SUMMARY OF THE COMMITTEE ON AGRICULTURE TRIP TO THAILAND AND THE PHILIPPINES

Committee Members traveled to Bangkok, Thailand and Manila, the Philippines to meet with government officials and private sector organizations on matters related to U.S. agriculture trade. The United States shares the goals of open and fair trade and the reduction of barriers to world-wide agriculture trade. The issues discussed included non-tariff trade barriers; liberalization of world-wide agriculture trade, and continuation of agriculture trade reform.

Members discussed specific barriers to United States agriculture exports and the importance of trading partners having access to each others' markets in order to have equitable bilateral trade.

THAILAND

Thailand ranks among the top 20 markets for U.S. food and agricultural products. The U.S. exported $622 million of agriculture products to Thailand in 1996 and imported $1.9 billion of Thai agriculture products. Thai economic development policies based on competitive, export­oriented, free market philosophy are enabling the transition from an agricultural based economy to a more open and broadly based economy with a large manufacturing sector. One clear outcome of Thailand's rapid economic growth over the past decade has been the emergence of a growing middle­class, with significant purchasing power reflected, in rising sales of consumer­ready, high­value food products. While domestically produced food items constitute the majority of the consumer­ready food market, imported food products are increasingly evident in retail outlets and on restaurant menus.

Although the economic trends are quite favorable for continued growth and expansion of the consumer­ready food market, Members of the Delegation spoke with Deputy Prime Minister Amnuay and other government officials about Thailand's high tariff structure for these items, which constrain the demand for imported food products. Duties on imported food items remain in the 40 to 60 percent range, with only a few exceptions, notably apples at 10 percent.

Fresh fruits are an important part of the Thai diet. Although there is an abundance of local, tropical fruits, many Thai consumers regularly eat imported fresh fruits. These fruits are often used as part of a gift basket for special occasions. Apples, grapes, peaches, pears, kiwis, and citrus fruits all have good market potential. The popularity of imported wines continues to grow at an amazing pace. While most sales originally concentrated in the hotel and restaurant industry, imported wine and beer sales are increasingly taking place in the retail sector.

Dried fruits and nuts packaged in the United States are popular items in supermarkets, but the food processing sector will likely be the source of most growth in the future. These items are imported in bulk, then packaged or mixed with other products to develop a snack food for domestic sale or re­export. Currently, almonds are the major imported product in this category, while sales of pistachios and dried fruit are expected to increase.

Despite U.S. export successes, competition remains steep. Thailand's protection of its domestic food processing sector, through the use of tariffs and non­tariff barriers, has resulted in a tremendous expansion of domestically manufactured snack foods, beverages, and other consumer­ready food products. Abundant domestic supply of relatively good quality fresh fruits and vegetables, processed fruits and vegetables, juices, poultry meat and other products provides strong competition for imports.

PHILIPPINES

In 1996, U.S. agricultural exports to the Philippines were at a record high of approximately $888 million. Consumer-oriented agricultural products accounted for $177 million, intermediate products amounted to a record $190 million and bulk products amounted to $520 million. U.S. agricultural imports from the Philippines in 1996 were $554 million, with intermediate agricultural products valued at around $400 million, consumer-oriented imports totaled about $176 million and bulk commodities imports were valued at $10 million.

Members of the Delegation met with President Ramos and other government officials to discuss trade issues between the United States and the Philippines. The Philippines has long been a valued trading partner of the United States. The U.S. is the second largest purchaser of Filipino exports (next to Japan) and American products represent 19% of all Filipino imports. Since President Ramos' election in 1992, the Philippines have been liberalizing their trade and privatizing several sectors of the economy, including agriculture. The Filipino government appears to be strongly committed to these reforms and the resultant economic successes they have created. A growing middle class is stabilizing the prospering country.

Currently, the major outstanding issue between the U.S. and the Philippines is the Filipino failure to implement their Uruguay Round tariff rate quota commitment on pork and poultry. On April 1, 1997, the U.S. notified the Philippine Government that it intend to bring the matter to the World Trade Organization.

In the Uruguay Round, the Philippines agreed to minimum access volume (MAV) for pork and poultry, among other agricultural products, agreeing initially to allow 32,520 metric tons pork imports annually at a 30 percent tariff, and 14,090 metric tons of poultry meat imports at a 50 percent tariff.

The 1995 Philippine MAV quotas were to have been in place beginning July 1, 1995. The United States raised the issue of Philippine implementation in the WTO Committee on Agriculture in November 1995, but did not take further action based on bilateral assurances from the Philippine Government that it was working to implement its commitments by January 1, 1996. However, the Philippine Congress failed to pass the necessary implementing legislation until March 1996. Under its implementing regulations, the Philippines was to have opened its minimum access Tariff Rate Quotas (TRQ's) for pork and poultry meat by August 1, 1996, and the quota amount included the cumulative quantities from 1995 and 1996.

