Rice policies and fallacies

Every administration in recent memory experienced a rice crisis, all traced to mistakes (on importation) made by the National Food Authority,” asserted former UP School of Economics dean Ramon Clarete in a recent Management Association of the Philippines panel discussion on rice policy. “We should never put ourselves under that kind of vulnerability, where one agency’s mistake can harm the entire economy,” he went on. We need an environment where no single market player’s actions can disrupt the entire supply-demand balance, which implies that government’s decades-old exclusive control over rice importation must go in favor of open trade.

That’s what “rice tariffication,” the subject of House Bill No. 7735 and Senate Bill No. 1998, is all about. It’s about increasing competition in rice trading by opening it to all, rather than allow a few favored licensed players to corner supplies enough to determine who gets what, and what price prevails. It’s not about removing protection of our rice producers from much cheaper imports, but about using appropriate import tariffs to provide that protection in a transparent and measurable way. And it’s about not using hard-earned taxpayer money to pay for rice imports.

That money, running into billions of pesos annually, is better spent helping rice farmers raise productivity, reduce costs and stand up to cheaper imports from our neighboring rice surplus countries. It must also be used to help rice farmers in less suited lands shift to other products that will not keep them mired in poverty, stuck in lower-yield rice production in a stubborn pursuit of rice self-sufficiency.

I’ve never said that the Philippines cannot be rice self-sufficient, as scientists and others often insist. The issue has always been: at what cost? With the right science and inputs, we can squeeze as much rice as we can from our much smaller rice area relative to our Greater Mekong Subregion neighbors, and yes, be self-sufficient—but it would still cost much higher than our neighbors can provide that rice to us. It makes far better sense to produce as much as we can only to the extent that its cost is comparable to that of our rice surplus neighbors.

I have no doubt that, with proper efficiency improvements, we have enough competitive farms and scientific resources to permit us to still produce the bulk of our rice needs, even at or close to Southeast Asian prices that are only about half ours.
But maintaining our age-old policy of shielding the domestic rice market via import restrictions will only keep permitting our domestic rice prices and production costs to remain up to twice higher than what other Southeast Asians pay for the staple.

Government is not supposed to be helping our farmers persist as high-cost producers; it’s supposed to help them become high-productivity, low-cost and competitive ones. That is where budgetary allocations of taxpayer money for rice should go, not for directly importing the commodity, which private traders could do better. And yet it is this flawed approach that has been our rice policy for ages, all because of our romantic attachment to the elusive idea of rice self-sufficiency.

The economy-wide harm that high-cost rice does is especially obvious now, as spiking rice prices have triggered inflationary expectations feeding on itself and fueling more inflation. As a dominant part of the Filipino worker’s budget, it has also forced our wages up to less competitive levels, impacting on our competitiveness and impeding jobs well beyond rice farming and agriculture itself.

Romblon, Masbate and other differently endowed provinces do not aspire for rice self-sufficiency for a good reason. In this age of a much more integrated Asean Economic Community, which as a region is a global rice surplus producer, the Philippines need not insist on producing all its rice for the same reason. An Asean-wide approach to food security makes far more sense now than one that aims for national self-sufficiency in the guise of food security. That position forgets that lack of affordability is the biggest contributor to the food insecurity of millions of malnourished Filipino poor.

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