Debate on Turkish flour continues, 2

(Concluded from Monday)

This is a continuation of the debate over Turkish flour (TF)—which is allegedly being dumped here—between the cartel of local flour millers, the Philippine Association of Flour Millers (Pafmil), and lobbyists for the product. Their answers to a questionnaire are being printed here to give them equal airing and to give the reading public a balanced view of the issue.

Question: TF lobbyists claim that “economies of scale” enable them to sell cheap Turkish flour to countries like the Philippines. Is this right?

Pafmil: That’s hogwash because the same economies of scale do not result in the domestic price of flour in Turkey being as low as its dumping price. How come the same cost benefits are not being enjoyed by Turkish consumers?

TF lobbyists: Turkish consumers are enjoying the same affordable prices in their own segment. We want to remind all the parties that the flour consumed in Turkey is for bread, whereas a big portion of the flour exported to the Philippines is for biscuits and noodles. Such a price gap exists in every market. For example, Pafmil members sell their bread-making hard flour at around $850-900 per metric ton, but sell their biscuit flour at $600-650/MT.

Question: What did the Department of Agriculture (DA) discover that prompted it to impose an antidumping duty on Turkish flour?

Pafmil: That for soft flour, the dumping margin or undervaluation of TF was as much as 35.21 percent; that for hard flour, it is by as much as 24.79 percent; and that for the biscuit type, it is by as much as 39.26 percent.

But in a way the TF lobbyists are correct in that they sell cheap flour made from the cheap wheat they import and which their government exempts from a 130-percent duty.

TF lobbyists: We believe that the intention of the DA was fair. Even though there are numerous errors which we criticize, they still found no dumping margin for eight Turkish companies which are now exempt from any measure at the moment. The general rate of 39.26 percent is calculated from some other small TF exporters’ data, and we are not aware how their dumping margin is calculated.

These companies also did not use professional legal assistance. The eight that got zero percent had legal assistance and had the opportunity to defend themselves. So, contrary to what Pafmil claims, the fact that the DA’s announcement that TF millers who got legal assistance during the investigation were calculated zero dumping margins would be interpreted as: Turkish flour has not been dumped in the Philippines.

Question: Is there a food security issue for the Philippines? Is there real harm for Filipinos economically if the dumping of Turkish flour continues?

Pafmil: Definitely! TF imports grew by 70 percent in 2012 and the projection is that unbated dumping would kill the local flour milling industry by 2017. In such a case, the Philippines would be held hostage by the pricing dictates of Turkey and other flour exporters. Turkish flour is cheap now, but wait until they have killed our own flour industry. They would have us by the neck then.

TF lobbyists: Turkish flour has been the export champion since 2005. Turkey’s strength in flour milling cannot be questioned. We believe that when it comes to food security, no country should make the mistake of relying on only one source. Therefore, the local industry and the imports should coexist. We reject the fear scenarios that the imports will kill the local industry. The opposite is true: Imports will bring competition to the industry so it will be stronger. The millers will feel the pressure to renovate and streamline their operations.

A good example is Indonesia. When Turkey started exporting wheat flour to Indonesia, there were only eight flour mills in that country. Three mills were controlling around 90 percent of the market. As Turkish flour opened up the market, more and more mills emerged. Now there are 22 flour mills operating; another four are under construction. More importantly, since the market has become competitive, Indonesia became a flour exporter. Let’s not forget that Turkish flour is still being exported to Indonesia. We believe that the Philippines can be the same as more and more mills will open. A competitive environment will benefit not only consumers but also other downstream industries.

Question: What about the issue of trade liberalization?

Pafmil: It should not result in local industries being wiped out. Turkey did the same thing when it imposed a tariff duty of 102.6 percent on imported flour.

TF lobbyists: The duty imposed in Turkey on wheat imports is to protect the wheat farmers. Every major wheat producer in the world has similar incentives to protect its own farmers. However, in the Philippines there is no wheat production. All the wheat milled by Pafmil members is imported. Therefore, there is no vulnerable low-income farmer community to protect in the Philippines.