Unproductive

Ukraine has a population of about 44 million. But its agriculture feeds over 400 million.

Not this year, however. Ukrainian farmers could not plant in the midst of a brutal war. A fourth of the population is displaced. Over a tenth spilled over the borders as refugees.

Ponder the productivity of Ukrainian agriculture. Its loss this year translates into food shortages in many places.

Contrast the productivity of Ukrainian agriculture with the unproductivity of ours. Our agriculture and fisheries cannot feed our people.

Last Tuesday, a full Senate hearing was conducted on the matter of smuggled agricultural products. Onions and carrots are being smuggled apparently.

The purpose of the hearing was to identify those responsible for smuggling vegetables into our market and possibly shut our borders even more tightly. If this was in aid of legislation, there could be a proposal to criminalize consumption of vegetable produced elsewhere.

Good grief.

Last year we were all agog over the importation of frozen fish from neighboring countries. People were scandalized that we, an archipelago of over 7,000 islands with one of the longest coastlines in the world, would be importing fish. People were bothered that the fish we import might have been harvested from our own waters.

After all the tumult over the fact that we import fish, no solution was offered to relieve us of this embarrassing predicament. No analysis of the structural deficiencies of our agriculture and fisheries was made available. We just want to tighten the screws on trade and find a law that will penalize those who import cheaper food options.

In the good old days, dreaded smuggling syndicates brought in cigarettes and guns, narcotics and luxury items not otherwise found in the domestic market. Things have become desperate, it seems. Today smugglers bring in fish and vegetables.

Smuggling happens when the price of stuff abroad is lower than the price at home. When people bring in fish and vegetables, it means that their final market price – transport, brokerage and storage costs included – is lower than what local producers offer.

Importing fish and vegetables offer our consumers a more cost-effective option. Our farmers object to this, of course. They want our consumers to be prisoners to their costlier and often less nutritious products. This is the logic of protectionism.

When we controlled rice importation despite our commitments to the World Trade Organization, rice was an inflation driver every year. Shortages of the staple commodity happened during bad harvests. There was always political pressure to use taxpayer money to offer free irrigation and subsidize fertilizers, milling and warehousing. The National Food Authority was notoriously corrupt and the NBI regularly raided storehouses of the “rice cartel.”

After many decades on the legislative shelf, we finally (and boldly) liberalized rice importation. This is consistent with our international trade commitments. It ensured our rice stocks were reliable and brought down prices for our consumers. Rice ceased to be an inflation driver. Revenue from the tariffs imposed on imported rice went to a fund used to modernize our farm processes.

The transition is a difficult one for our rice farmers, understandably. Our farmers have to produce more and earn less. Until we fully mechanize our farm production and improve our logistics system, this will be the case. But consumers (all of us are) benefit from predictable supply and pricing. Unless something truly horrible happens in the global grains market, rice will never again have to be rationed.

There are upsides and there are downsides. But what will be of long-term consequence is dramatic improvement on the productivity of our agriculture and fisheries. Otherwise food imports will be the only recourse.

A few months ago, a small fishing town in a small island in the Visayas found their municipal waters teeming with fish. They did not know what to do with the bounty. They suddenly had more fish than they could sell or store. They did not have the cold chain or the market link to convert this bounty into wealth for the community. The abundant catch was largely wasted.

Why are fish and vegetables more costly at home than they are elsewhere?

There are many structural reasons for this. Most simply, for decades we trapped our agriculture and fisheries in subsistence mode. There was little investment in upgrading our logistics system and mechanizing our farms.

For too long, we imagined our fisheries and farms a self-contained universe, impermeable to the operations of the global market. We did not observe the benchmarks for productivity and costs that are observed in other countries. Some called this “self-sufficiency.” Better call it policy myopia.

While our neighbors in the region were consolidating their agri-businesses and investing in modern technology, we were busy breaking up our farmland until they were uneconomical and plainly unsustainable without hefty subsidies. While our neighbors were assembling 200-vessel fishing fleets that include blast freezing boats and even floating canning factories, we relied on municipal fishing supplying only the locality.

We have let obsolete social justice orthodoxies and the electoral clout of small farming communities control our policy-making. We relied on subsidies rather than mechanization, agitation rather than capitalization to run our agriculture and fisheries.

Now the price gap between what we produce and what outside markets offer has simply grown too large. We can crack down on “smuggling.” But that will only bring high prices.

Our fisheries and agriculture must be opened to investments. It might be politically incorrect to say this: the “peasants” do not represent the future.