Terrified of tariffication

Why do many voices sound so terrified of the coming tariffication of rice imports? Even within government, there are signs that suggest continuing resistance to this long-awaited reform. Why did it take nearly two months for the approved measure, ratified by Congress in late November, to be transmitted for the signature of the President, who had certified to its urgency? And as of this writing, it has been five days since the measure was received in Malacañang, with no indication of when (or if) President Duterte will sign it
into law. Now we hear that the Department of Agriculture wants the President to veto it so the National Food Authority (NFA) can keep its tight control over the rice industry.

The key economic agencies — the Departments of Finance, Trade and Industry, and Budget and Management; National Economic and Development Authority and the Bangko Sentral ng Pilipinas — seeing wisdom in the reform, are all solidly behind it. On the other hand, public expression of support for the law by the Department of Agriculture has been lame and heavily nuanced. Agriculture Secretary Manny Piñol makes no effort to conceal his opposition to what is considered to be the most critical policy reform that could finally set Philippine agriculture on a bold new positive direction — and, ironically, ultimately make him look good. He, and those who would rather cling to our age-old rice policy that has been at the root of our farm sector’s persistent laggard state, seem unable to grasp lessons our economic history has taught us.

What are the historical lessons I allude to? More than two decades ago, in a bid to follow the example of our zooming “Asian tiger” neighbors, the Aquino and Ramos administrations made bold moves to liberalize trade, especially in the erstwhile heavily protected manufacturing sector. I remember the period well, as my fellow economic managers and I were at the receiving end of curses and threats from protectionist critics predicting the death of Philippine industry. We were driving the last nail on the coffin of Philippine industry, they admonished us.

And yet, just a few years after barging into my Neda office cursing and accusing me of killing his company and industry with
liberalized trade, a prominent industrialist proudly proclaimed that he was now exporting his products to South America. The discipline of competition led his firm to shape up and turn around from producing costly, inferior import substitutes to world-class exports reaching the other side of the globe.

That industrialist’s transformation exemplified the whole rationale of liberalized trade all along. Another 20 years hence, after import tariffs on manufactures fell to zero across Asean in 2010, our manufacturing sector has consistently grown faster than the overall economy, and its exports to the rest of Asean literally zoomed. Through it all, consumers have enjoyed wider choice and lower prices, and our inflation rates fell from the double- and high single-digit rates of the 1990s, to the low single digits we’ve had since.

The same transformation would come under an open trade regime for rice. I see those now terrified of rice tariffication to be creating the same ghosts our strident critics feared over two decades ago. Government’s rice budget, boosted by rice import tariff proceeds, should help capable rice farmers raise productivity over time, and not fund government rice imports that the private sector could well do. Marginal ones should be assisted to grow new crops that will lift them out of poverty.

As it did with our manufacturers, more open trade would finally induce our rice industry to transform into one that can stand up to outside competition. And, through it all, Filipinos would cease paying far higher prices for rice than the rest of Asean does, and the biggest gainers would be the poor and the hungry among us.

But to achieve this win-win for farmers and consumers, the NFA’s control over all aspects of rice trade must cease. The rice tariffication law will all be for naught if the NFA will continue using regulation to stifle the very competition that has built inherent strength in what are now key pillars of our economy.

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