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Reduce/Eliminate the Non-tariff Barriers (NTBs)
Liberalizing Thailand’s Maize Trade
Reduce/Eliminate the Non-tariff Barriers (NTBs)
Liberalizing Thailand’s Maize Trade
Maize is the source of income for more than 471,000 households of
Thai farmers (2013) with a planted area of
7.3 million rai (2014)
Extensive expansion of maize cultivation has contributed to
forest and watershed encroachment
Maize is a key raw material in
the ever-growing food industry and other downstream
industries
Maize is a major agricultural product subject to Thailand’s policy controversy. If proper policies are implemented, it would be a key opportunity for Thailand to become the Regional Hub for Agro-based Industries.
Why maize?Why maize?
The price of maize is volatile
Annual price volatility
Seasonal price volatility
Policy issuesof maize
Policy issue sof maize
The policy issues of maize are not about “the price” for farmers
but about “the income” of maize farmers
• During the harvest season maize floods the market, suppressing the price. Maize price then rises to its peak in the dry season.
• Depending on the world’s excess demand and supply
Farmers suffer from
low incomes
Uncertain future of maize
depending on• Most farms are small, with little output and low income• Lack of land ownership, hence, no incentive for farmers to maintain its fertility resulting in low productivity• Lack of basic supporting infrastructure resulting in the high cost of cultivation, harvest, storage and transport• Concentration of maize sales during the harvest season suppresses farmers’ price• Poor storage facility and management resulting in poor quality maize with high humidity and/or aflatoxin and, hence, selling for a low price• Low bargaining power in non- competitive markets for farm inputs and outputs
• Productivity of Thai farmers and competitors• Productivity of substitute crops• Prospect of demand for maize as animal feed and source of renewable energy• Development of renewable energy technology• Development of technology affecting demand for maize for other uses
• Import period for general importers is restricted to only 1-7 months/year• Public Warehouse Organization (PWO) is the sole importer with no seasonal restriction on imports but is subject to an annual procurement plan
1. Inefficient farmers continue to grow maize without productivity improvement
2. Incentives for extensive expansion of maize cultivation to the upland watershed and forest areas with no sufficient agricultural infrastructure, i.e. irrigation with inevitable concentration of maize sales in harvest seasons, low quality of maize and suppressed price
3. Uncompetitive high price of domestic maize drives maize’s downstream industries to use other substitute raw materials such as wheat, soybean meal, fish meal, etc. or otherwise they risk becoming uncompetitive too
4. Extensive expansion of maize farming in watershed and forest areas would also jeopardize Thailand’s com-petitiveness and market access in maize and i ts ent ire downstream industries on CSR and SDG grounds
Focusing on price elevation
Same old inappropriatepolicy measures
Same old inappropriatepolicy measures
Price guarantee scheme: The guaranteed maize price was higher
than the world competitive price (2008, 2009, 2013)
Price guarantee scheme: The guaranteed maize price was higher
than the world competitive price (2008, 2009, 2013)
Consequence
CSR = Corporate Social ResponsibilitySDG= Sustainable Development Goals
• Requirement of Permit to import a prohibited article for commercial purpose• Requirement of Report on the quantity of import, usage, distribution and leftovers to DFT within 1 month of each import, usage, and distribution
Other regulations that create barriers to trade
Non-tariff Barriers (NTBs) Restricting foreign maize from domestic market
Abolish
• Abolish the price intervention measure on domestic maize.
Enhance competitive market mechanism
• Promote efficient central market for maize that is fully equipped with trading facilities and services to enhance competition among buyers and sellers and eliminate farmers’ disadvantages.• Improve the existing Agricultural Futures Exchange of Thailand as a mechanism for farmers to be able to make cultivation plans in accordance with market demand, both domestic and in the world market to reduce volatility of maize prices and farmers’ incomes.
Relocate Develop
• Relocate maize farming from the upland watershed and forest areas to more suitable areas and provide restructuring assistance and/or alternative occupations for the affected farmers.
• Relocate maize farming from low productivity areas to neighboring countries under a fair contract farming system and strengthen regional trade and production networks to transform Thailand into a regional hub for the maize value chain.
• Promote the cultivation of maize in irrigated areas an alternative to the second crop of rice farming during the dry season, resulting in a higher quality of maize and better returns on the use of irrigated land.
• Promote research and development of maize including development of maize varieties and technology in cultivation, harvest and storage to increase productivity and value added.
• Develop and strengthen agricultural cooperatives to increase farmers’ collective bargaining power in markets for farm inputs and outputs, and to collectively deal with production plans, plant diseases and pest prevention plans, logistics, farm mechanization, and warehouse storage.
• Promote investment in supporting services related to maize (as well as other crops), i.e. quality examination service, logistics service, warehouse service, etc.
• Develop an effective crop insurance system to protect farmers against damage from natural disasters.
To enhance Thailand’s position as a Regional Hub for the maize value chain
Key policy objective
• Eliminate seasonal import restrictions on maize and liberalize trade in all maize-related products
• Revoke the privilege of the Public Warehouse Organization (PWO) as the sole maize importer with no seasonal import restrictions and encourage open and fair competition for importers and exporters of maize
• Remove the requirement that maize importers must file a report on the quantity of import, usage, distribution and leftovers to DFT within 1 month of each import, usage, and distribution.
• Establish clear and transparent regulations for registration and automatic licensing for traders
of maize and its related products
• Remove maize from the list of import prohibited articles for commercial purpose
To create sustainable incomes for farmers
Policy for maize production and trade
• Increasing Thailand’s and ASEAN’s competitiveness through restructuring of the maize supply chain in Thailand and in ASEAN countries and enhancing Thailand’s position as a regional hub
Benefits for ThailandBenefits for Thailand• Expansion of businesses where Thailand has a comparative advantage in the maize supply chain, i.e. production of maize seeds, animal feed factory, maize warehouse, etc.
• Higher economic growth in the border provinces between Thailand and neighboring countries, i.e. Cambodia, Laos and Myanmar. Potential beneficiaries include retail and wholesale traders of agricultural machinery and inputs, consumer goods, logistic services, tourism and entertainment providers, healthcare services, etc.
• Thai businesses in the maize value chain become more competitive through lower transaction costs in the domestic and international maize supply chains
• Reclamation of the forest land and
restoration of the environment for
sustainable development
• Maize farmers have more bargaining power and gain higher income share
• Improvement of quality and productivity of domestic maize production, resulting in higher domestic maize prices and Thai maize farmers’ incomes
• Thai maize and downstream products can get through CSR and SDG related trade barriers
This material is based on the final report on “Promoting Regional Economic Integration in South-East Asia
by Addressing NTBs: A Case Study of Maize in Thailand.” The information and views set out in this material are
those of the authors and do not reflect the opinion of The Asia Foundation and Thailand Development Research
Institute. Responsibility for the information and views expressed in this material lies entirely with the authors.