Unwise import liberalization
The implementation of import liberalization can negate the move’s valid benefits if done irresponsibly and can actually cause considerable damage. This happened when we started this process carelessly in 1995. Instead of preparing agriculture stakeholders with the necessary support services, we left our people to fend for themselves.
On an annual basis, we were told to expect 500,000 additional jobs, a P60-billion agriculture GVA (gross value added) increase, exports that would far exceed our imports, and significantly reduced poverty. We did not get any of these.
Today, the Philippines is the only net food-deficient country in the Association of Southeast Asian Nations-5 or Asean-5 (Philippines, Indonesia, Malaysia, Singapore and Thailand). Also, our rural poverty rate is alarming at 32 percent, more than double that of our neighboring countries.
This unwise trade liberalization is still happening in some critical cases today.
An example is in rice. Last May 15, Executive Order (EO) No. 135 lowered the tariff on rice from outside Asean from 50 percent out-quota and 40 percent in-quota to a uniform 35 percent. Is this wise? In a well-documented and fact- based May 17 letter to Congress from Federation of Free Farmers (FFF) national manager Raul Montemayor, he argued that this was damaging.
Let us review a few events. When the Rice Tariffication Law (RTL) was passed in 2019, the FFF and Alyansa Agrikultura submitted two proposals for rice safeguard measures (consistent with the Republic Act No. 8800). These would effectively increase tariffs to protect farmers from the very low 35 percent tariff rate. Previous studies from PhilRice (Philippine Rice Research Institute) showed that the tariff rate that would equate the imported to domestic rice was 70 percent. The safeguard proposals were denied.
In 2019, as the president of the cement industry associations in the Philippines and Asean, I supervised a cement safeguard study with the Department of Trade and Industry acting on a motu propio basis. The safeguard was granted by the Tariff Commission.
In comparison, the Department of Agriculture aborted the review of our submissions and did not give us any result. Ironically, we now see a proposed decrease, instead of increase, in rice tariffs.
Let us review the facts. The RTL’s promise of a P7 rice price decrease did not happen. Since 2018 was an abnormal year because the government had internal difficulties and did not import rice on time, we should compare 2017 without RTL to 2019 and 2020 with RTL. Instead of a P7 decrease, there was a 73-centavo increase in 2019 and a 36-centavo decrease in 2020 (2017-P42.03, 2019-P42.76, 2020-P41.67). Consumers spent P86 billion more in 2019 and P24 billion less in 2020, or a net increase in spending of P62 billion. The farmers had to reduce their prices to compete with the cheaper subsidized imports. For 2019 and 2020, they received P56 billion less. The importers and traders were the only ones who truly benefited with more than P60 billion, which they did not pass on to the consumers in the form of lower prices.
This pattern is expected to happen with EO No. 135. The farmers who are already having difficulty because of the 35-percent tariff with no safeguards will suffer more. The consumers will not get any significant price decrease. Again, the importers and traders will get the foregone revenue of P548 million, which the farmers need. This is exactly the same issue that was raised in the Congressional hearings on the pork tariff reductions. It was shown that pork gross margins were 110 percent, which means the importers did not need to get the scandalous P11 billion in foregone revenue had the original executive branch proposal been implemented.
It is clear that there is no need to cut the prices through the proposed tariff reduction for rice from non-Asean countries. On May 24, 92 groups formed the Farmer and Fisherfolk Congress. Various organizations signed a joint statement identifying unwise import liberalization as a major cause of our agriculture crisis today. They also identified key agriculture issues and priority recommendations.
These are important additions to the National Food Security Summit held last May 17-18. The latter had commendable nationwide preconsultations and involved additional categories of agriculture stakeholders. If done synergistically, the combination of these two major gatherings will point the way to wise trade liberalization. This is the transformation the agriculture sector needs badly today.
The author is Agriwatch chair, former Secretary of Presidential programs and projects and former undersecretary of DA and DTI. Contact is [email protected].
