Tariffied

President Duterte signed into law a bill that will finally end quantitative restrictions on rice importation and impose tariffs on rice imports. This will have profound effects on our agricultural sector and will likely drag our rice industry, screaming and kicking, into the 21st century.

Of course, the usual Luddites will object to this law, predicting that there will be “chaos” in our agriculture because of the withdrawal of quantitative restrictions. They would prefer us in suspended animation, enamored with the vision of independent rice farmers tilling their own land in blissful subsistence agriculture. 

That vision exists only in Amorsolo’s romantic paintings of rustic farms and healthy farm folk. That is not what our farms are today.

Trapped between, on the one hand, a land reform program that gave farmers a plot of land too small to be sustainable and a protectionist policy that shielded domestic producers from external competition, we created a nightmare.

The average age of our rice farmers is over 57 years. They are dependent on continuing subsidies on agricultural inputs. Our farming families cultivating “family-sized plots” are barely keeping their heads above water, with aggregate family income more dependent on family members holding non-farm jobs than on earnings from farm produce.

Rice production in this country is a poverty trap. This is why the average age of our rice farmers becomes progressively older. This is why so many flee the farms and try their luck in the cities. This is why so many “family-sized plots” are left idle and its economic potential wasted with every passing day.

Through the NFA, government subsidizes milling, storage and distribution. That can only mean the actual price we pay for rice is fake. Ultimately, the entire rice economy is fake. It is a Potemkin village. It is a section of the domestic economy that cannot breathe the invigorating air of market forces.

We cannot keep up the pretense any longer. It is too costly for the taxpayer. It is prone to shortages and food crises – not to mention corruption. It is a mummified economy.

Our cost of production is among the highest in the world. This is because we continue to insist on maintaining subsistence forms of production for some of our most staple crops. We need to capitalize our farmers, bring in mechanization and link producer directly to consumer. In a word, we need to modernize our farm systems to end the high cost food regime that continues to inflict poverty on our people.

We cannot continue to imagine some “historical grievance” and use that as the cornerstone of our agricultural policy. The only way our agriculture will serve our people is if it gains efficiency. The cornerstone of our agricultural policy should be the most optimal use of our scarcest resources: land and fresh water.

In a word, we should put economics in command. Enough of romanticizing subsistence agriculture. That can only bring food shortages and high prices. 

Let the corporates come into play. They will do wonders for our agricultural productivity, wonders that Manny Pinol can only begin to imagine. Wonders that the old Left cannot possibly comprehend.

When we let the corporates come in and build infrastructure, they produced the wonders of efficient expressways and mobile communications systems. These things we now take for granted would not have been available if we maintained government monopoly over building things and creating social goods.

In this century, corporates will simply be more efficient than government in supplying the needs of society, be they medical care or airports. This is why we have become more open to public-private partnerships in building the things our economy needs.

Imagine if we can unleash corporate power on our ailing agricultural sector.  We will have cheaper and more abundant food, through capitalization of the farm systems, technological innovation and better logistics.

Opening rice trade to the private sector, albeit controlled through tariffs opens the closed agricultural system to a bit of sunlight. There will be more efficiency down the road. Private corporations can set up silos and modern milling systems, buy in bulk instead of in sacks, to cut costs and improve quality.

Economists estimate that by shifting rice trade to a tariff regime instead of quantitative restrictions, we can bring down our inflation rate by a full percentage point. That is just the beginning.

The law dictates that revenues from the tariffs will be used for agricultural modernization. That is the equivalent of using revenue from the sin taxes to fund universal health care. Now there will be real money, in the billions every year, to help our agricultural sector transition from antiquity to modernity.

We should sit and wait for our rice farmers to die of old age before sparking a revolution in our agricultural systems. Rice tariffication provides us the fiscal means to mount that revolution.

Soon, we will be growing our vegetables in vertical farms in the city, right next to the consumer. This is happening everywhere. We do not yet have the policy framework to spur this. But doing so is inevitable. It is simply more efficient.

Soon, San Miguel Corp. will enter into the trading of rice and other grains, using its capacity to handle bulk and the efficiency of backloading to bring down costs. They will deploy the best technologies to protect the rice stock from molds and infestation.

There will be many more new players who will come in as we reform our policy framework to allow market forces to define outcomes.