Philippines Gov't Studying End to Tariff-free Wheat Imports

The trade department may recommend the restoration of a 3% import duty on food wheat after a tariff suspension lapses in June, an official said, pointing to the policy's failure to stabilize bread prices.

"The tariff removal on imported milled (food) wheat gave no benefit to 'tasty' bread consumers, since wheat prices had gone up again in April after dropping in March," Victorio Mario A. Dimagiba, Bureau of Trade Regulation and Consumer Protection (BTRCP) director, told BusinessWorld on May 9, 2011.

"The policy only took P20 off the price of a bag of flour, but that is not enough to bring tasty bread down to P38," he added.

The Philippine Baking Industry Group yesterday raised the price of the loaf bread product to P39. Bakers' representatives were not immediately available for comment but an official of a flour miller group said they favored tariff reimposition.

"It was DTI (Department of Trade and Industry) which asked for it; we were opposed to it precisely because it only led to lower flour prices but not bread," Ricardo M. Pinca, Philippine Association of Flour Millers, Inc. executive director, said in a text message.

Wheat flour prices were up by 12% in late April to P920 per 20-kilogram bag from the start of the year, only 6% away from the 2008 food crisis peak of P980 per bag. Although prices have since slid to P880, the downtrend may not be reflected in future loaf prices.

"A price reduction must be sustained for about two or three months. Otherwise, there is no assurance that flour millers were able to buy their wheat when prices were low," Mr. Dimagiba explained.

Global wheat price volatility, he said, has compelled the BTRCP to search for a viable trade regulation policy that will keep bread prices affordable.

"We are working on a scheme to extend assistance to wheat and baking associations to keep tasty bread affordable to the consumers," Mr. Dimagiba said, adding that several proposals are being studied.

"The most effective option we have right now is a stricter regulation of wheat acquisition, so we know when the import was purchased and at what price," he said.

"Focus should be given to wheat regulation because flour contributes to 80% of the input cost of bread".

The policy of allowing duty-free imports of food wheat has been constantly renewed by the government, most recently via Executive Order 21 that was signed by President Benigno S. C. Aquino III in January.