Of bananas and tariff cuts

It is imperative that the private sector take a strong proactive role in improving our agriculture exports.

This was highlighted during the quarterly meeting of the Committee on International Trade (CIT) of the Philippine Council for Agriculture and Fisheries (PCAF) last June 18.

Paul Cuyegkeng, former Dole Asia president and now president and owner of the multinational Sumufru Corp., said it was the first time he saw the Department of Agriculture (DA) significantly reach out to the private sector, thanks to Agriculture Secretary Francisco Tiu Laurel Jr. Cuyegkeng also complemented the extensive work of Special Assistant to the Agriculture for Agriculture Export Development Philip Young in spearheading the DA’s first clear export strategy.

Just for context: It used to be that we were way ahead of Thailand, but our agriculture exports as of 2022 reached just $7.5 billion versus our neighbor’s $42.9 billion.

The PCAF-CIT meeting approved 22 recommendations from four working groups: export development, marketing and regulations; trade agreements, negotiations and remedies; antismuggling and border controls; and monitoring, evaluation and impact. Each group is chaired by a private sector leader and cochaired by a DA assistant secretary. Three of the recommendations from the private sector are listed here.

TariffsThe tariff plan announced concerning rice and other products did not go through the required hearings to justify reductions. The CIT recommended that the President consider holding hearings before a tariff adjustment is implemented.

Hearings would determine if the rice tariff reduction from 35 percent to 15 percent would actually result in a P6 to P7 decrease in retail prices. Previous experience has shown that tariff reductions failed to do so.

Sure, if the hearings reveal that a tariff cut is truly necessary, then the rate should be properly determined.

Perhaps a 25-percent tariff would have the same effect on retail price, even locking in potential savings of P14 billion for farmer subsidies and P45 billion of what might have been farmer income losses, according to Federation of Free Farmers’ Raul Montemayor. Those hearings will determine important issues such as this.

Budget monitoring

The CIT commended the PCAF secretariat for restoring a proven effective private sector monitoring of the DA budget. After Tiu Laurel emphasized this, five regions immediately made the adjustments.

Such restoration entails giving the private sector-led Regional Agriculture and Fisheries Councils (RAFCs) a complete list of DA-funded projects for monitoring purposes. Its previous abolition and the consequent lack of transparency were cited as major reasons as to why a third of the DA’s expenses in 2020, 2021 and 2022 were tagged as unliquidated and unexplained in a Commission on Audit (COA) report.

The CIT said this mode of transparency should be implemented by a wider group. One way is to establish an accessible website where these projects are listed. This should be accompanied by a reward and punishment system.

As far as I know, no one has yet to be charged in relation to the COA findings.

Advocacy

Cuyegkeng also reported that banana exports were cut in half from $2 billion in 2019 to $1.1 billion in 2022. This was largely because of decreased competitive access to important markets.

The CIT recommended stronger private sector advocacy for a tariff reduction.
 Japan imposed a tariff of 9 percent for bananas from Vietnam for the period October to March, while ours is 18 percent. South Korea, on the other hand, gave Vietnam a zero-percent tariff, while our bananas are levied 30 percent. If we do not move fast, we will soon lose to Vietnam.

There is already an approved tariff reduction scheme pending in the Senate. The private sector should move for its ratification, or consider an executive agreement with the two countries.

From these examples, we see how bringing in new investments is not enough. The private sector must participate proactively in cogovernance if we are to achieve our most needed agriculture development.