Banana chip exporters lament China’s tariff hike

The growth of the banana chips industry in Mindanao which in recent years has emerged as one of the region’s promising export earners is being seriously threatened by the hefty increase in import tariffs imposed by its major market, China.

Exporters are now asking the government to negotiate with the Chinese government for lower tariffs for its product and include this in the fast-tracked list of commodities under the ASEAN-China Cooperation agreement.

Several banana chips exporters groups based in Mindanao said the recent decision of Chinese customs authorities to arbitrarily raise by three-fold the valuation on the landed price of Philippine banana chip products shipped to main Guangdong since January this year, from Rmb 7.5 per kilo to Rmb 20 per kilo, has made it difficult for producers to market their product at competitive rates.

"Because of this new and higher valuation rate, importations of Philippine banana chips into China have drastically slowed down, forcing many exporters to reduce their operating capacities or temporarily closed down. This has put many workers here in Mindanao out of jobs and driven down cardaba farmgate prices from a high of P4.80 per kilo to as low as P2 per kilo which is barely the break-even point for most growers," said Rolando Denila, chairman of the Banana Industry Council of Southern Mindanao in an appeal letter to Agriculture Secretary Domingo F. Panganiban and Trade and Industry Secretary Peter Favila.

Denila pointed out that while the Philippine Trade and Investment Center in Guangdong already took steps to assess various options for Mindanao banana chip exporters, the problem has not been resolved and only a top-level government-to-government negotiations could address the issue.

China is an important market for Philippine banana chips since it comprises 20 percent of the country’s total exports of the commodity. In 2004, exports to China reached $36 million of which 80 percent was supplied by 26 processing plants in Mindanao. The industry employs about 5,000 workers who are directly and indirectly employed by banana chip factories while thousands of cardaba farmers rely on these plants as primary markets for their produce.

Denila said exporters are worried that the tailspin in cardaba prices will prompt growers to scrap farm expansion and upgrading other processing plants.

"This will once again threaten the growth of the banana chip industry as supply of raw materials will be insufficient to cope with the industry’s medium and long-term requirements for the export market."

Key industry players composed of growers, processors and exporters met recently and created a priority action agenda that include, among others, raising the issue of higher customs valuation of banana chips to the Chinese government as restricting existing bilateral trade relationships.

Denila said the Philippines should push for a mutually-acceptable valuation rate.

At the same time, the Department of Agriculture’s agriculture and commercial attaches should regularly assess and counter-check prevailing market situation for banana chips in China and other major export markets such as the European Union, US, Canada, Japan, Middle East, South Korea and give feedback on significant emerging trends and directions.

Philippine banana chip exporters prefer to ship their products to China because of its proximity and its growing demand for the product.

Agnes G. Luz, export market development team leader of Growth with Equity in Mindanao 2 (GEM 2), a USAID-funded (United States Agency for International Development) agency that extends technical, capacity building and marketing assistance to various groups such as farm producers that seek to establish markets overseas, conducted a market study on banana chips exports said earlier that China should be targeted as a major market.

Industry data show that the country’s annual banana chips exports average close to $80 million with the biggest shipments going to the US, Taiwan, Hong Kong and mainland China.

"It is worth noting that in major cities in China, Philippine banana chips are considered better in quality compared with banana chips from Thailand, the other major source of banana chips. Our chips are more acceptable because of their appearance, moderate sweetness and the breakage is good," said Luz.

Luz earlier urged Mindanao banana chip exporters to band together and create a single brand for one of the region’s emerging export winners.