US demand for coconuts may drop due to tariffs

THE 19-percent tariff rate that the United States has imposed on Philippine products may have “very little effect“ initially, but may eventually cause a drop in demand for coconuts in the long term, according to Marco Reyes, chairman of the United Coconut Associations of the Philippines (UCAP).

In a statement, the head of the umbrella group of the country’s coconut producers and traders explained that the Philippines’ top competitor, Indonesia, has also been imposed with the same tariff rate. 

Moreover, Reyes said that two factors will likewise have little bearing, and may, in fact, increase demand for the nutritious, versatile product: the US Food and Drug Administration taking off coconut from its list of allergens in January; and the review of its saturated fat guidelines.

This means coconut is no longer subject to strict labeling requirements for major allergens, thus expanding its use in food products. Reyes said this may also remove the 10-percent saturated fat limit in US FDA dietary guidelines. 

Coconut oil has over 95 percent saturated fat, but also contains lauric acid which research shows raises high-density lipoprotein (HDL) or “good“ cholesterol levels, which may lower overall heart disease risk.

Downside

However, the downside is that the 19-percent import duties on Philippine goods, including coconut, would jack up its cost in the US market, potentially causing a drop in consumer demand, Reyes pointed out.

The US and Europe account for over 60 percent of the Philippines’ total coconut product exports. Shipping more volumes to the European Union is not that easy, Reyes said, since the EU has stringent quality regulations.

“We need to work double time to expand our export markets by negotiating bilateral free trade agreements with [other] countries, while protecting our own domestic market from the onslaught of cheap palm oil,“ Reyes asserted.

Producers can also diversify with value-added coconut products.

These efforts will go hand-in-hand with the Philippine Coconut Authority’s plan to boost coconut production through planting and fertilization initiatives, Reyes said.

The overall trade agreement with the US has been disappointing and disadvantageous to the Philippines, Reyes added.

“We sent the highest government delegation [and] we have [already given] previous concessions (US military installations, Enhanced Defense Cooperation Agreement and Visiting Forces Agreement), [and] we seem to have also agreed on ammunition production,“ Reyes said.