We all have heard of this plan to impose as much as 180 percent tariff on imported rice and to establish a Rice Competitiveness Enhancement Fund (RCEF), both of which are expected to bring down rice prices by as much as P7 per kilo, as promised by the President in his recent State of the Nation Address.
Somehow, we’ve heard something like this before. And, unfortunately, that plan did not have a happy-ending.
The Lower House recently passed on third and final reading House Bill 7735, or the Revised Agricultural Tariffication Act which proposes to impose a 40-percent Most Favored Nation tax rate on the first 350,000 MT of rice imports from non-ASEAN members and 180 percent for import volumes in excess of the 350,000 MT.
HB 7735 also proposes the creation of the RCEF, where taxes derived from rice imports will be set aside for the establishment of a rice endowment fund, loans, and grants for rice farmers and financing for infrastructure to improve rice farms.
If the grand plan goes as envisioned, the RCEF will enable Filipino farmers to export their rice at globally competitive price levels. This would also mean that the local market prices for rice would be cheaper.
Parallels
Few readers will remember that more than two decades ago, in 1996, the Agricultural Tariffication Act was passed, which called for taxes on the importation of agricultural products including sugar, but excluding rice. It also called for the establishment of the Agricultural Competitiveness Enhancement Fund (ACEF).
Starting 2000 when ACEF became operational, more than P12 billion had been set aside by the national government for the loan and grant program to benefit the agricultural and fisheries sectors. The fund’s life has been extended several times, the most recent in 2016, good for six more years until 2022.
Management of ACEF by the Department of Agriculture had been plagued by problems from the onset, and the hoped-for trickle-down benefits to vegetable farmers, sugar producers, and fisher folk has not materialized, much less prepared farmers for global competition.
To save ACEF from becoming one of the worst programs of the Philippine government, lawmakers amended guidelines on loan procurement, making them stricter to ensure that intended beneficiaries would truly benefit from the soft loans.
The parallelism of the Agricultural Tariffication Act and ACEF with the proposed Rice Tariffication Law and RCEF are just uncannily too glaring to pass over without making a comment.
Let’s just hope that two decades of mistakes in the implementation of the Agricultural Tariffication Act and ACEF will make the proposed rice tariff law and its fund bolster our rice farming sector to become globally competitive.
Sweetener
The Senate still has to pass its own version of the rice tariff bill before any bicameral work can start, although the President has already certified the passage of the measure as urgent.
Senator Cynthia Villar, who chairs the Senate Committee on Agriculture and Food, is proposing for the allocation of P10 billion from the national coffers as a sort of sweetener for the RCEF, to be augmented yearly by taxes collected from the importation of rice.
Agriculture Secretary Emmanuel Piñol estimates that the rice tariffs could amount to about P20-to P25-billion annually, which he stressed should go directly to the RCEF. He adds that any benefit from the RCEF, if used correctly, would only be seen in three to four years.
If the bill is passed into law before the year ends, Piñol is hopeful that Filipinos will be able to see rice prices drop by as much as P7 per kilo – as the President had promised – most likely only just before his term ends in 2022.
Of course, all this presupposes a perfect-world scenario. Unfortunately, things do not always work out as we wish.
Slow pace
The hurried push to define a tariff system for imported rice comes after the government finally decided to ditch the old quota system on rice importations, and thus honor its commitment with the World Trade Organization.
In 1995, to prepare Filipino rice farmers for the eventual easing of global trade barriers, the WTO allowed the Philippines to impose a 10-year quota system for rice importation, which was extended in 2004, and again, in 2014 until June 2017.
All those years have passed without seeing any improvement in our rice farms. Instead, we see continued poor land productivity, shrinking rice field acreage, an aging and diminishing rice farming population, no improvement in rice planting techniques and technology, degradation of irrigation canals, a countryside still without enough farm-to-market roads, and the growing vulnerability of rice farms to climate changes.
Instead, too, we have increased our importation of rice (and would occasionally wreak havoc on world rice prices because of knee-jerk rice orders), and our people would see domestic rice prices rising, especially when unscrupulous traders manipulate the market.
Legislative work to shift rice importation from a quota system to a tariff regime started in early 2017, but discussions to amend the 1996 Agricultural Tariffication Act has not progressed as quickly as planned. Still, things are moving along.
This does not mean, though, that we will have a perfect law, or that the Department of Agriculture will be able to judiciously spend every single peso that is earned from higher tariffs to truly improve the competitiveness of our rice sector.
Still, we hope we get it right this time, and that our harvests in the coming years will become more bountiful.
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