Dumping duty shielded domestic flour millers

One can argue that a dumping duty on imports is a protectionist measure that just coddles an inefficient sector of the economy. Or one can say that the import tax protects a local industry from unfair competition and allows it to develop and ultimately become globally competitive.

The dumping duty clearly benefitted Philippine flour millers and protected them from unfair competition. Consumers, too, reaped the benefits of the additional import levy through steady bread prices in the market. 

The Philippine Association of Flour Millers said with the unfair competition brought about by dumped Turkish flour minimized, local businessmen were encouraged to invest in the wheat flour milling sector. Seven new flour mills have been put up since 2015 and another two are being planned each in in Davao and Cebu provinces.

Philippine wheat flour millers, however, are not yet off the hook. They want another five years of dumping duty imposed on Turkish flour, claiming the dumped product remains a threat to the local industry still recuperating from losses caused by the import.

PAFMIL, in a recent letter to the Department of Agriculture, asked the agency to endorse to the Tariff Commission the request of local flour millers for the TC to initiate an expiry review of the anti-dumping duty on wheat flour from Turkey. The commission announced the initiation of an expiry review Aug. 29, with a preliminary conference scheduled on Sept. 9.

But before such extension could be granted, local flour millers must go through the tedious process of proving to the Tariff Commission that Turkey, the world’s biggest flour exporter, remains a threat to the local flour millers. 

Turkey’s flour exports from 2018 to 2019, according to World Grain magazine, are expected reach five million metric tons. Its export market extends from the Near East (Iraq, Syria, and Yemen), Africa and Southeast Asia. Dumping occurs when a country exports its product at a price lower than the value in its domestic market. 

The Tariff Commission in 2015 found Turkey dumping flour into the Philippines, prompting the agency to impose a dumping duty of 2.87 percent to 16.19 percent on flour imported from Turkey. This duty imposition is due to end on January next year, thus PAFMIL’s request for another five-year anti-dumping penalty.

Aggressive exporter

Turkish figures show that there are 1,200 flour mills in Turkey with a combined milling capacity of 30 million metric tons. Some 707 of these flour mills are in active commercial production with an average capacity utilization of 45 percent, giving Turkey enough room to expand exports.

In contrast, the Philippines has 21 flour mills with a combined production capacity of 5.1 million metric tons in 2018. The capacity utilization, however, is less than 50 percent. 

But what has transpired since the Tariff Commission imposed the punitive duty on Turkish flour? Did the imposition limit the supply of flour in the country? Did flour prices go up and cause the consumers to spend more for their favorite Pandesal?

With more competition in the market among local companies, flour prices have gone down benefitting the consumers. Bread prices have not moved up in recent years. With the stability in flour and bread prices, consumption of bread products have increased, while flour sales reached 83 million bags in 2018, up by 7.85 percent from just 77 million bags in 2014. Each bag of flour weighs 25 kg.

With the end of the five-year dumping duty imposition, local flour millers face the prospect of a more aggressive Turkish flour export regime and the recurrence of unfair trade and dumped flour products.

The Tariff Commission faces this daunting task of determining whether it is time to lift its dumping imposition on Turkish flour, or if the Goliath of the world’s flour industry remains a serious threat to the viability of the local wheat flour milling industry.

PAFMIL cited reports showing Turkey to be the world’s leading flour exporter, processing 18 million tons of flour for domestic and export market, while having a very high idle capacity.

According to PAFMIL, the Philippines is the third biggest export market for Turkish flour, behind Iraq and Syria. Turkey exported $68.5 million worth of wheat flour to the Philippines in 2012, representing eight percent of its total wheat flour shipments. 

Iraq and Indonesia similarly imposed additional duties on Turkish flour.

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