Smuggling rice is not immoral

Smuggling is the act of illegally transporting certain goods across the international border. It is illegal only on account of some applicable law, rather than due to an intrinsic harm it does to society.

If the smuggling is done to avoid paying an immorally high legal tariff, or to avoid the cornering of the supply of the product by an unscrupulous monopolist, then is it not socially beneficial, and hence justifiable?

Freedom for all ordinary persons to import or export, using mutually acceptable money, is the natural state for economic exchange across international borders. Such freedom benefits both buyers and sellers, since both parties are also free not to buy or not to sell, if the price is not beneficial to them.

Imposition by law of any restrictions on the traded product, such as on the maximum quantity allowable for entry, or the levy of a tax or tariff on it, reduces the trade and raises its price, and thus harms consumers, compared to the natural state of free trade.

Barter, which is the direct exchange of goods for goods, is an abnormal system for conducting trade, whether international or domestic. Its great inconvenience, compared to trade through the medium of money, unnecessarily adds to the cost of the goods and thus lessens the benefits from them.

Of course, there are some products with good social reasons to be subjected to restrictions or regulations by the government before entering the country. For example: dangerous drugs, weapons, explosives.

BUT NOT FOOD. Not the most fundamental food of Filipinos: RICE.

The Philippines has the most expensive rice in Asean. A private person cannot import it without a permit from the National Food Authority (NFA). The NFA has a legal monopoly, since time immemorial, on the international rice trade. Only a favored few can get permits to import it; and even then, they must still pay a minimum 35-percent tariff.

This setup has led to the NFA’s reputation as one of the most corrupt agencies of government, in ALL administrations. This was also true of the NFA’s predecessors, namely the Naric (National Rice and Corn Council), RCA (Rice and Corn Administration) and NGA (National Grains Authority).

Advocacy of freedom of trade in rice is not just my personal view, but also that of Filipino economists in general (see “Abolish the NFA!,” Opinion, 9/1/18).

The simplest way to relieve the present economic suffering of Filipinos is to remove the NFA’s legal stranglehold over rice imports. It will not cost the government any more money, and will thus reduce its dependence on taxes.

Liberalizing imports will lower rice prices and thereby benefit rice consumers, whether they buy imported or domestic rice. The welfare of consumers, who are virtually all of the people, should matter more than that of rice farmers, whose families are only 5 to 10 percent of the population.

In the first place, just how much the farm price of palay will decline once imports are freed still remains to be seen. I expect some part of the impact will be to reduce the margin of middlemen instead.

In the second place, the cost of growing rice is not the same for all Filipino farmers. Many of them do have good technology, plus irrigation, to grow rice at a cost competitive to Thailand or Vietnam. Those that have no chance to do so should shift to different crops. They deserve government assistance to make the shift.

The government doesn’t need a budget to solve the supposed “problem” of smuggling of agricultural products. It just needs to decriminalize it.

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