How to reach the full potential of the Rice Tariffication Law

The Rice Tariffication Law (RTL) is in the news lately as it is being trumpeted as a partial solution to the rice crisis. While amendments are being introduced, effective implementation of the current law is also needed.

This was what the AgriFisheries Alliance (AFA) said in a position paper and during a testimony at a May 14 Senate hearing on the matter. AFA is composed of three coalitions: Alyansa Agrikultura (AA), representing farmers and fisherfolk; Philippine Chamber of Agriculture and Food, Inc. (PCAFI) representing agribusiness; and Coalition for Agriculture Modernization in the Philippines (Camp) representing science and academe.

Here are AFA’s three priority recommendations, plus valuable insights from Senators Cynthia Villar and Imee Marcos.

Implementation

The first is for an effective implementation of the law. Improvements were seen since the law’s problematic start in 2019.

The Senate was correct in legislating a 35-percent tariff to replace the damaging quantitative import restriction. However, the 35-percent level required by the World Trade Organization (WTO) agreement should have been supplemented by the executive branch with a WTO-sanctioned safeguard measure of an effective additional tariff.

READ: Bill seeking to amend Rice Tariffication Law sent back to House plenary

The Senate was not able to give the executive branch the guidance needed so that the RTL would not seriously hurt farmers.

Misleading news then followed from several sources: Rice retail prices were reported to have decreased by 14 percent from 1988, thanks to the RTL.

But 1988 was an abnormal year because imports were very much delayed because of government inaction. Compared to 2017, retail prices decreased by only 2 percent. What was also not often stated was that rice farmer incomes fell by a disastrous 25 percent. Again, this is because the Senate was not able to guide the executive branch on the matter.

The Senate must now use its oversight function to ensure that the executive branch takes action consistent with the objectives of the RTL. During the hearing, Villar showed how her oversight guidance helped make the RTL more effective in the area of mechanization.

Half of the P10 billion allocated for mechanization had two major implementation problems. Aside from extremely slow disbursement, farmers were receiving equipment not appropriate for their needs. In addition, they were not trained to operate the equipment, which was eventually left idle.

Tapping the oversight function, Villar influenced both the speed and quality of the disbursement while also ensuring proper equipment training. This oversight function must also be used for other RTL components.

Amendments

The second recommendation is related to the oft-quoted phrase: “Do not throw the baby out with the bath water.” In abolishing (correctly) the harmful rice import quantitative restriction, certain important regulatory functions necessary for producer and consumer welfare were also cut. These must immediately be restored.

Examples are the government’s ability to quickly import rice during crisis situations (only as a last resort), easy access to information such as importer details, rice shipments and storage areas, and inherent responsibilities such as visiting warehouses to prevent hoarding.

READ: Padilla seeks amendments to rice tariff law to restore NFA’s role

While both Villar and Marcos agree to restore some of these functions, they are not for giving them back to the National Food Authority because of its deplorable track record. Options they mentioned were to give these to the Agriculture Secretary, an interagency task force, or even a new commission. They have a very valid point.

The third recommendation is for other RTL components to be improved. For example, the P1-billion allocation to government banks for credit can be redirected because these banks are already awash in funds.

They hesitate to lend because of the risks in agriculture. One possibility is to transform the credit component into a credit guarantee that will minimize agriculture risk.

If guided by the Senate, this could even become a model to follow for our now suboptimal agriculture credit guarantee schemes.

To fulfill the full potential of RTL, the amendments as well as the Senate oversight function on implementation are needed. Given our critical rice situation, it is hoped that action on these points will be immediately implemented.