Not wishing to use former US President Clinton’s presidential campaign statement, “It’s the economy, stupid,” an equally frustrated farmer leader said the solution to our rice crisis is: “It’s the safeguard, sir!” When President Duterte heard about the farmers suffering from the low prices due to the 35-percent price tariff, he publicly said twice that he would stop rice importation. His advisers said this was wrong. The President then backtracked, and the farmers continued to suffer.
The President should have been told that a temporary safeguard duty would have lessened the adverse impact on the farmers’ income of subsidized imported rice. This safeguard used by many countries could have given farmers a chance to compete in a level playing field. This safeguard is recommended by our own law (Republic Act No. 8800) and the World Trade Organization.
I am familiar with this measure. For disclosure, I helped get the cement safeguard as former president of both Cement Manufacturers’ Association of the Philippines and Asean Federation of Cement Manufacturers. Getting the rice safeguard is far easier than getting the cement safeguard, especially since rice impacts our farmers adversely.
As early as Aug. 13, 2019, Alyansa Agrikultura (AA) filed a formal request asking the Department of Agriculture (DA) to institute a rice safeguard. The DA then called for inputs for a study on this. Consequently, AA and Federation of Free Farmers (FFF) submitted documented evidence to support their safeguard petition. But on Oct. 19, the DA prematurely terminated this study. It since refused to give AA, FFF, and other interested parties even the interim study results.
The rice safeguard means adding to the 35-percent rice tariff a duty of between 35 percent and 50 percent, resulting in an effective tariff rate of 70 percent to 85 percent. This will equalize the prices of imported and domestic products. This practice is used by other countries to motivate local producers to compete more effectively against imports. This tariff should be decreased within a given time frame to allow the producers to adjust, or face extinction.
This chance was not given to our rice farmers. Consider the table above:
From the 2018 farm-gate price of dry palay of P20.36 per kilo, the 35-percent tariff forced rice farmers to drop their prices to compete with the cheaper subsidized imports. Their net incomes fell from P31,760 to P12,040 per hectare. Today, palay prices have increased slightly, but their incomes are still very low at P16,280.
Worse, for the majority of our rice farmers who sell wet palay as they don’t have access to drying facilities, their palay is sold at P3.16 less than dry palay. At the same production cost of P12.45 a kilo but with a much lower selling price, their income is only P3,640 a hectare. This is way below the monthly poverty threshold of P10,481 for a family of five.
Was rice tariffication a mistake? No, because tariffication stopped the practice of the government unilaterally deciding the price, quantity and timing of imports, which resulted in massive government losses from bad judgment and corruption. The private sector is more capable of doing this function. But the government must provide the correct tariff structure to ensure a level playing field. By not implementing a safeguard, more than 3 million tons of rice imports significantly exceeded the 1.3-million ton rice supply gap. This resulted in the farmers’ disastrous income losses.
International trade experts said the correct tariff is one that equalizes the price of the landed import and that of the domestic product. For rice, it is between 70 percent and 85 percent, depending on the import source.
As we celebrate World Food Day today, our rice farmers who provide us our main food staple continue to suffer. The services provided by the rice tariffication law should have been given before the 35-percent tariff was implemented, not after. Government must now provide the necessary adjusted effective tariff level that will challenge our farmers to become more productive, but give a limited time and the necessary support services for this adjustment. The answer to this crisis is not a ban on or opposing tariffication. As the farmer leader said: “It’s the safeguard, sir.”
The author is Agriwatch chair, former secretary of presidential programs and projects, and former undersecretary of the DA and the DTI. Contact is agriwatch_phil@yahoo.com.