Proposed tariffs will harm farmers
The newly proposed tariff reduction will harm, not help, our farmers.
In the first place, what are tariffs for?
As quoted from investopedia.com: “Governments impose tariffs to raise revenues and protect industries.” So when tariffs are to be reduced, the opposite will happen.
For the swine volumes inside the quota (minimum access volume, or MAV), the 30-percent tariff will be decreased to 5 percent for the next six months and 10 percent for the succeeding six months. For those outside the quota, 40 percent will go down to 15 percent in the next six months and 20 percent for the succeeding period.
If these tariff reductions decrease government revenue and lessen farmer protection, why propose this at all?
For background, it should be known that tariffs are determined at a level that will protect farmers from imports, but at the same time, low enough to force them to be competitive. Since the swine tariff levels have been set at 30 percent and 40 percent, the reason for decreasing tariffs is not because we are ready to compete at lower levels, but because we need more imports immediately. This is to cover our sudden severe shortage because of the African swine fever (ASF). Our farmers will not be able to compete at the 5 percent to 10 percent levels.
We must, indeed, increase supply—not necessarily at the farmers’ expense. The shortage is because of the ASF, but that is not the farmers’ fault. Some even say it is partly the government’s fault because of inadequate border controls that failed in preventing ASF entry. If other governments did it successfully, why not ours?
The government now wants to bring in imports even cheaper than current levels, when they are already cheaper than our local products. So why give importers and traders even more profits when they are already enjoying enough? The result of decreased tariffs is less protection for farmers and decreased government revenue. This revenue should instead be used to help our farmers improve local supply.
There is definitely profiteering with pork prices at P440 a kilo, instead of the P330 to 360 range submitted by stakeholders to the government. But the government’s mistaken price range of P270 to P300 has made the product disappear. What we see now are very large subsidies to enable the product to be sold at that low range. These resources are better used by correcting the price ceilings and using the saved subsidy money to support our farmers’ increased production.
Definitely, profiteering should be severely penalized. But this should be done with the correct reasonable P330 to P360 price ceiling. A better alternative is the more flexible suggested retail price, which the Department of Trade and Industry (DTI) has used very successfully to penalize profiteers.
An example of using the saved revenue from unnecessary subsidies is providing sufficient insurance for each ASF casualty. This way, farmers hesitating to grow hogs because of ASF will now do so because of this insurance. In addition, those hiding the ASF casualties will now reveal them, thus helping focus our anti-ASF activities on the correct areas.
The proposed MAV expansion from 54,000 to 162,000 tons has consequences that Department of Agriculture (DA) senior officials may not know about. The additional 108,000 tons will give the importers even lower costs, even though they don’t need it because they are already making enough profits. But in addition, the decreased costs to them of only P15 from the product’s price of over P300 is not likely to change their decision.
On the other hand, this means a loss of P1.62 billion (P15 times 108,000 tons) in lost government revenue, which can help the farmers increase supply. A plea of the farmers is that collected tariffs for their products should be plowed back to help them, instead of going to the general fund and used for other purposes. If rice tariffs go back to rice, why not do that for other products like swine?
An added concern stated during the Feb. 1 Senate hearing is the added corruption risk. Since who gets the added quota worth P1.62 billion is discretionary, a person reportedly terminated for alleged MAV corruption is now back in the MAV committee. This allegation is now under review.
On the proposed rice tariff reduction for non-Asean countries from 40 to 60 percent to 35 percent, the same logic applies. Rice tariffication is definitely good. But it needs an added safeguard measure. The tariff that equates imported to local rice is 70 to 85 percent. The temporary added effective tariff to approach this level was not given. This resulted in farmers losing 30 to 50 percent of their previous incomes. But instead of increasing the 35-percent tariff, the opposite is being recommended: the 40 to 50 percent non-Asean tariff is being decreased to 35 percent. One can imagine how the rice farmers must feel betrayed.
These current proposals do the opposite of what tariffs are meant to do. Because they harm farmers and waste government revenue that should be used to help them, these proposals should definitely be disapproved.
The author is Agriwatch chair, former secretary of Presidential Programs and Projects, and former undersecretary of the DA and the DTI. Contact is [email protected]
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