In addition, the licenses necessary to import these products were not issued until October 1996, leaving a little more than two months to import 18 months worth of product. [Importers of pork who imported without licenses were required to pay the 30% tariff and also pay an additional 70% deposit. Importers under the 1996 TRQ to date have not received refunds on those deposits.]

Furthermore, the bulk of licenses were allocated to the Philippine pork producers and poultry integrators (a type of producer/processor), who have little interest in importing. Regarding poultry, the integrators currently hold virtually all of the import licenses and it is unclear given the oversupply of poultry in the Philippines how much poultry will be imported in 1997. Consequently, in order to fully utilize the quota, the U.S. may also need to seek some type of reallocation of MAV licenses for poultry. The 1995/96 MAV for poultry was 22,000 metric tons compared to a 1997 MAV of 16,160 metric tons.

Over the last year, in bilateral and multilateral meetings, the US raised the Philippines' delay in issuing import licenses. In response, the Philippine government proposed renegotiating its import commitments for pork, poultry meat and live poultry, citing the need for "technical" corrections.

BRIEFINGS FOLLOWING THE COMMITTEE ON AGRICUTURE'S TRIP TO THAILAND AND THE PHILIPPINES

Upon return, Chairman Smith discussed the results of the meetings in Bangkok and Manila and his observations with the United States Trade Representative, the Honorable Charlene Barshefsky and, in a separate meeting, with the Thailand Ambassador to the United States Ambassador Nitya.

Chairman Smith and Members of the Committee Delegation wrote to the Thai and Filipino officials concerning the matters discussed with government officials during the committee trip.

The Chairman and two Members from the Committee on Agriculture formed the delegation from May 24 - June 1, 1997 to Thailand and the Philippines.

Thailand

Issues:

1. Fruits: Thai's have high tariffs on pears, grapes, citrus fruits, and cherries even though they don't compete with domestic production
2. Grains: There are opportunities to expand U.S. grain exports to Thailand to meet its growing livestock industry's demand
3. Rice: Thai government now requires a supplementary regulatory phytosanitary certificate that APHIS can't issue,
4. Processed foods: Thailand has high tariffs and time consuming licensing and registration procedures on all imported processed food items.

Committee Delegation Meetings:

1. Mr. David L. Hendrix, The American Chamber of Commerce in Thailand

2. The Honorable Prachuab, Minister of Foreign Affairs

3. The Honorable Narongchai, Minister of Commerce

4. Thai Business Council

1. The Honorable Amnuay, Deputy Prime Minister and Minister of Finance
2. The Honorable Pravat, Deputy Minister of Agriculture and Cooperatives
   

Philippines

Issues:

1. Pork and poultry: the Philippines has failed to comply with its commitments made during the Uruguay Round agreement
2. Florida citrus: the Philippines presently bans imports of Florida citrus claiming the presence of certain fruit flies
3. Grains: the Philippines has been a U.S. wheat market; is a growing corn market; and offers long term potential for rice
4. Philippine mangos: approval for Philippine mangos imports into the U.S. is waiting for further test results from the Philippine Department of Agriculture.

Committee Delegation Meetings:

1. Senator Juan Ponce Enrile, Chairman of the Ways and Means Committee

2. The Honorable Domingo Siazon, Jr., Secretary of Foreign Affairs

3. The Honorable Fidel V. Ramos, President, the Philippines

4. The Honorable Jose de Venecia, Speaker of the House of Representatives

5. The Honorable Joseph Estrada, Vice President, the Philippines

6. The Honorable Salvador Escudero, Secretary of Agriculture

1. Mr. Bill G. Armstrong, President, American Chamber of Commerce
2. The Honorable Cesar Bautista, Secretary of Trade and Industry

THAILAND/BRIEFINGS/MEETINGS

Bangkok, Thailand

May 26 - May 27, 1997

U.S. Charge D'Affairs Skip Boyce

U.S. Agriculture Counselor Peter Kurz

U.S. Agriculture Attaché Scott Sindelar

Mr. David L. Hendrix, The American Chamber of Commerce in Thailand

Mr. Prachuab, Minister of Foreign Affairs

Dr. Narongchai, Minister of Commerce

Dr. Amnuay, Deputy Prime Minister and Minister of Finance

Dr. Pravat, Deputy Minister of Agriculture and Cooperatives

Major Issues Discussed

-----Several fruit exports have tremendous potential in Thailand. In accordance with the Uruguay Round trade agreement, Thailand's import duty on most fresh fruit is scheduled to be reduced from 60% to 40% over the next six years. The U.S. industry's repeated efforts, together with those of USDA/FAS, to achieve a more commercially advantageous import duty of 10% have not been successful.

