RICE TRADE LIBERALIZATION | PH never learns from its mistakes

By SHERWIN DE VERA
www.nordis.net

First of two parts

President Rodrigo Duterte’s economic managers and the big corporations were the main proponents for the passage of the Republic Act No. 11203 or Rice Liberalization Act (RLA). The law amended the Republic Act No. 8178 or the Agricultural Tariffication Act of 1996.  They publicized that by liberalizing the rice industry, the government and consumers will reap significant benefits, and create better relations with international trading partners and investors.

However, the primary reason for this is to comply with the Philippines’ obligation under the World Trade Organization’s Uruguay Round’s Agreement on Agriculture (WTO-AOA) to remove import restrictions on agricultural imports.

Posted by National Economic and Development Authority on Wednesday, February 20, 2019

The entry of the country to the WTO in 1995 came with the responsibility to ensure the implementation of the WTO-AOA, thus, in 1996 the Ramos administration established the tariffication system through RA 8178. The law repealed the prohibition of onions, potatoes, garlic, cabbages and coffee imports. It also abrogated other measures that subjected importation of agricultural projects through stiff conditions.

This paved the way to the unimpeded entry of imported agricultural products, except for rice. This special treatment, accorded to the country when it joined the international trade umbrella that limits rice imports, finally expired on June 30, 2017, after a decade of extensions.

RLA was among the priority legislations of the Duterte administration. It was on the top of the list of the measures that the Legislative-Executive Development Advisory Council certified as urgent in July 2017.

President Duterte signed the bill into law on February 14 and it took effect on March 5 despite widespread appeal and protest from small grain traders and farmers. The legislation lifted the quantitative restriction of rice imports in the country and instead imposed a 30 to 50 percent tariff.  This means the unimpeded importation of rice by traders, including wholesale and retail corporations.

What the proponents say

As a measure, the government is relying on the imposed tariffs to protect domestic production. It also created the Rice Competitiveness Enhancement Fund (RCEF), a P10 billion annual subsidy to cushion the impact on local producers and develop their global competitiveness. The allocations of the fund based on the Implementing Rules and Regulations are as follows: 50 percent for rice farm machinery and equipment; 30 percent for the development, propagation, and promotion of rice seeds; 30 percent for the credit assistance for rice farmers; and the remaining 10 percent for rice extension services

The government will earmark the RCEF for the next six years from the estimated P28 billion annual revenue collection from rice importers. To date, the revenue collected from the measure has reached P5.9 billion according to the Department of Finance. The amount came from about 1.43 metric tons (MT) of rice stocks imported by private traders.

LOWER INFLATION RATESHeadline inflation rate would be reduced by 1 percentage point if the domestic wholesale rice…

Posted by National Economic and Development Authority on Wednesday, February 20, 2019

Finance Secretary Carlos Dominguez III defended the law, saying that liberalization of the rice industry will make quality rice more affordable and accessible to Filipino families. The government expects to lower the retail price of rice from P4.00-7.00 per kilogram. He also claimed that the measure will lower the country’s inflation rate and further develop the agriculture sector to be globally competitive.

With the passage of the law, the National Economic and Development Authority (NEDA) sees a 0.44 percentage point improvement in the country’s Gross Domestic Product (GDP) under 35 percent tariff rate. The agency also expects more crop diversification as rice farmers who are unable to adapt will shift to other high-value crops.

Meanwhile, 13 big business groups in a statement said that with the passage of the law “the financial resources, management expertise, logistics support and extensive nationwide distribution system of the private sector will be harnessed to ensure food security.”

Agricultural trade liberalization impact

According to the IBON Foundation, the cutting down tariffs and other trade barriers brought by the trade liberalization in agriculture resulted in the dumping by rich countries of their surplus and heavily subsidized produce to our local market. This proved to be devastating to the domestic economy and pushed the people deeper into poverty.

