Thailand, Philippines fail to agree on rice tariffs

g* Thailand wants better tariff deal from the Philippines

* Rice tariffs due to be halved by January under ASEAN pact

* Manila insists rice is on sensitive list, offers quota

HUA HIN, Thailand, Oct 24 - The Philippines and Thailand failed to reach agreement on Saturday in a row over rice that threatens to derail a trade pact at the heart of Southeast's bid to build an EU-style economic community by 2015.

The 10 members of the Association of South East Asian Nations -- of which Thailand and the Philippines are members -- had been due to overcome final hurdles to an ASEAN Trade in Goods Agreement (ATIGA) at a summit in the Thai town of Hua Hin.

Thai Commerce Minister Porntiva Nakasai said the pact would be delayed by a month or two as negotiations continued.

According to the ASEAN free trade pact, Philippine rice import tariffs should be cut to 20 percent from 40 percent by Jan. 1, 2010. But Manila insists rice is classified under a "highly sensitive list" allowing tariffs to stay at 35 percent.

The Philippines is proposing to give Thailand a quota of 50,000 tonnes of tariff-free rice annually to compensate for not meeting the tariff target. Thailand has demanded 360,000 tonnes.

"They have shown their readiness to talk with us and we will reschedule a meeting," Porntiva told a news conference.

"We need to find a way out and find a solution. The deadline has been set, I believe it should be settled within a month or two to finalise this matter," she added.

"This issue is very crucial and important and we will proceed in a compromised manner, in the right direction."

Recent typhoons badly damaged farmlands and roads in northern Philippines, killing more than 900 people and forcing the country of 98 million people to import more rice rather than rely on cheaper, domestic supplies.

'NEGOTIATIONS MOVING FORWARD'

Both countries agreed to hold another round of bilateral talks next month in Manila on the issue, Philippines Trade Secretary Peter Favila told reporters.

"Our negotiations are moving forward," Blinks Kabigting, a trade official from the Philippines, told Reuters. "We agree not to talk nasty in the press and focus on finding ways to resolve our differences."

He declined to elaborate on the talks but indicated no change in the Philippines' position of keeping tariffs at current levels. "We're talking about rice supply from Thailand but I can't give you any figures."

Thai officials have said it was one of several issues that are crucial for ratification of the Trade in Goods Agreement, a key plank of an ambitious bid by ASEAN and its 540 million people to build an EU-style economic community by 2015.

"We still have time to ratify the article, we have a month or two," said Porntiva. "Many countries are not yet ready to ratify, so we will have to wait anyway, regardless of whether we resolve the issues or not."

Thailand exported 10 million tonnes of rice in 2008 of which 599,677 tonnes went to the Philippines, according to Thailand's Commerce Ministry data.

From January to August 2009, Manila bought 116,322 tonnes of rice from Thailand, mostly premium grade for high-end restaurants. Vietnam has mainly snatched the market for lower quality rice grades by offering better prices, traders said.