------ Despite advancements in technology and a supply of skilled labor, Thai livestock producers' competitiveness is being reduced by the high cost of production. The problem of increasing production costs is the high cost of feed and import controls on these feed stuffs by the Thai government. The office of Agricultural Economics (OAE) reported that livestock production costs for independent farms in 1995 rose by 10%, directly attributed to the 5 -10 % increase in prices for commercial feed. By way of specific example, Thai's broiler production costs in 1995, rose by 10% to 22.90 baht/kg live weight ($.42/pound), as opposed to 20.90 baht/kg ($.38/pound) in 1994, due to increased prices for chicken feed ingredients.

----- Thailand requires rice imports to be accompanied by a unique phytosanitary certificate. APHIS does not usually provide certification for supplemental concerns. APHIS only issues a routine phytosanitary certificate carrying a generic statement about pest freedom for processed rice that is packaged and ready for retail sale. Thailand is the world's leading exporter of long-grain rice, yet it does not allow entry of medium grain processed rice.

----- Although the economic trends are quite favorable for continued growth and expansion of the consumer-ready food market, Thailand's high tariff structure for these items constrains the demand for imported food products. Duties on imported food items remain in the 40% to 60% range, with only a few exceptions.

Apart from high tariffs, Thailand's time consuming and cumbersome licensing and registration procedure can delay the entry of new products into the market. Importers of many goods are required to obtain an import license from the Ministry of Commerce. In addition, all importers of food products must be licensed with the Thai Food and Drug Administration (FDA). Most consumer ready products are deemed to be "specific control" products. There products must be registered at an additional fee and undergo extensive product analysis.

Thailand often requires proprietary information on imported processed food products without providing assurances that the information will be kept private. Many U.S. companies are not willing to share percentages of ingredients or detailed processing information and therefore forego any export possibilities.

PHILIPPINE/BRIEFINGS/MEETINGS

Manila, the Philippines

May 28 - June 1, 1997

The Honorable Tom Hubbard, U.S. Ambassador to the Philippines

U.S. Agriculture Counsel Kathy Ting

U.S. Agriculture Attaché John Wade

Senator Juan Ponce Enrile, Chairman of the Ways and Means Committee

The Honorable Domingo Siazon, Jr., Secretary of Foreign Affairs

The Honorable Fidel V. Ramos, President, the Philippines

The Honorable Jose de Venecia, Speaker of the House of Representatives

The Honorable Joseph Estrada, Vice President, the Philippines

The Honorable Salvador Escudero, Secretary of Agriculture

Mr. Bill G. Armstrong, President, American Chamber of Commerce

The Honorable Cesar Bautista, Secretary of Trade and Industry

Major Issues Discussed:

-----After a delay of over one year, the Philippine government appeared to be ready to implement its Uruguay Round trade commitments during the summer of 1996. However, rather than allocating the tariff rate quota (TRQ) to Philippine processors or other parties that have a demand for imported pork, over 80% of the TRQ was allocated to Philippine hog producers. Further, requirements such as the posting of 100% of the value of the shipment, compromised the participation of other importers. Not surprising, the result was a minimal level of pork imports in 1996. In spite of allocating the TRQ late in 1996 that was deficient in various ways, the Philippine government did not permit the carry-over into 1997 of unused TRQ from 1996.

-----To open discussions on the possibility of exporting Florida citrus to the Philippines, APHIS has provided a pest list specific to Florida to Philippine officials. This list can be used to develop pest risk assessments to determine whether Florida citrus can be exported and under what mitigative measures. At this point, APHIS has not received a response from the Philippines. APHIS will continue to work with Philippine officials on this issue.

-----The Philippines is a solid, dependable wheat customer of the United States. It is projected to import 2 million tons of wheat in marketing year (MY) 1996/1997 (July/June), including 1.6 million tons from the U.S. However, Philippine wheat imports are predicted to dip slightly next year because of a decrease in demand for wheat as a feed ingredient.

The Philippines imported a total of 515,000 MT of corn in MY1995/1996, their highest import level ever. Approximately 80 percent came from the United States. Demand for corn in the Philippines should continue to rise largely due to the widening gap between domestic production and food and feed consumption. The Philippine government has extremely high tariffs (100 percent out-of-quota) on feed grains. As a result, milling wheat, imported under a 10 percent tariff, is being diverted into feed channels and displacing US corn.

In both 1996 and 1997, the Philippines has been one of the world's major importers of rice. Limits on areas planted to rice, as well as stagnating yields, are forcing the Philippines into a chronic net deficit position. Rice imports, however, touch a sensitive political nerve among the nation's farmers. At the same time, rapid increases in rice prices caused considerable unrest in Manila in late 1995. As a result, the Philippine government, while making substantial purchases, has been careful to time purchases in order to avoid any market disruptions.

-----Mango exportation to the U.S. is pending a required study on Vapor Heat Treatment (VHT) efficacy for the two species of fruit flies that exist in the Philippines. APHIS has promised to send trained technicians and they have issued an invitation for Filipino scientists to study the testing procedures in the U.S.