Members:

BATERNA, ALVIN D.
BATION, JASHMINE
ELLESO, KATE ANGEL
HERNANE, SHIELA MAE
TRIMIDAL, PRECY JOY

Directions:  Do the researches:

3.2 Research for the tariff and non- tariff obstacles of the product (you choose) for
export or import in the Philippines or country of exportation. Choose only one,
whether product for import or product for export. 

COCONUT EXPORT
The Philippines is still primarily an agricultural country despite the plan to make it an
industrialized economy by 2000. With agricultural sector as the main sector that plays a very
important role in the country’s economic growth. Agricultural sector is the main source for
staple foods, a sector for job opportunity, and source of government income through export
trade activities. The country's agriculture sector is made up of 4 sub-sectors: farming,
fisheries, livestock, and forestry (the latter 2 sectors are very small), which together employ
39.8 percent of the labor force and contribute 20 percent of GDP. The country's main
agricultural crops are rice, corn, coconut, sugarcane, bananas, pineapple, coffee, mangoes,
tobacco, and abaca (a banana-like plant). Secondary crops include peanut, cassava, camote (a
type of root crop), garlic, onion, cabbage, eggplant, calamansi (a variety of lemon), rubber, and
cotton. The Philippines exports its agricultural products around the world, including the United
States, Japan, Europe, and ASEAN countries (members of the Association of Southeast Asian
Nations). Major export products are coconut oil and other coconut products, fruits and
vegetables, bananas, and prawns (a type of shrimp). Other exports include the Cavendish
banana, Cayenne pineapple, tuna, seaweed, and carrageenan. The world trade environment
has been liberalized. It is now one big, borderless global market.

Free trade, however, has called for reduction and eventually removal of trade
protection mechanisms - tariff and non-tariff, among market country participants, big and
small, developed as well as developing economies, to level the playing field. Philippines is the
second world's leading coconut producer. In 2018, Philippines produced about 15,353,200
million metric tons of coconuts. It was previously the world's largest producer before being
overtaken by Indonesia. Luzon, Southern Mindanao, and the Eastern Visayas are a few of the
country's most prominent locations for coconut producing. It is estimated that around one
quarter of total farm land in the Philippines is dedicated to coconut production. The industry
has a mass base of about 1.5 million coconut farmers directly dependent on it for their
livelihood and over 20 million more indirect beneficiaries that include among others traders,
processors, and related service sectors.

TARIFF BARRIER

Tariffs are used to restrict imports by increasing the price of goods and services
purchased from another country, making them less attractive to domestic consumers. It can be
said that the coconut industry has had one of the oldest experience on tariff as protection
mechanism for local industries. Considered as one of the major accomplishments of the last
Uruguay Round of Multilateral Trade Negotiations under the GATT (now the WTO) that took
nearly eight years to conclude was the Agreement on Agriculture. Features of this Agreement
are (1) ratifications of quantitative restrictions, (2) tariff reduction, (3) reduction of domestic
subsidies, (4) reduction of export subsidies, and (4) harmonization of sanitary and phytosanitary
measures. Essentially, all these pertain to some form of protective measures which the WTO
has been trying to reduce if not eliminate to improve trade access among member countries,
and conduct world trade under a stable set rules. Based on this agreement, in the case of the
Philippines, reduction in coconut oil tariffs in major markets like EU and Japan would provide
greater opportunity to enhance export and export revenue. Reduction of domestic and export
subsidies would similarly be beneficial if such could be implemented.

Tariffs in effect are a traditional tool in trade policy. They have been used in different
degrees by all countries throughout the world both as an incentive to enhance trade among
countries, and as a barrier to trade. The advent of trade liberalization in the last decade has
brought tariff levels lower. This can be traced to:

Common effective preferential tariff program, which has led to the ASEAN wide
Common Effective Preferential Tariffs (CEPT).

The CEPT is the mechanism by which tariffs on goods traded within the ASEAN region,
which meet a 40% ASEAN content requirement, will be reduced to 0-5% by the year 2002/2003
(2006 for Vietnam, 2008 for Laos and Myanmar, and 2010 for Cambodia). The tariff reductions
are moving ahead on both the "fast" and "normal" tracks. Tariffs on goods in the fast track were
largely reduced to 0-5% by 2000. Tariffs on goods in the normal track will be reduced to this
level by 2002, or 2003 for a small number of products. Currently, about 81% of ASEAN's tariff
lines are covered by either the fast or normal track.
 ASEAN members have the option of excluding products from the CEPT in three cases: 1.)
Temporary exclusions; 2.) Sensitive agricultural products; 3.) General exceptions.

