EU-Asean FTA not good for RP rice sector, says study

MANILA, Philippines – The European Union-Association of South East Asian Nations (EU-ASEAN) Free Trade Agreement (FTA) may pose difficulties for the Philippine rice sector while favoring that of Thailand.

This was the gist of draft interim report by the Dutch Ecorys Research and Consulting group for the European Commission on the EU-ASEAN FTA.

In an interim report on Trade Sustainability Impact Assessment, Ecorys stated that “Thailand appears to be the only ASEAN country that stands to gain from the FTA in the grains sector.”

The Ecorys report went on to say that “for the cereals and grains sector in ASEAN, the sub-sector rice presents a special case, as it is a staple food in the region, particularly for the poor. Two countries are compared, which are a net exporter – Thailand – and a net importer – Philippines – of rice.”

The report stated that “Thailand’s rice sector is expected to gain from the FTA (increased outputs and prices), while in the Philippines the sector is expected to decrease, reflecting differences in competitiveness between the two countries.”

 “The decreases for the sector in the Philippines could have some negative real income and social effects in the rural areas especially in the short run, while in the long run the structural shift towards other, higher value added sector is expected to benefit the welfare of the people. Also (poor urban) consumers are expected to experience positive real income effects from the small cut in the price of rice,” the report stated.

 “These observations pose policy challenges, as the Philippines currently has a restrictive export policy for rice and provides subsidies to the sector in light of its perceived importance for the poor and for food security,” it added.

Negotiations for the EU-ASEAN FTA were launched by the European Commission in April 2007.

In December 2007 Ecorys Nederland BV was asked to carry out a trade sustainability impact assessment to assess the economic, social and environmental impacts of such an agreement. The study is expected to be completed by next month.

Apart from the EU-ASEAN FTA, the EU has also started negotiations for a bilateral partnership and cooperation agreement with the Philippines. –Marianne V. Go, Philippine Star