How to fix our agriculture trade deficit
There is a need to come up with a strategy to fix, or at least balance, our agriculture import-dependent situation today.
Our agriculture imports outpaced our exports by $8.92 billion in 2021, alarmingly’ higher by 39 percent compared to the previous year.
When we joined the World Trade Organization (WTO) in 1993, our trade balance was a positive $292 million. Unlike countries like Vietnam which took the necessary steps of preparing for global trade, we did practically nothing for agriculture. Thus, we are now the only country among our Asean (Association of Southeast Asian Nations) neighbors with an agriculture trade deficit.
If we make the same mistake of not preparing now, we will suffer the same WTO agriculture disaster when we join the Regional Cooperative Economic Partnership (RCEP).
Because of inadequate government support, we are globally uncompetitive in many areas. We are therefore struggling with increasing our exports. To improve our trade balance, we should also implement an import strategy. This should include two important approaches.
IMPORT SUBSTITUTION. The first is to list in a systematic and comprehensive way the areas where imports have come in. Today, we have no such list.
For those areas where we have no comparative advantage, imports should continue with the appropriate tariffs.
For those with actual comparative advantage, we often lose to imports because of factors like unreasonable regulations, red tape and even corruption. According to Philip Young, we can address these issues effectively if we pursue more vigorously the government’s commendable “ease of doing business” initiative.
More importantly, we must address the areas where we have untapped potential comparative advantage. We are busy looking at export markets, while ignoring “low lying fruits” in areas where we can replace imports with the right government support. Both the target priority areas and the specific government support needed should be identified immediately.
IMPORT FAIRNESS. The second approach is to ensure that imports must abide by the right laws and regulations. Two years ago, the Alyansa Agrikultura (AA) had identified three key areas of unfairness, which were then raised anew at the public-private Philippine Council of Agriculture and Fisheries. So far, not much has been done.
The first area is to reduce rampant smuggling. Though the Bureau of Customs (BOC) has taken commendable measures like the computerization of its processes, this is far from enough.
The AA recommended the reinstallation of a public-private oversight committee. In the two periods it was in operation before being abolished, the committee helped reduce the smuggling rate by an impressive 25 percent and 31 percent.
It succeeded because the high-level committee members monitored and supported the BOC through monthly meetings. These ensured the transparency and accountability that are sorely missing today.
The second area is protecting our borders, i.e. quarantine procedures must be in place. The government previously said this required a big budget, which we don’t have.
It takes little to add more personnel and basic equipment at our borders. We do not lack the budget; we lack competence and compassion. These could have prevented the dangers brought about by the African swine fever and the “cocolisap” that destroyed thousands of hectares of coconut farms.
The third is ensuring that imports follow the same health and safety regulations that our own products comply with. Because imports often do not follow these, they endanger consumer welfare and have unfair advantage over our own strictly regulated products.
Some countries do not even allow imports unless they carry labels using their own language to minimize misunderstanding. According to Norbert Chingcuangco, if we do the same, imports will substantially decrease in selected areas.
With political will, our government can implement in a short time the urgent basic components in a needed import strategy. This should be done before a possible RCEP ratification, which could lead us into a WTO-like disaster unless we take the necessary precautions.
The author is Agriwatch chair, former secretary of presidential flagship programs and projects, and former undersecretary of the Department of Agriculture and the Department of Trade and Industry. Contact is [email protected].
