The Rice Fiasco: How smugglers, bureaucrats and naïve economists are mugging our farmers

In Bertold Brecht’s “The Measures Taken”, a political opera set in revolutionary China in the 1920’s, the rice trader sings: How should I know what rice is?

How should I know who knows what rice is?

I’ve no idea what rice is, I only know its price.

These lines come to mind as one observes the awful debacle that has overtaken the fate of the most important item in the Filipino diet. In a controversial recent judgment, a court in Davao recently ruled against the Bureau of Customs and ordered the release of 4.2 million tons of seized smuggled rice. Now the smugglers are shouting with glee at an unexpected development: Secretary Leila de Lima is on their side.

In a recent opinion issued after the smugglers sued the National Food Authority (NFA) and the Bureau of Customs for seizing their illegal imports, de Lima said that according to the terms of its agreement with its trading partners in the World Trade Organization (WTO), the government’s right to impose import quotas on rice expired in June 2012.

In her leaked opinion, de Lima asserted: “To renege on this agreement, consent to which was manifested by the act of both the President and the Senate in accordance with the Philippine Constitution, is beyond the power of a mere implementing agency like the NFA, which must exercise its rule making and regulatory powers in accordance with and not contrary to applicable laws.”

The rice quota fiasco

We anticipated that a crisis like this would break out sooner or later, when the Philippines signed on to the Agreement on Agriculture of the WTO in 1995.  Quotas or quantitative restrictions were eliminated on all agricultural products except rice.   But the Philippines was obligated to accept a “minimum access volume” of around 350,000 metric tons of rice yearly.

Near the close of the ten year period that the agreement on rice was in effect, in 2004, the Philippines filed for an extension, and it was granted, covering the period 2007-2012.  As the 2012 deadline approached, pressure from rice farmers and farmer advocates forced the DA to seek another extension, but the Philippines’ trading partners have so far refused to enter into negotiations, apparently in search of concessions in terms of increased meat imports as a quid pro quo for granting the government’s rice request.  Thus we have a period of indeterminacy, where the rice quota extension agreement has lapsed but no agreement has taken its place.

This fiasco could have been avoided had there been closer coordination among the government agencies, particularly the Department of Agriculture and the Department of Justice.  This process could have begun way before the expiration of the extension in 2012.  This could have resulted in an executive order or some other legal instrument maintaining the quota until a new agreement was reached with the Philippines’ trading partners.  Instead, the NFA and the Bureau of Customs put their heads in the sand, pretending that the agreement with the WTO had not lapsed and acting on the basis of old directives.  Secretary de Lima, for her part, issued a judgment based on very narrow grounds, failing to even explore the provisions in the WTO Treaty, such as those allowing import restrictions owing to dumping and violations of sanitary and phyto-sanitary standards.

Without a proactive government push to retain the quota in the form of notices to our ASEAN partners, we will face a similar quandary when the Asean Economic Community (AEC) becomes reality on 2015.  We are talking about a free-trade area that will no longer have commodities like rice on a “temporary exclusion list” or “sensitive list.” Informing our trading partners now that we intend to keep rice as a protected commodity under quota will save us a lot of diplomatic grief later on, when we could be accused of having negotiated the AEC in bad faith.

Academics align with the smugglers

In the midst of this bureaucratic fiasco, members of the academic community associated with the University of the Philippines School of Economics have also come out in support of the smugglers.  In recent statements, these academics, claiming to base their estimates on international prices, have asserted that local consumers have been paying have been paying 40 per cent more for rice than should be the case. The thrust of their interventions is that in the interest of consumers, the government should drop the quantitative restriction on rice.

These economists blame the rice farmers for their alleged low productivity.  What these neoliberal ideologues forget is that the key countries that determine the international price of rice—the US, Thailand, and Vietnam—subsidize their rice producers heavily, then dump their products at cut-rate prices on world markets.  The Thai government, for instance, buys rice from Thai rice farmers at above market prices, then dumps the rice on the international market.

In the recent controversial case of competitive bidding between Vietnam and Thailand to sell the Philippines 500,000 metric tons of rice, what we were witnessing was a battle between two governments that heavily subsidize their rice production seeking to dump their artificially cheap rice on the Philippines, their actions guided not by production costs but by non-price considerations like grabbing a greater share of our country’s rice market.

A key person that has resurfaced in the debate after years of relative obscurity is Dr. Ramon Clarete, now the dean of the UP School of Economics, who played a key role as a government resource person during the 1994-95 debates on whether the Philippines should join the WTO.

Clarete predicted then that signing the Agreement on Agriculture, which required the Philippines to eliminate all but one of its import restrictions, would result in the addition of 500,000 new jobs yearly in agriculture.  Instead, the number of people employed in agriculture declined from 11.2 million in 1995 to 10.8 million in 2001.

Clarete also predicted that allowing enlarged imports of traditional crops like rice and corn would push farmers to shift to so-called “high value added crops” like broccoli, snowpeas, and cutflowers, the production of which would make the Philippines a major exporter of these  products.

The opposite happened.  From being a net agricultural exporter in 1995, when it joined the WTO, the Philippines became a net agricultural importer.  Nearly 20 years after the Philippines entered into probably its most disadvantageous agreements, Clarete and his neoliberal associates still do not understand the harsh realities of global agricultural trade, where the policies of powerful governments undermine their mythical nirvana of an international market running along free market lines.

Rice policy and Philippine society

The country’s agricultural policy is a mess, and this has not been helped by the Department of Agriculture’s being the subject of investigation owing to the involvement of some of its senior officials in the pork barrel scam.

High level intervention by Malacañang is needed to sort out the mess and clarify our priorities.  Among these aims must be the reinvigoration of our agriculture, promotion of the interests of our rice farmers and other agricultural producers, and a fair deal between consumers and our rice producers—one that is based on the true cost of rice production, not one based on rice prices that are artificially depressed by rice dumping in the Philippine market by aggressive players like Thailand and the United States.

Beyond this, what we need is a renewed appreciation of the role that rice plays in our diet, cuisine, and society. Our 2.5-million rice farmers (who support some 10-12 million family members) are the guardians of that heritage. Our country would be a great loser not only economically but also culturally if we allow our rice economy to slip into irreversible crisis owing to pressure by business interests seeking to make a killing in the rice trade, the bungling of bureaucrats and negotiators who allow themselves to be intimidated and outmaneuvered by avaricious trading partners, and the pernicious influence of neoliberal academics who are naifs when it comes to understanding the harsh realities of global trade.

*INQ.net columnist Walden Bello represents Akbayan in the House of Representatives of the Philippines.