Understanding the Rice Tarrification Law

September 24, 2019

Ever wondered why our previous governments did not immediately implement rice tariffication? A research disclosed that previous presidents of the country then, feared that it would hurt ‘palay’ farmers because the entry of cheap imported rice would pull down palay prices.

The ‘left’ at those times,  was considered a force to reckon with in policy making and their populist perspective was accepted as sound policy advice, particularly during the administration of President Corazon Aquino.

President Fidel Ramos took a different tack when he pushed for the membership of the country in the World Trade Organization (WTO) in 1995. A necessary part of our ascension to the WTO was the liberalization of agricultural trading, including rice.

At that time, the country availed of the exception for rice import for ten years to allow the government to put in place the necessary productivity-enhancing measures to protect our palay and them globally competitive.

Unfortunately, it is evident that our previous governments did not do their homework of improving the production efficiency of palay farmers. Hence, after the 10-year grace period, we applied for another 10-year exemption (though this required sacrificing another agricultural producers though lower tariffs) from the lifting of quantitative restriction (QR).

The 20-year grace period ended in 2015, during the time of former Department of Agriculture Sectary Proceso Alcala, under the administration of President Benigno Aquino III and the government was no longer allowed by the WTO to extend the QR.

The government resorted to various legal measures such as declaration of emergency situation, imposing non-tariff barriers (NTBs) or sacrificing more products through lower tariffs, in exchange for maintaining the rice quantitative restrictions.

PNoy even appointed Sen. Francis Pangilinan as Presidential Assistant for Food Security and Agricultural Modernization - a Cabinet-level position, to ‘assist’ Alcala, who was accused of being incompetent in his position.

However, Pangilinan,  who also happened to be the chairman of the Senate committee on agriculture and foods, failed to file a single bill that would help our local farmers and the agricultural sector. Aquino, Alcala and Pangilinan promised to attain rice self-sufficiency, but unfortunately, this did not happen.  

As an answer, the Senate under the Duterte administration passed the RTL or Republic Act 11203 due to the Philippines’ failure to meet its obligations with the WTO. President Duterte signed the law in February this year.

The law, which removed the QRs on rice while imposing a 35-percent tariff on imports from neighboring Southeast Asian nations, was actually a result of the country’s failure to meet its obligations under a 1995 agreement with the WTO,  to make the country’s rice farmers more competitive.

Had the previous governments succeeded in making Filipino farmers competitive while the WTO agreement was in effect, there would have been no need for the government to impose the liberalization of rice.

Since October 2018, Duterte declared the RTL issue as ‘urgent’ due to price hikes that caused rice to hit P70 per kilo last year. Finance undersecretary Tony Lambino predicts that the law will cut rice prices by P7 per kilo. BangkoSentral ng Pilipinas projects that this will also cut inflation by 0.6 percent.

President Duterte says the said law will address the urgent need to improve availability of rice in the country, to prevent artificial rice shortage, reduce the prices of rice in the market and curtail the prevalence of corruption and cartel domination in the rice industry.’

The said law essentially allows for the liberalization of rice imports. It will remove the previously placed quota on rice imports, permitting traders to import a near-unlimited quantity of rice.

In the basic rules of economy, the law of supply and demand will dictate market prices. By allowing more competitors to enter the rice market, the law will lower the price of rice by increasing supply.

The tariffs are 35 percent from the Association of Southeast Asian Nations (ASEAN); 40 percent from non-ASEAN countries if imports are below 350,000 metric tons; and 180 percent if imports are from non-ASEAN countries and above 350,000 metric tons. The taxes will go to a Rice Competitiveness Enhancement Fund (RCEF), which will allocate the revenue to programs for mass irrigation, rice storage, and research initiatives.

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