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Business

Food security, agriculture, foreign trade and RCEP

CROSSROADS TOWARD PHILIPPINE ECONOMIC AND SOCIAL PROGRESS - Gerardo P. Sicat - The Philippine Star

The Philippine Senate adjourned its last session without ratifying the RCEP (Regional Comprehensive Economic Partnership) agreement.

A large free trade agreement. In 2021, the ten members of the ASEAN Free Trade Agreement (AFTA) agreed to form with China, Japan, South Korea, Australia and New Zealand the RCEP.

The RCEP is a large trading bloc that improves the prospects for broader and deeper gains in benefits for its members. (See my Crossroads of February 23, 2022, “To move forward – in trade and productivity.”)

The hesitancy on the part of the Senate is unfortunate.

To miss out on the benefits of access to wider free trade in goods and services with other progressive countries derived from such an agreement would be a great misfortune for the nation.

For this reason, eventually the country’s membership in RCEP will likely be ratified by the incoming Senate as it reviews the needed urgent actions to advance the nation’s economic progress. It must act with speed.

Food security and agricultural development. The objections to the country’s accession to RCEP is based on the argument that the country’s farmers are going to be harmed by the country’s membership.

Farmer’s groups’ demand for protection have to be weighed against the cost that such protection imposes on other citizens who want cheaper prices for the goods they consume.

Still more important, what about the gains that other sectors of the economy will make as a result of membership in this larger trade group. The calculus appears to be that there will be larger gains for the nation.

A full appreciation of the issue means that we must look at our economic potentials more fully.

The most vocal among the farmers’ groups that demand protection are rice farmers. All the rice farmers – and associated farmers producing food – are not as large as the bulk of Filipinos who work in the economy to support their families.

The whole economy is much larger and broader, and the bulk of our people earn their livelihoods in secondary occupations, not in farms. They deserve to get their food at reasonable prices.

The rice and food farming sector needs to become more productive and efficient through modernizing investments that reduce their costs. The government has to oversee these developmental investments. The support is in terms of infrastructural and regulatory improvements. Still other reforms have to be in terms of institutional improvements that advance these sectors.

All these have to be undertaken while the economy moves forward. They cannot be made by blocking important international trade reforms.

Bringing down food costs. That in order to bring down the cost of food to the whole economy, self-sufficiency in production is not the answer if trade provides a good solution.

A sensible import policy can be part of a nation’s agricultural strategy. Produce other high-valued commercial crops to pay for the nation’s essential food needs.

Even better, make the economy a highly productive, technologically advanced country with access to imports and sensible home production as the core of the country’s food-security-strategy.

Our neighbors can produce far cheaper rice than we can. In turn, we can produce other agricultural crops more advantageously suited to our land and clime. In such a world, we can produce more values from our bananas, pineapples, coconut, sugar, abaca, marine and forest products to pay for some of our food needs.

This should involve individual all kinds of farming – individual, cooperative and corporate agriculture. And it should encourage foreign direct investments as well to realize all market opportunities and improvements in farm productivity.

This, in general, is what trading countries do. They produce the goods that they are most capable of producing at low cost, and they buy the goods that they need from others, including their food requirements.

For many decades in our own economic history, our agricultural industries of sugar, coconut, abaca and tobacco produced for us the means to pay for all our import and development needs.

Today, rice farming continues to be a significant domestic agricultural activity as it should be. In fact, we should have some rice farming sector that is also prosperous in lands where it is advantageous still to do so.

We are fortunate that our ASEAN partners are in this position. Our best bet is to consider the ASEAN rice producers as part of our food security network. They almost form a part of our agricultural hinterland.

At the same time, we can make use of our agricultural lands for the production of food and other commercial crops that can earn good income for the nation to pay for our other needs. In this way, the agricultural sector constitutes a net food exporter for the nation.

Potential of agriculture. Despite the country’s limited land (in relation to our high population, now at 110 million people), there is still a wide potential for agricultural development in the country.

In recent years, the agricultural sector has suffered neglect and needs stronger development.

In the aftermath of the 2022 elections, the agricultural sector will be given more attention. That potential can be directed at the production of other crops both for food and for commercial uses for which the country’s land is suitable.

There is wide potential for increasing productivity in agriculture, but much needed investments in land require infusion of capital. Underutilization of foreign capital in agriculture became a major problem after independence. This was result of the restrictive economic provisions on foreign capital in the Philippine constitution.

The decline of large-scale agriculture after independence was a consequence of these provisions. Land reform legislation has broken large landholdings.

But over-ambitious land reform extended it to all forms of large landholdings beyond rice and corn lands after 1987. That decision made land reform too large and unwieldy to complete. It threatened scale efficiency of commercial farming, including the prospects for forestry and reforestation.

A big challenge to agricultural policy in the current context is how to restore vibrancy of agriculture in the national economy. The nation needs to ask what potential can be assigned to corporate farming in crop agriculture. Just as important is to raise the role of forestry agriculture in the long term. This is critical to the issue of climate change and environment.

 

 

For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/

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