Preparing for no QR

Is it really too late to ask for an extension of the quantitative restrictions (QR) on rice importations beyond July 2017? And will the lifting of QRs by then really negatively affect rice farming in the Philippines?

Agriculture Secretary Emmanuel Piñol wants the Philippine government to go before the World Trade Organization and negotiate for another extension of the QR, its fourth if ever, after being awarded preferential treatment on rice importations in 1995.

The extensions were given purportedly to give Filipino farmers more time to prepare for free trade, which essentially meant that our local rice production would be able to squarely compete with imported rice that would not be subjected to import taxes or even import limitations.

The first extension was given until 2004, and extended two more times, with the second until 2014, and the third by July 2017. If ever the Philippine government would ask for a fourth extension, the reason would still be the same: to give Filipino farmers more time to prepare for free trade.

Nothing changed

It is understandable why there is reluctance on the part of our government planners, and even the President, to go for another pleading session. Even if the QR were extended by another two years, as Secretary Piñol is asking, what could really be accomplished towards getting our farmers prepared?

Secondly, with barely five months to go before the QR expires, there is not enough time for negotiations. It took the former administration two years to be given the last extension, which could now be regarded as a waste of time, money, and human resources since nothing really had changed.

Sure, we can go plead for another extension, but the chances of getting it would be slim – and even at the risk of the country losing face, time, money and resources during the negotiations.

More importantly, you and I know that Filipino rice farmers would not really be better prepared to face free trade if an extension of two years – even four or six years – were granted. There are just too many things needed, including government funds, to nurse back our rice production to a healthier state.

Tariff debates

It seems the National Economic Development Authority is thinking of taking a different route about how to handle the country’s rice production. By letting go of the QRs, why not increase the tax on imported rice so that local rice production will be priced lower?

Currently, the government allows 805,200 metric tons of rice to be imported at a tariff rate of 35 percent. Any importation above this minimum access volume is charged a higher tariff of 50 percent. With the QR removed, the NEDA is thinking of raising tariffs on all rice imports to 40 percent, even 50 percent.

There is a big debate on the merit of how much tariffs really should be imposed. Some contend that a 35 percent uniform tariff will do the job of increasing state revenues since some two million MT are imported by the country annually to augment local production. A 35 percent tariff would be consistent too with the ASEAN Free Trade Agreement.

A higher tariff of 40 to 50 percent would, of course, significantly increase importation revenues. And would likewise provide Filipino rice farmers with more protection from the forecasted flooding of imported rice as it would allow them to sell at better prices, and correspondingly, earn better.

But this would make rice smuggling a bigger temptation, especially if the National Food Authority’s rice importation role is diminished.

Uncertainties

There are worries too about adversely affecting global rice prices with the QR lifting. In 2008, when the Philippines had to urgently import two million MT, rice prices in the global market doubled to more than $1,0000 per MT from the normal $500 per MT level.

And with the expected unrestricted importation of rice, there are fears that Filipino rice farmers will even be discouraged from pursuing rice production, and would leave farming for good.

On the other hand, NEDA is saying that about 35 of the country’s rice producing provinces will be able to compete directly with their Vietnamese and Thai counterparts, and that even without tariff, about 13 rice-producing provinces would remain competitive.

Safety nets

With all of the uncertainties, it is best that Secretary Piñol now focuses on setting up all the necessary safety nets that Filipino farmers would need to get ahead should there be any negative effectives from the QR lifting.

If the flood of imported rice would really dent rice farmers’ incomes, as some government planners are forecasting, the Department of Agriculture should already prepare to supervise temporary relief programs, including conditional cash transfers.

Longer term measures could include training affected rice farmers to shift to high value crops, similar to what sugar farmers in Negros did when world sugar prices plummeted after new cheaper sources of sweeteners were used by confectionery manufacturers.

Likewise, measures are needed to ensure that rice prices would remain stable locally and globally, and this includes mitigating any sudden rice importation order that would cause abnormal international supply disruptions, even if temporarily.

Realistic program

More importantly, the DA should start putting together a realistic program that would revert the downward trend in agricultural productivity, and secure the country’s food supply for future generations.

With additional income to be derived from possible higher tariffs on imported rice, the DA must intervene to make sure that the collected money is spent for the improvement of agricultural infrastructure such as irrigation and drying facilities, better seeding varieties, expanded credit, research and development, and farm-to-market roads.

We laud Secretary Piñol’s enthusiasm and drive to find ways and means to help Filipino farmers. But at the end of the day, or his six-year term, he will be judged as to whether the contribution of agriculture to the country’s economic growth had actually increased.

He definitely cannot cite the QR lifting as a reason for not performing well.

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