1. Temporary exclusions refer to products for which tariffs will ultimately be lowered
to 0-5%, but which are being protected temporarily by a delay in tariff reductions.
This is permissible under the AFTA agreement, and is spelled out under a Protocol
Regarding the Implementation of the CEPT Scheme Temporary Exclusion List.
Malaysia invoked this protocol in 2000, delaying tariff reductions on completely-
built-up automobiles, and automobile knock-down kits, in order to protect its local
auto industry.
2. A small number of sensitive agricultural products will be extended a deadline of the
year 2010 for their integration into the CEPT scheme. In an agreement that has yet
to be fully spelled out, the process of tariff reduction on these products will begin
between 2000-2005 apparently depending on the country and the product.
3. General Exceptions refer to products which a country deems necessary for the
protection of national security, public morals, the protection of human, animal or
plant life and health, and protection of articles of artistic, historic, or archaeological
value. Approximately one percent of ASEAN tariff lines fall into this category.

The Association of South East Asian Nations (ASEAN) has committed to the
establishment of the ASEAN Free Trade Area (AFTA) and signified adherence to its Common
Effective Preferential Tariff (CEPT) scheme. Under such scheme, tariff reduction on oilseeds and
products for member countries have been programmed down to a uniform tariff level of zero
and 3% by year2003.

NON-TARIFF BARRIERS

A nontariff barrier is a way to restrict trade using trade barriers in a form other than
a tariff. Nontariff barriers include quotas, embargoes, sanctions, and levies. As part of their
political or economic strategy, some countries frequently use nontariff barriers to restrict the
amount of trade they conduct with other countries.

In the case of the Philippine coconut industry, it considers the anti-tropical oils
campaign launched in the late 80s and the 90s in the US as a non-tariff trade barrier. The
accusation that coconut oil is injurious to human health as a cholesterol enhancer was made
without scientific basis. Proof is that we remain healthy to this day even if our diets are
generally rich in coconut oil. The campaign effectively restricted the use of coconut oil in the US
that UCAP has resorted to an expensive counter offensive on three fronts (legislative, technical
and public relations/public affairs) to regain that market.
 In the European market, we find a couple of issues immerging as non-tariff trade
barriers: (1) The aflatoxin issue on copra meal, (2) The EU food hygiene directive, (3) The
proposal to ban the use of thermal heating oil.
1. The aflatoxin issue continues to upset copra meal, particularly when prices are high,
that we in the Philippine coconut industry feel it is a losing battle. This issue has come to fore
again this year as discussions continue in Codex on the lowering of aflatoxin Ml in milk from the
present 0.5 ppb to a stricter 0.05 ppb. Mycotoxins are toxic secondary metabolites,
representing a wide diversity of chemical species, which are produced by certain toxigenic
molds during their development on foods and feeds. The molds which appear to be the main
producers of mycotoxins belong to the Aspergillus, Fusarium and Penicillium genera.
At present, EU have not changed its regulations on aflatoxin limit in feeding stuffs.
However, the EC Standing Committee on Feeding stuffs is discussing the issue of whether or not
to lower existing aflatoxin B1 levels. It has been reported that Sweden, Finland and Denmark
are supporting the view that it should be lowered following that of aflatoxin Ml while United
Kingdom, Belgium, the Netherlands and Germany advocate that a decision to reduce existing
levels should be based on a new and separate scientific inquiry. The latter view is receiving
wider support.

CONCLUSION
Free trade benefits consumers through increased choice and reduced prices, but
because the global economy brings with it uncertainty, many governments impose tariffs and
other trade barriers to protect the industry. There is an insubstantial balance between the
pursuit of efficiencies and the government's need to ensure low unemployment. Sometimes,
restrictions on imports from certain places are fully consistent with protecting consumers, the
environment, or agriculture from harmful diseases or pests that may accompany the imported
product. As you can see, there are numerous methods of isolating a market from foreign
competition. As an exporter, it’s essential to understand what you’re up against and consider
the resources necessary to overcome the barriers applied to your products and services.
References

https://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Philippines-
AGRICULTURE.html#:~:text=The%20Philippines%20is%20still%20primarily,an%20industrialized
%20economy%20by%202000.&text=The%20country's%20main%20agricultural%20crops,a%20banana
%2Dlike%20plant).

https://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Philippines-AGRICULTURE.html

https://library.apccsec.org/paneladmin/doc/20180322055104Jesus%20L.%20Arranza.50.pdf

https://www.worldatlas.com/articles/the-world-leaders-in-coconut-production.html

https://www.wto.org/english/res_e/booksp_e/agrmntseries2_gatt_e.pdf

http://www.fao.org/3/ad729e/ad729e00.htm

https://www.epa.gov/sites/production/files/2016-04/documents/50fr49164_1.pdf