest Program, the import
tariff of these fruits is reduced to 10% by January 2004,
and to 5% by January 2005, and by 2006, these products will
enjoy tariff-free access to the Chinese market, thus
enlarging the market share of Philippine fruits in China by
a big margin. Besides the Philippines, Vietnam, Thailand and
Malaysia are also competitive suppliers of tropical fruits,
all of which have already signed the Early Harvest Agreement
with China and are now enjoying the preferential tariff
rates for their tropical fruits export to China. If the
Philippines continues to be indecisive on the Early Harvest
Program, I am afraid, the Philippine tropical fruits will be
edged out from the Chinese market by those more competitive
ASEAN countries. This is certainly not in the interest of
the Philippines.
Secondly, Early Harvest means
that your coconut products will enjoy more and easy access
to Chinese market. The Philippines is one of the
world-leading producers of coconut products with a planting
area of more than 3.1 million hectares, accounting for 26%
of the agricultural lands. About 3.5 million households or
250 million people directly or indirectly rely on coconut
products for a living. Coconut products, such as coconut
oil, coco peat and copra, are the Philippines most
important export products, representing 30% of the
countrys total agricultural export products. In recent
years, Chinas demand for coconut oil has been
increasing rapidly. In 2003, China imported 60 thousand
metric tons of coconut oil from the Philippines, 48% more
than that in 2002. Now, China is studying the feasibility of
using coconut fiber for combating land erosion and
anti-desertification. These coco products have a good future
on the Chinese market. Now, our MFN tariff rates for coconut
oil and coconut fiber are 10% and 5% respectively. After the
establishment of China-ASEAN Free Trade Area, all the
participating states will enjoy tariff-free trade with
China, thus creating favorable conditions for exporting the
Philippine coco products to Chinese market. However we
should be aware that Indonesia, Vietnam and some other
countries are also exporting coconut products to China, and
Indonesia has already included its coconut oil on the list
for gradual tariff reduction under the Early Harvest
Program. If the Philippines is still hesitant to join the
Early Harvest Program, then it will find much more difficult
to export its coconut products to China very
soon.
Thirdly, Early Harvest means that your
aquatic products and seafood will enjoy more and easy access
to Chinese market. China is a large producer of aquatic
products and seafood as well as a large consumer of these
products. We import US$2.5 billion worth of these products
annually, of which the Philippines has only taken a small
proportion. Statistics of Chinas Customs show that
China imported only US$5.74 million worth of aquatic
products from the Philippines in 2003. At Present, our MFN
tariff rates for tuna, frozen shrimp, frozen crab and canned
fish are 12-14%, 20%, 20%, and 17.2% respectively. Under the
Early Harvest Program, the tariff rates of these products
will be rapidly reduced. Having joined the Program, the
Philippines will be able to export more of its aquatic
products and seafood to China.
3. Early Harvest
Program will not seriously affect the Philippine export of
agricultural products.
People may worry that
the Early Harvest Program may produce adverse effects on the
Philippines export of its agricultural products.
Lets me share with you my views on this
point:
Firstly, China and the Philippines are
supplementary in agricultural products. As for the
Philippine agricultural products export to China in 2003,
the major products exported to China were: tropical fruits
mainly banana, mongo and papaya accounting for 63.5% of the
countrys export total, vegetable oil (mainly coconut
oil) accounting for 24%, raw rubber accounting for 6.3% and
aquatic products accounting 4.3%. Meanwhile, the
countrys imports from China were: grain and cereal
products (29.5%), vegetables and fruits (28.6%), rapeseeds
and oil-contained nuts (9.4%), aquatic products (8.4%),
tobacco (6.1%), beverage (4.7%) and meat (3.4%). So we can
see what the Philippines imported from China are mainly
those the Philippines does not produce or do not produce
enough to satisfy its domestic needs. Furthermore, although
the Philippines import a large quantity of agricultural
products, yet it imports most of agricultural products from
other countries except some fruits from China. The
Philippiness import of the Chinese agricultural
products takes up only a small proportion of its import
total and the imported Chinese products are those in short
supply in the Philippines.
Secondly, Early
Harvest allows some sensitive products to be placed on an
exclusion list for transitional protection. In accordance
with the terms of the Early Harvest Program, ASEAN countries
and China may include on an exclusion list some of their
sensitive products that may at a later stage be included in
the Program after a grace period. This is designed to
prevent certain less competitive products of some countries
from being seriously affected after the import and export
restrictions are lifted. Some sensitive products of the
Philippines may be placed on an exclusion list for
protection in a transitional period. At the same time, it is
advisable for this country to increase agricultural
productivity so as to make local products more
competitive.
4. It is of key importance to
improve farm management and technology to enhance the
competitiveness of the Philippines agricultural products in
the world market.
Protection of any kind is
only of an expedient nature. After all, free trade is a
give-take business. If there are only
take and no give, there will be
certainly no trade deal. Long-term protection will only
protect backwardness and reduce competitiveness. As a
result, the agricultural and industrial sectors cannot
develop further and they will find themselves in a very
difficult position in the increasingly competitive
international market. It may be advisable to take positive
measures to overcome these difficulties.
First, to increase agricultural productivity
so as to make local farm products more competitive. The
Philippines is bestowed with rich soil and suitable climate
for agriculture. Low output and high production cost are the
main causes for low competitiveness of some local
agricultural products, which could be improved through both
policy and technology support. For instance, the animal feed
cost accounts for 60-70% of the total cost of livestock
production. Corn is the major animal feed in the
Philippines. If the per hectare corn yield can be increased,
the feed price would be reduced by a large margin and the
cost of livestock production will decrease as a result so
that local meat products will accordingly be more
competitive. At present, the corn production in this country
is only 1.8 metric tons per hectare, while per hectare
output of hybrid corn in China is about 7-9 metric tones.
Now, Chinese experts have successfully cultivated 29
varieties of Chinese hybrid corn in 21 places across the
country. If Chinas hybrid corn seeds could be
introduced together advanced farm technology to this
country, it would not be difficult to reduce both the cost
of animal feed and the price of meat products. The same
applies to local vegetables. For example, in
China, the average output of cucumber is 50-60 metric tons
per hectare, and the output may reach 200 tons if cultivated
in green houses. China has suitable vegetable seeds and farm
technology and we would like to help our Philippine friends
in this regard.
Second, to strengthen the
customs control to curb smuggling. The best way to protect
local products is to tighten the customs control so as to
stop the illegal entry of smuggled products into this
country. Obviously, smuggling does not only reduce the
countrys tax revenues, but also badly disturb the
normal market order, thus seriously hindering the
development of both local agricultural and relevant
industrial sectors.
The leaders of ASEAN
countries and China have agreed to establish a Free Trade
Area by the year 2010. This ASEAN-China FTA will cover an
area with 1.7 billion consumers, total GDP of 2 trillion
USD, and trade volume of 1.2 trillion USD according to the
present-day statistics. It will be the largest free trade
area of developing countries. The Early Harvest Program is
one of the concrete steps taken by ASEAN countries and China
towards the future FTA. As close neighbors, China and the
Philippines have enjoyed time-honored friendship. As the
worlds largest potential market, China represents an
important opportunity for Asia. China and the Philippines
can, as developing countries, supplement each other in many
areas. The ASEAN-China FTA and the Early Harvest Program
will certainly bring enormous business opportunities to this
country. As a friend of the Philippine people, China does
not want to see our Philippine friends stay out from the
economic integration process.