Economists back move to abolish MAV

LOCAL economists threw their support behind the government’s plan to abolish the minimum access volume (MAV) and regulate the importation of various agricultural products by setting appropriate tariffs.

Former UP School of Economics Dean Ramon L. Clarete said the MAV can be removed by unifying the in- and out-quota scheme or by zeroing the quantity of the MAV.

However, setting an appropriate tariff would be important. Former Tariff Commissioner George M. Manzano said the tariff should be “lower than the ad valorem equivalent of a MAV, otherwise there is no point in removing the MAV and replacing it with an equivalent tariff that is even higher than the tariff equivalent of a MAV.”

“If the appropriate tariff is lower and causes additional imports, trading partners have no cause to sue us. Our consumers would be better off,” Clarete stressed.

University of the Philippines Professor Emeritus Epictetus Patalinghug told BusinessMirror on Wednesday that it is within the legal rights of the country as a World Trade Organization (WTO) to adjust the MAV and set tariff rates.

This is stipulated under the WTO Safeguards provision. The MAV is a Non-Tariff Measure (NTM) that guarantees the entry of a certain volume of exports into an importing country.

Manzano said the “spirit” of the WTO encourages free trade among its members. This means the WTO will support efforts that promote freer trade globally.

“In the spirit of things, I think the WTO does not mind if you become more liberal. It minds when you become more restrictive. So they put a cap on your restrictiveness. That’s what’s called a bound tariff, you cannot exceed that. But you’re free to set up a tariff which is lower than the bound,” Manzano said.

Ateneo Eagle Watch Senior Fellow Leonardo A. Lanzona Jr. told the BusinessMirror on Wednesday that the Philippines has some leeway in adjusting to a lower tariff and a higher MAV.

Lanzona said if the removal of the MAV passes the necessary procedures and laws are adjusted, there would be no question as to the legality of the measure.

The removal of the MAV would benefit consumers particularly in terms of the lower prices of goods. However, Lanzona said, the producers will be adversely affected.

Producers need to be more efficient while the government should develop the right policies such as taxes and subsidies to ensure market efficiency and competition.

“On the whole, the consequences will be good for the country. It reduces the market power possessed by local producers, making them more efficient,” Lanzona said.

Philippine Institute for Development Studies (PIDS) Roehlano Briones agreed with the decision to remove the MAV, highlighting its impact on lowering prices.

Pork issues

ACTION for Economic Reforms (AER) Coordinator Filomeno Sta. Ana III told the BusinessMirror the WTO encourages rules that will apply equally to all.

Sta. Ana added that “MAV discriminates against imports” and removing it would ultimately benefit consumers. This is especially the case when it comes to pork imports at this time.

Due to the shortage in supply caused by the African swine fever (ASF) which increased pork prices, Sta. Ana said removing the MAV would address the steep prices.

“Neda [National Economic and Development Authority] has done calculations that tariff rate likewise has to be reasonable in order to encourage imports. Too high a tariff rate will not meet the objective of addressing supply and lowering prices,” he said.

For University of Asia and the Pacific Center for Food and Agri Business (CFA) Rolando T. Dy, increasing the MAV volume for pork at this time will help consumers.

Dy said, however, local pork producers believe it will lower farm prices. Nonetheless, the Neda and the Department of Finance believe otherwise.

In the case of pork, Patalinghug said, the domestic hog raisers can sue the government. But given the slowness of the court system, it may not be worth fighting out in court. He said after 12 months when the old MAV and tariff rates are reinstated, the court case may already be moot and academic. This would render the legal route impractical.

On Tuesday, Finance Secretary Carlos G. Dominguez III, as chairman of the government’s Economic Development Cluster (EDC), took responsibility for the twin proposals to reduce pork tariffs and increase minimum access volume (MAV), measures facing opposition from lawmakers.

In a letter to Senate President Vicente Sotto III on Tuesday, Dominguez disclosed that the EDC has instructed the Departments of Agriculture, and Trade and Industry to “work towards” the abolition of the MAV system and “set an appropriate rate of a tariff to regulate the importation of agricultural products.”

Furthermore, Dominguez, a former agriculture secretary, assured Sotto that the importation of pork under the proposed MAV plus of 350,000 metric tons will enter the country “in batches,” according to his letter, a copy of which was obtained by the BusinessMirror.

Earlier, Agriculture Secretary William Dar had given the House of Representatives similar assurance that import arrivals will be “calibrated” carefully to avoid the “flooding” of imports that the local hog sector fears will wipe out whatever is left from the impact of the ASF.