“In 1980, the Marcos regime actually made the Philippines the first country in Asia and the second country in the world, after Turkey, to be at the receiving end of a World Bank structural adjustment loan (SAL). The conditionalities of the US$200 million loan included among others tariff cuts, removal of import licenses and quantitative restrictions, lowering protections, and export-promotion – all in line with the market-oriented restructuring of the economy. This first SAL and another US$302 million one in 1984 were the historic spearheads of subsequent decades of trade and investment liberalization in the country.” — from Anyare? Economic Decline Since Marcos

Such was the case of the thriving garlic and semi-temperate vegetable productions in Ilocos and the Cordillera according to studies by the Solidarity of Peasants Against Exploitation (Stop Exploitation) and Alyansa Dagiti Pesante iti Taeg Kordilyera (Peasant Alliance in the Cordillera Homeland or Apit Tako).

Stop Exploitation, a regional peasant organization in Ilocos, in its previous statements said that RLA would bring the same “tragedy” that liberalization brought to the garlic of Ilocos.

“At first, imported garlic was cheap. Unable to compete with this, local farmers went bankrupt. After a few years, we became dependent on imports and the price of garlic rapidly went up,” Antonino Pugyao, chairperson of Stop Exploitation recalled.

Pugyao, who hails from Ilocos Norte, cited data from the agriculture office that in 2014 price of an imported variety of garlic shot up to P300 a kilo while it was P180 for the local garlic. The province produces 62 percent of the national garlic production according to data obtained from the Philippine Statistics Authority (PSA).

The latest Agricultural Exports and Import Report of the PSA showed that garlic imports in 2017 reached 68,164 metric tons or almost 16 percent higher than the previous year. Government data also showed garlic production dropped rapidly three years after the Philippine entered WTO and has struggled to recover ever since.

Apit Tako also blamed trade liberalization in the sector for the massive price drop of semi-temperate vegetables. Despite the sufficient domestic production of potatoes, the group also noted that the country continues to import significant volume of the crop.

Based on the latest government statistics, the volume of imported cauliflower and headed broccoli, and fresh carrots went up in 2017 by 305 and 201 percent respectively. Potato imports also almost quadrupled from 2013 (4,362 MT) to 2017 (20,262MT).

The Cordillera Administrative Region (CAR) contributes 62percent to the country’s broccoli production and 89 percent of carrots. It also shares the bulk of the cauliflower harvest with Ilocos with the former producing 43 percent and the latter contributing 41 percent to national output.

Farmers losing billions

Back in February of this year, Agriculture Secretary Emmanuel Piñol admitted that during the period, the price of palay (unmilled rice) in some areas already dropped to Php 14-15 per kilogram. The average price of palay during the same period from the previous years is about P20 per kilogram according to the weekly farmgate price monitor of the Philippine Statistics Authority.

In a report this May, the Philippine Chamber of Agriculture and Food Inc. (PCAFI) pegged the price drop of palay since the passage of the law at around P5.00 per kilogram, amounting to about P95 million annual income lost for farmers.

Also, in a study conducted in March 2017 by the government think-tank, Philippine Institute of Development Studies (PIDS) said that replacing the quantitative restriction tariff on imports would lower palay prices by as much as P4.56 per kilogram.

Using these figures, an estimate of possible income lost for Northern Luzon farmers alone will reach P21-23 billion annually. This is about 75-82 percent of the expected tariff collection from imported rice and way above the P10 billion RCEF fund the government promised to the farmers.

However, billions of lost by farmers are not solely from the liberal policies on agriculture but also from other neoliberal measures like oil industry deregulation and regressive tax reform packages. For example, the compounded impacts of the Oil Deregulation Law and the Tax Reform for Acceleration and Inclusion (TRAIN Law) increased the cost of production of farmers.

According to a study, those using water pumps incurred P0.50 per kilo increase in their production expenses diminishing their net income by 10 percent. It noted that in 2016, farmers earned P5.12 per kilogram and went down to P4.62 per kilogram after implementing the TRAIN Law. This translates to about P2.34 billion lost for farmers in Northern Luzon based on the average volume of production in the past five years.

Also, the deregulation of oil trade in 1998 coincided with the steep and continuing rise of the country’s consumer price index (CPI) that indicates the increasing cost of living that severely impacts the poor. # nordis.net

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