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Pork

FIRST PERSON - Alex Magno (The Philippine Star) - April 17, 2021 - 12:00am

No, this is not about the pork we normally associate with politicians. This is about pork, literally, the one derived from swine, literally.

For the first time during the Duterte presidency, the Senate and the Executive branch appear to be on a collision course on an entirely policy-based disagreement. The disagreement is over the Executive branch decision to liberalize pork importation.

President Duterte last week issued Executive Order 128 that lowered tariffs on imported pork and raised the minimum access volume from 54,000 to 404,000 metric tons. Groups of hog raisers raised a howl. The Senate convened itself into a Committee of the Whole and passed a resolution calling on the President to withdraw the said executive order.

This was not an ordinary expression of the sense of the Senate. It was a loaded gun. As Sen. Franklin Drilon put it, the senators “will take a more affirmative action of withdrawing the authority of the President of setting the tariff rates.”

Withdrawing such authority is entirely within the compass of the legislative branch, to be sure. The resolution puts the Chief Executive on the back foot. But that does not diminish the questionable economics animating the Senate’s position in this policy debate.

The decision to lower tariffs and increase minimum access volume was based on the Department of Agriculture (DA)’s estimate of the shortfall in pork supply. Unless the shortfall was addressed, the commodity will become scarce and, by the iron logic of supply and demand, prices will rise sharply. This will penalize our consumers.

The executive order was not threatening the viability of local producers. It was addressing the shortfall in supply.

The senators should have listened more carefully to NEDA chief Karl Chua’s presentation. The 404,000 metric tons is the actual pork shortage. It is unlikely importers will be able to bring in that volume. Our total cold chain facility can accommodate only 260,000 metric tons of produce and this includes everything that needs cold storage including (and mainly) local produce.

The choice is stark. We have a few thousand hog producers and 95 million consumers who consumer about 15 kilos of pork per capita annually. If the executive order is withdrawn, 95 million consumers will be penalized with steeply higher prices.

Even if the full 404,000 metric tons is actually imported, this will only account for 22 percent of domestic consumption. It cannot possibly threaten local hog raisers who are, at any rate, not producing the supply we need. It cannot threaten supply that is not there.

One senator was quoted as saying that pork importers do not reduce prices anyway. If traders can pay 35 percent tariffs and still jack up prices, then our domestic hog industry is truly screwed.

What this actually tells us is that the protectionist tariff barrier that has been there for decades failed in helping us build a competitive pork industry. With that barrier (that the senators want to maintain), domestic hog raisers make ridiculous profits even if they remain inefficient.

This is akin to our ailing sugar industry where cost of production is double prevailing world prices. With the protective tariffs, our consumers are left no choice but to pay the price inefficient domestic producers want.

In the case of sugar, our consumers pay double the price that everybody else pays to access the commodity. In the case of pork, our consumers pay well over 35 percent the price everybody else pays.

And where do all the obscene profits go? They go to inefficient producers who are able to overprice to match the tariff protection. Protectionism always creates market distortion.

No wonder we have the highest food price regime in all of the ASEAN. That limits food access for the majority and magnifies poverty. This is the reason malnutrition is high among Filipinos.

Malnutrition, we know, impairs mental capacity for life. In turn, that affects the political choices we make and the policy choices we support.

The senators cite the losses absorbed by domestic hog producers because of the ASF epidemic that ravaged our farms. About 5 million hogs had to be culled to contain this epidemic. Little attention was paid this curse because we were all engrossed fighting COVID-19.

The ASF epidemic ran rampant because of the failure of our biosecurity measures. This is the fault of the hog raisers as it is of our agriculture officials. By citing these losses as a reason to keep tariff barriers high, the senators have given the green light for local hog raisers to pass on the costs of their neglect to our hapless consumers.

High tariff barriers bring other hazards. It makes it tempting for traders to smuggle pork since the rewards grossly outweigh the risks of doing so.

Smuggled pork doubles the risks for our consumers. The pork could be coming from uncertified sources. Normally, pork of questionable quality are sold online, the better to evade taxation. Everybody loses save for those who profit from smuggling.

The executive order, just to reiterate, is a temporary measure that seeks to avert a serious supply shortage. The tariff barrier the senators so love will not be permanently lowered.

Again, to reiterate, it is the consumers who pay for the tariffs at whatever level they are. If tariffs are kept high in a situation of domestic shortage, we court not just price speculation induced by tight supply but also food inaccessibility.

If the senators get their way in the anti-consumer tack they choose, they must be held responsible for the food crisis that will inevitably happen.

NEDA
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