Today’s newsfeed brought in
a Bangkok Post report that the
Thai sugar industry was complaining of non-tariff barriers (NTBs) to trade in
sugar within the ASEAN Economic Community (AEC). Thailand has the largest
sugar industry in ASEAN, and is the third largest sugar exporter in the
world.
According to the Bangkok
Post report, a combination of tariff and non-tariff measures in the major
ASEAN markets prevents Thailand from increasing its intra-ASEAN exports:
· Thailand,
Indonesia and the Philippines had placed sugar on sensitive lists, excluding
the product from the 0-5% intra-ASEAN rates set by the ASEAN Trade in Goods
Agreement (ATIGA).
· "The Indonesian
government imposes a rule to force consumer product producers to use only
locally made sugar, while industries can use imported sugar only if they
receive government permission, of which there is no guarantee,” according
to Rangsit Hiangrat, director-general of the Thai Sugar Millers Corporation.
· Rangsit complained that Malaysia allows imports of raw sugar
but not refined, white sugar.
However, there are always
two sides to a story. According to the
Philippine Daily Inquirer, the Philippine sugar industry is not ready for
the AEC because of competition from the Thais:
Jose Maria Zabaleta, former chair of the Philippine
Sugar Millers Association, meanwhile stressed the need to repeal certain laws
deemed a hindrance to the sugar industry’s competitiveness. “Small farms cannot
compete with bigger and better-financed firms in Thailand. [The government]
needs to allow reconsolidation, and to remove the Comprehensive Agrarian Reform
Program (CARP) Law for sugar, rice and most other crops,” Zabaleta said in a
separate text message.
The sugar industry in
Indonesia, while expanding production, fears increased competition from Thai
producers according to a
report last month:
[T]he future challenge for sugar factories in Indonesia will
be harder with the implementation of Asean Economic Community in 2015. Before its implementation, the presence of
refined sugar in domestic market is quite bothersome and is a challenge for
local sugar factories. In Batam, for example, refined sugar from Vietnam and
Thailand is found and sold at IDR5,500/kg, and so is in Kupang. Regulation on
imported refined sugar will not harm sugar factory and farmers if there is not
any imported refined sugar sold at the market. But it is worried that the
import will exceed the permitted regulation hence it will seep into the market
as happened some time ago. Hence, in the future sugar factories under RNI
management will face tougher rivals, not other SOE’s sugar factory but more
efficient sugar companies from Vietnam and Thailand.
Another
report from Vietnam indicates similar difficulties for its sugar industry
caused by Thai competitors:
A report of the Vietnam Sugar and Sugar Cane Association
showed that by the end of August 2013, the companies still had had 288,000
unsold tons of sugar. The sugar smuggling through the border gates has made it
more difficult to clear the inventories.
Nguyen Thanh Long, Chair of the Sugar and Sugar Cane Association, said
though Thai imports bear the 5 percent tax rate, they are still VND2,000-3,000
per kilo lower than Vietnam made products.
If the import tariff is cut to zero percent by 2015 as committed for
AEC, Thai sugar would flood the Vietnamese market.
Sugar thus is a
controversial issue in the AEC. However, as a primary agricultural product,
that is to be expected. Sugar remains a
politically sensitive industry in all parts of the world, even in more fully
developed regional blocs such as the EU and NAFTA. Both have massive subsidies for their sugar
industries which are supported by various import restrictions to maintain
higher domestic prices. For example, I once heard that an American company
could make money purchasing imported candy (which was not restricted), boiling
it down into white sugar and selling that sugar on the U.S. market at the
higher, subsidized price. Prices have
since come down in the U.S., but this informs the reader of the distortions
caused by government sugar policies.
Thus, given the political
and social sensitivities involved, is the Thai sugar industry’s effort hopeless?
Absolutely
not.
The identification of NTBs
to intra-ASEAN trade is necessary for the next stage of the AEC’s
implementation, after 2015. Only after
NTBs are identified can they then be eliminated. Furthermore, as the ASEAN Secretariat is not
given sufficient resources to conduct its own investigations into NTBs, and
more importantly, do something about them, then the private sector will need to
step up its own efforts. Interaction
between the various national sugar industries, and just as importantly, the consumer
interests in ASEAN, will also be necessary to make rational policy choices that
improve consumer welfare (in the form of lower sugar prices) while balancing
against the need to protect important rural constituencies such as the sugar
industry. We therefore will need more such “naming and
shaming” efforts from the Thai sugar industry and other private industry actors
if the AEC is going to succeed.
