A group of prominent economists under the Foundation for Economic Freedom (FEF) has called for the liberalization of pork imports—in lieu of price controls—to address the supply shortfall in the country.
The Foundation for Economic Freedom, an organization advocating market-friendly reforms, good governance and economic and political liberty, recently wrote to Agriculture Secretary William Dar to suggest the unification and lowering of the pork tariff rate on pork to 5 to 10 percent to quickly bring in the volume needed to stabilize supply and prices. The group noted that the rice price spike in 2018 had been quickly fixed by the rice trade liberalization law.
The Philippines maintains a two-tier tariff policy for sensitive agricultural products, including pork. All imports outside of the minimum access volume (MAV) are taxed at a higher out-of-quota rate. Presently, the out-quota and in-quota tariff rates on pork are 40 percent and 30 percent, respectively.
“This tariff quota system requires complicated administration. If the difference is just 10 percentage points, why don’t we just unify those tariff rates so we can save on administrative costs? However, unifying the tariff rate on pork imports at 30 percent is high. Lowering that tariff to 10 percent or 5 percent can better generate significant household savings and will eventually make our hog industry more competitive,” the FEF said in a Feb.5 letter sent by president Calixto Chikiamco.
On the other hand, FEF said price controls particularly on basic food items were ineffective.
“If they were considered because of alleged price manipulation by traders or higher cost of transporting live hogs to slaughterhouses near major cities like the National Capital Region, price caps will fail to sustain overall increase of supply,” the FEF said.
“Rather than spending time and resources to catch price manipulators, the government is better off focusing on increasing the supply. In any shortage, there will always be actions to raise further prices but such feeble practices are immediately quashed by the entry of additional supply,” it noted.
The planned expansion in the MAV for pork by about 100,000 tons could help, provided certain conditions are met, FEF said. One of this is if the expanded volume is the amount of the shortage itself. The allocation of MAV import permits should also be on a first-come-first-served basis with realistic economic size allotments. Furthermore, FEF said there must be close monitoring of speedy use of MAV import permits and cancellation of such permits for failing to bring in the imported pork within a prescribed time frame, alongside a quick reallocation of unused MAVs.
“On the first condition, the expected expansion falls short of the amount of the shortage. From our review of existing analyses, the shortage of pork is running at 500,000 metric tons. Assuming that you expand the volume to the shortage itself, the other conditions need to be met to bring in the imports quickly,” FEF said, adding that the rest of the conditions would be difficult to administer.
FEF also called for a realistic program to control the African swine fever (ASF), the root of the current crisis, alongside a collective hog management program for backyard small producers.
“Producers will invest in new hog production if the government guarantees at least reimbursement of production costs plus cash assistance to producers, once it decides on terminating hogs in ASF-contaminated farms. To minimize the risk to the government, it has to require that participating hog producers follow good agricultural husbandry practices designed to reduce the risk of ASF outbreaks. The DA can pilot the program in Batangas and Bulacan in the next quarter,” the FEF said.
A more long-term solution is producing an appropriate vaccine for ASF, the group added.
To ensure that the solution for consumers won’t come at the expense of producers and other actors in the pork value chains, FEF cited collective farming as a safety net.