The Philippines can pull down the price of sugar if only government honors its commitments under the World Trade Organization (WTO) and trade agreements with countries under the Association of Southeast Asian Nations (Asean), according to the United States Department of Agriculture (USDA).
The agency also claimed the Philippines could earn as much as P2.42 billion if it creates a sugar replenishment program that involves the export of domestically produced raw sugar to the United States and replace the domestic requirement with imported supply.
“If the Philippines were to honor its commitments under the WTO and Asean, retail sugar prices are estimated to decline by $480 per metric ton (MT) from Asean and $128 per MT, at 50 percent tariff or break-even at 65 percent tariff, if outside Asean,” the USDA reported on Wednesday.
The agency’s assumptions were based on an exchange rate of $1 to P56 as well as average per MT prices of P39,200 or $700 and prevailing wholesale price per 50 kilogram (LKG) bag in Manila as of December 2022 at P4,500 or $80.36.
The report claimed the wholesale price of an LKG bag of sugar from Asean using a 5 percent tariff will only cost P3,153.70 or a difference of P1,346.30 per bag.
If purchased through the most favored nation (MFN) at in quota rate of 50 percent, the wholesale price of an LKG bag of sugar will be at P4,141.54 or a difference of P 358.46 per bag.
Meanwhile, if supply comes from MFN out quota rate of 65 percent, the wholesale price of LKG bag of sugar will be at P4,470.82 or a difference of P29.18 per bag.
The USDA said the Philippines, as member of the WTO, is bound to implement a tariff-rate quota (TRQ) on sugar, where MFN trading partners are entitled to export 64,050 MT each year at an in-quota tariff of 50 percent.
It added the MFN trading partners are also entitled to export unlimited volumes outside the minimum access volume (MAV) at an over-quota rate of 65 percent.
However, the agency said the Philippines made sugar available through the MAV system the first and only time, back in 2002.
USDA said the Philippines, through its preferential trade agreement with the Asean, also agreed to allow sugar to enter at 5 percent duty which can also be raised to similar rates provided under the MFN when imports from Asean sources reach a trigger level or suspended when an import surge threatens domestic producers.
The group also said the Philippines can still protect local producers as sugar imports entering under preferential trade agreements such as Asean do not count toward fulfillment of the Philippines’ MFN obligation.
The USDA likewise highlighted that while global suppliers such as Australia and India have preferential trade agreements with the Philippines, these countries do not have preferential rates agreed upon for sugar, making any sugar exports from them as under MFN TRQ.
On the other hand, the USDA said the country can earn up to P2.42 billion if it supplies the US with its 145,235 MT raw cane sugar allocation for fiscal year 2023, also under the TRQ system.
The Philippines can fulfill the quota from October 1, 2022 through September 30, 2023
The system allows countries to export specified quantities of a product to the US at a relatively low tariff but subject all imports above a pre-determined threshold to a higher tariff.
This quota is important as the Philippines is among selected countries given an annual allocation of raw sugar exports to the US market at a premium price.
The USDA said that in 2021, the Philippines’ Sugar Regulatory Administration (SRA) issued an order allowing exporters of sugar for US to import the same volume at a ratio of 1:1 for raw sugar and 1:0.925 for refined sugar.
Based on the Philippine Department of Agriculture’s monitoring of public markets in the National Capital Region, the prevailing retail price as of Thursday ranges from P90 to P110 per kg of refined sugar, P83 to P95 per kg for washed sugar and P80 to P95 per kg for brown.
SRA mill site monitoring show the composite price of raw sugar as of December 25, 2022 at P3,017.92 per LKG, up by 2.2 percent from December 18’s P2,953.27 per LKG.
