Where to, rice tariffication?
The Philippines is now entering a tariff-based regime with the expected lifting of the quantitative restriction on rice after three extensions granted by the World Trade Organization (WTO). The last extension was delayed due to unresolved issues, such as the role of the state trading enterprise, among others.
Quantitative restriction is a WTO trade rule instrument that restricts entry of cheap imports — rice in our case. On the other hand, a tariff-based regime is a WTO trade rule that allows the open, free entry of goods as long as taxes and customs duties are paid in accordance with tariff rates.
Rice farmers, civil society organizations and food security advocates, including the Department of Agriculture (DA), have repeatedly said that tariffication without necessary support is detrimental to our rice industry. Since the recent rice crisis, economic managers have focused their responses on importation, as if rice tariffication is the primary solution.
The rationale behind this is not so much about making the rice industry — particularly small rice farm holders — competitive, but simply to reduce the prices of locally produced rice by importing cheap rice. Vietnam and Thailand are our major sources of the staple.
The 2017 rice supply data show that the country’s level of rice production is sufficient. The total rice/food requirement is 12,659,235.6 metric tons, while production of milled rice is equivalent to 12,529,625.31, short of 129,610.29 metric tons to fill the rice production gap. If we include the National Food Authority’s (NFA) imported 243,992 metric tons of rice and the government’s obligation with the minimum access volume that allows private sector imports of 600,000 metric tons, the total rice supply for 2017 is at a comfortable 14 million.
However, it appears that rice tariffication is in the works to influence domestic prices. If economic managers had their way, their solution is to flood the local market with cheap imported rice.
This is problematic. This rice is subsidized with corresponding infrastructure support. And the production cost per kilo in Vietnam is P6.53 as against Philippine paddy rice of P12.41 per kg. With the 35-percent Asean rice tariff, it will be difficult for Filipino rice farmers to compete. According to PhilRice, “even with 35-percent tariff rate, imported rice from Vietnam, the least expensive among the three (Vietnam, Thailand, India), is about 21 percent cheaper than domestic rice.”
Because of that, whatever rice production gains that have been achieved will be put to waste with tariffication sans state support. Tariffication runs opposite to what rice farmers have campaigned for, which is to level the playing field against importation. The government’s consistent support for and protection of Filipino rice farmers is paramount to ensuring competitiveness. Rice importation is not the solution.
Nonstate actors have been actively pursuing sustainable rice production as the solution to a liberalized food trade regime. Unfortunately, the Senate and the economic managers have been lukewarm to suggestions that any plan prior to full implementation of rice tariffication be put in place to address weaknesses in the rice industry.
Competing under a tariff-based regime is difficult. Rice farmers need at least six to eight cropping seasons to be competitive. The Senate bill on rice tariffication is not much of help to farmers, either. It is contemplating the abolition of the NFA by reducing functions to direct rice importation. Meaning, they want rice importation to become the sole responsibility of traders and importers.
The DA made it clear that abolishing the NFA would mean giving up flexibility imposed by the WTO. A strong NFA is a policy vehicle for the government that protects farmers’ interests.
If a liberalized rice trade regime becomes a main policy track, a substantial reduction in rice production, where a sizable number of rice lands will be primed for land conversion, becomes the future. This scenario is favorable to real estate developers, since these rice lands are strategically located near town centers. The further we liberalize our rice industry, the bigger the risk of food insecurity.
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Omi C. Royandoyan is executive director of Centro Saka and founding chair of Alyansa Agrikultura.
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