RESTRICTED
WORLD TRADE G/STR/Q1/PHL/1
10July1996
ORGANIZATION(96-2674)
Original: English Working Party onState Trading Enterprises
REPLIES TOQUESTIONS POSED BYCANADA1,
JAPAN2AND THE UNITED STATES3CONCERNING
THE ARTICLE XVII NOTIFICATION OFTHE PHILIPPINES4
Thefollowingcommunication,dated3July1996,hasbeenreceivedfromthePermanentMission
ofthePhilippines.
_______________
Question from Canada
1. TheNational Sugar Refinery Corporation willbesolely responsible fortheimportation ofsugar
within theaccess commitment. Could thePhilippines describe theother functions ofthiscorporation
andtheirrelationship toitsroleinimports? Should thisorganization benotified asastatetrading
enterprise? Ifnot,whynot?
TheNASURESCO nolonger functions assoleimporter ofourminimum access commitment
forsugar. Itmay, however facilitate requests from small importers byconsolidating theirdemand
tomeeteconomic volumes forimports. Itshallhavenospecial privileges andshallbetreated like
anyother importer.
ThePhilippines willrevise itsnotification onAdministration ofMinimum Access Quota
accordingly (MA: 1)toreflect thisinformation.
Question byJapan
1. Asthere isnomention ofcommitments withrespect toexport subsidies inSchedule LXXV -
Philippines, weunderstand thatthePhilippines doesnotgrant export subsidies. ThePhilippines further
states thattheexport pries ofriceandcornareprimarily based onworld market prices. Wewould
therefore liketoknow howtheexport prices aredetermined ofthetwoproducts inthecasewhere
domestic prices exceed world market prices.
LikeJapan, thePhilippines doesnothaveexport subsidies onriceandcornoranyother
agricultural product.
Exportation isbased onworld market price. Incases where thedomestic price ishigher than
theworld price, thePhilippines sellsdomestically. Thepriceisthebestindicator ofwhen tosellabroad
ordomestically. Itshould alsobenoted thatthePhilippines isnotatraditional riceandcornexporter.
Onthecontrary ithasbeenatraditional importer.
1G/STR/W/13,2G/STR/W/11,3G/STR/W/10.
4G/STR/N/1/PHL.G/STR/Q1/PHL/1
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Questions bytheUnited States
WenotethatthePhilippines didnotprovide detailed information onDescription ofthe
Functioning oftheState Trading Enterprises, asrequested under part3ofthe1960 Questionnaire.
Could thePhilippines elaborate beyond statements suchas:
1. "Private traders areallowed toexport andimport (except forrice) depending onthe
supply-demand situation inthecountry."
a. Could thePhilippines explain thecriteria usedbytheNational Food Authority (NFA)
indetermining when toallow private trade, therelationship between private traders
andtheNFA(including forrice), andreport iflong-term contracts areentered into
bytheNFA?
TheNFA istheonlyentity mandated under Presidential Decree No.4toexport/import rice.
Importation isdeemed required byNFA when supply shortfalls occur duetonatural calamities and/or
toavert market distortions duetospeculations. Only traders licensed bytheNFA canimport/export
rice.
Under thepresent setup,NFA-licensed private traders, inthecaseofrice,market almost all
ofthericeimported byNFA. Inthecaseofcorn, stocks imported byNFAaresolddirectly toend-users
(hogandpoultry raisers).
TheNFA maybuthasnotentered intoanylong-term contracts.
b. CouldthePhilippinesexplainthecriteriausedbytheNFAindeterminingwhentoimport
rice?
Therecommendation toimport rice/corn ismade byaninter-agency Technical Working Group
composed ofrepresentatives fromtheDepartment ofAgriculture (DA), Bureau ofAgricultural Statistics
(BAS), Bureau ofAnimal Industry (BAI), National Irrigation Administration (NIA), thePhilippine
Atmospheric Geophysical Astronomical Service Administration andtheNFA, using thequarterly
production survey results andtherice/corn stocks inventory. Therecommendation isthenelevated
totheDASecretary andtheNFA Council which ischaired bytheDASecretary fordecision. Rice
importation istraditionally subject toPresidential approval andnowtoourAnnex 5commitment in
theAgriculture Agreement oftheUruguay Round.
Importation ofriceandcornisusually resorted towhen theproduction andthestock levels
aredeemed notsufficient tomeet therequirements during theleanmonths ofproduction (July to
September forpalay, January toMarch forcorn) and/or when domestic riceprices during thelean
months areexpected torisebeyond thenormal seasonal peaks.
2. "Sell riceataprice within reach ofthegeneral population."
Could thePhilippines explain thecriteria usedbytheNFAindetermining prices?
TheNFA'sbuying price forpalay isdetermined using available information onfarmers 'cost
ofproduction, plusareasonable margin forreturn toinvestment. Thebuying price isalsosetata
levelthatwillallow NFA toaccumulate inventories before buffer stocking.G/STR/Q1/PHL/1
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TheNFA release price isdetermined byadding thecosttoNFA ofbuying thepalay, milling
itintorice,storing anddistribution. Therelease price isalsosetatalevelsuchthatitallows private
traders toderive sufficient margins fortheiroperations.
Atthemoment, theGovernment isseriously considering thefeasibility ofadopting aflexible
price band asatoolfordetermining when andwhere NFA should buypalay andrelease price for
stabilization purposes. Suchaprice bandwould bewideenough toallow sufficient room forprivate
traders tooperate viably.
3. "Handle thestocking ofother basic commodities asnecessary."
Could thePhilippines provide alistofcommodities statutorily eligible andalistofcommodities
handled intherecent past, other thanriceandcorn?
Thefollowing arethecommodities statutorily eligible forstocking bytheNFA:
vegetables andfruits
processed meatproducts
animal feedingredients
wheat
Please note, however, thatsince 1986, onlyriceandcornhavebeenstocked bytheNFA in
accordance withtheGovernment policy tolimitNFA market interventions tothese commodities.
4. "Export prices areprimarily based onworld market prices."
a. Could thePhilippines explain howtheexport price forindividual salesandtheprices
paidtoproducers aredetermined, andhowthese prices relate todomestic prices?
ThePhilippines hasnotexported ricenorcornoverthepastseveral years except in1992when
werepaid inkindariceloanextended byIndonesia. Nonetheless, private exports ifandwhen
undertaken,will depend onexporter 'sjudgement ofwhether suchaventure would provide sufficient
returns given theircostandtheprevailing world market prices.
Thedetermination ofNFA buying prices discussed initemQ.2above.
b. Howareexportpricesdeterminedinthecaseofrepaymentofgovernment-to-government
commodity loans?
Payment ofgovernment togovernment commodity loans arebased onthecontracted price
ofthecommodity atthetimewhen theloanwasmade.
5. Thestatistical information provided bythePhilippines didnotinclude abreakdown between
private trade andNFAtrade inrice.G/STR/Q1/PHL/1
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Could thePhilippines provide thisinformation?
Year Production NFA Procurement Share ofNFA Procurement
1992 9,123.80 419.63 4.59%
1993 9,434.20 155.10 1.64
1994 10,538.10 60.74 0.58
Production notprocured bytheNFA goestoprivate traders.