Senators buck bid to lower tariffs on pork and rice

THE Department of Agriculture’s (DA) petitions to lower tariffs on pork and rice face an uphill battle ahead of the Tariff Commission (TC) hearings on the matter, as senators on Monday blocked the proposal, saying local producers would be placed at a disadvantage against cheap imported products.

This, as the Neda is mulling over an option to adopt a unitary rate; while a noted economist urged both policy makers and the farm sectors to “look beyond” a simplistic resort to tariffs to resolve systemic problems in food security.

Senate Committee on Agriculture, Food and Agrarian Reform Chair Cynthia A. Villar told Agriculture Secretary William D. Dar that the senators are in “unison” in opposing any moves to reduce tariffs on food items.

“You know, Secretary Dar, we are one in saying that we are not in favor of tariff reductions and MAV (minimum access volume) expansion. So, we in the Senate will not approve of any tariff reductions and MAV expansions,” Villar said during the committee’s hearing on Monday.

The DA filed two petitions last week before the TC for the reduction of most favored nation (MFN) rates of pork and rice imports.

The DA petitioned to lower the tariffs for in-quota pork imports from 30 percent to 5 percent for the first six months; and to raise it afterward to 10 percent for the succeeding six months.

The DA also petitioned to lower the out-quota tariff for pork to 15 percent for the first six months and increase it to 20 percent for the next six months. Out-quota pork imports are slapped with a 40-percent tariff.

In terms of rice, the in-quota tariff for rice imports or those within the minimum access volume (MAV) is at 40 percent while those outside the MAV (out-quota) are at 50 percent.

The Cabinet-level Committee on Tariff and Related Matters (CTRM) has endorsed the proposal to reduce pork tariffs. (Related story: https://businessmirror.com.ph/2021/01/29/ctrm-endorses-tariff-reduction-on-pork-imports/)

Hog industry leaders and experts have opposed the reduction on tariffs as it would discourage growers from restocking, while some argued that there is no guarantee consumers would benefit from lower tariffs.

Furthermore, the DA petitioned to cut MFN rates for rice imports to 35 percent from the current 40 percent for in-quota imports and 50percent for out-quota imports. (Related story: https://businessmirror.com.ph/2021/02/01/tariff-cut-to-expand-phl-sources-of-rice-imports/)

Industry groups have lamented the lack of consultation for both proposals by the DA. The TC is set to conduct a hearing on the two petitions this Thursday.

“Ay hindi! Hindi. Over my dead body. Wala namang rice shortage. Talagang pinapaimport naman sila eh. Bakit ninyo pinag-iinitan ang rice, eh rice ang saving grace natin ngayon eh,” Villar said.

(No. No. Over my dead body. There is no rice shortage. And importers are allowed to import. Why are you focusing on rice, when it is the saving grace today?)

Villar emphasized that tariffs are “very necessary” to protect local producers. “You use the tariffs to subsidize your producers in order for them to become competitive [against foreign counterparts],” she said.

Unitary tariff for pork, rice

One option, in the view of a National Economic and Development Authority (Neda) official, is for the Philippines to implement a unitary tariff rate for pork and rice imports after consultations are conducted.

Neda Undersecretary for Policy and Planning Rosemarie G. Edillon, however, told BusinessMirror the consultations at the Tariff Commission will have to be completed before this can happen.

Edillon said Neda is right now still completing simulations, which can measure the implications of such a revision in the country’s tariff rates.

“This (having a unitary rate) is in keeping with our WTO (World Trade Organization) commitments on MFN (Most Favored Nation),” Edillon told this newspaper in a message. “(It is) possible (to have a unitary rate), but we are still studying the implications.”

The DA is proposing to lower pork tariffs within MAV from 30 percent to 5 percent and those outside MAV, at 15 percent from 40 percent; while rice tariffs would be brought down to a single 35-percent rate.

For Philippine Institute for Development Studies (PIDS) Senior Research Fellow Roehlano Briones, what is more important is for tariffs to be cut in order to benefit consumers.

“A lower unitary tariff is better for consumers. (However), producers are not in favor of this. As to the tariff rate, any rate that is better than what we have now (would be recommended),” Briones said.

If it were up to the former dean of the School of Labor and Industrial Relations (Solair), Rene E. Ofreneo, determining an overall strategy for the agriculture sector is imperative at this time.

Focus beyond tariffs–Ofreneo

Ofreneo said policymakers and farmers organizations should bare an overall strategy and not simply talk about tariff rates. He said it is easy to discuss tariffs, but the effect of these rates on the entire agriculture sector are only temporary.

“We can solve inflation at the moment (by reducing tariffs) but in the meantime, what do you do with domestic producers who suffered losses and when can they recover?” Ofreneo said.

“It’s time to raise very serious questions. This is not only addressed to the government but to farmers’ organizations. Is your only position to say no to importation? This is a very serious matter,” he added.

He lamented that the Philippines has become a net food importer and that agriculture now only accounts for about 8 percent of GDP and given the current situation with climate change, this could go down further to 5 percent of GDP.

It is time to think of an overall strategy, especially when protectionism is rife in many parts of the world. Ofreneo said many countries are talking about technology nationalism and vaccine nationalism.

He also noted that India withdrew from Regional Comprehensive Economic Partnership (RCEP) agreement for nationalistic reasons. India has been firm on its resistance to the liberalization of trade in goods.

Under existing laws, the TC is mandated to conduct investigations on tariff adjustments and afterward submit a recommendation to the Neda, which subsequently makes its final recommendation to the President to issue an executive order (EO) to modify tariffs.

However, the power of the President to modify tariff rates is only in effect when Congress is not in session.

Congress is currently in session and would only be in recess on March 27.

As mandated by the Constitution, all tariff-related bills shall “originate exclusively in the House of Representatives but the Senate may propose or concur with amendments.”

In 2018, when food prices were also rising—driven by rice—the Congress tinkered with taking an almost 2-week break in August to allow Duterte to issue an EO that would cut tariffs on imported food products.

Villar disclosed that she is mulling over filing a bill that would create an enhancement fund for the livestock and poultry sectors likened to the Rice Competitiveness Enhancement Fund (RCEF) that was established by the rice trade liberalization law.