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I. Body: (Shanon)

The document discusses the history and implementation of rice tariffication in the Philippines. It notes that the Philippines had long maintained quantitative restrictions on rice imports to protect farmers but this led to higher rice prices and corruption. The Rice Tariffication Law of 2019 replaced the quantitative restrictions with high tariffs on rice imports while providing funds to help farmers modernize. However, the transition to the new law has been difficult for farmers as imports and domestic supply have increased, lowering prices. Proper implementation of the law remains a challenge to ensure its goals of more efficient farming and lower consumer prices are fully realized.

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23 views

I. Body: (Shanon)

The document discusses the history and implementation of rice tariffication in the Philippines. It notes that the Philippines had long maintained quantitative restrictions on rice imports to protect farmers but this led to higher rice prices and corruption. The Rice Tariffication Law of 2019 replaced the quantitative restrictions with high tariffs on rice imports while providing funds to help farmers modernize. However, the transition to the new law has been difficult for farmers as imports and domestic supply have increased, lowering prices. Proper implementation of the law remains a challenge to ensure its goals of more efficient farming and lower consumer prices are fully realized.

Uploaded by

shhhg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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I.

BODY 
A. History of the Rice Tariffication Law in the Philippines [SHANON]

In 1995, the Philippines agreed with the World Trade Organization for the revision of
The
Quantitative Restrictions (QRs) and reducction tariff protection. However,
Philippines was granted an exemption from the removal of its
quotas on rice importation. This exemption was originally
meant to expire in 2004, but was extended until 2014, and
further stretched till the passage of the Rice Tariffication Law
in early 2019.

The Philippines opened up imports on rice under a minimum access volume (MAV) which is in
operation equivalent to Quantitative Restrictions (QRs). The QR regime of the Philippines was
mandated for conversion into tariff protection. The country obtained a special treatment for rice
up to 2005, which was later on extended until 2012. The Philippines has been applying for
extensions of QR on rice since 1995. Eventually, the Philippines acquired a waiver to maintain
QR up to June 30, 2017.

The Philippines’ membership to WTO for 24 years aimed to counter the impact of the expected
influx of cheap rice imports. The country apparently has been extending protection primarily to
safeguard the local rice farmers from increased competition of imported rice. Another reason the
Philippines had been pushing for a two-year extension of the restriction is to achieve rice self-
sufficiency by 2020. However, given that QR on rice shall be retained, consumers shall
continue to bear the burden of overpriced rice, with the poorest households bearing the burden.
Based on the 2012 Family Income and Expenditure Survey, the richest 20% of households only
devote 3% of their spending on rice while poorer income groups tend to allocate greater share
for rice (PIDS, 2012).

The long regime of quantitative restrictions, ostensibly to


protect farmers, had severe costs. For one thing, the
protection meant that the Philippines had to compromise other
sensitive economic sectors by opening them up to more
competition. For another thing, quantitative restrictions bred
massive corruption, created an ineffective and incompetent
import monopoly, and imposed a disincentive on farmers,
beset with inefficiencies, to shape up. The government
became lax and felt no pressing need to enhance our farmers’
productivity since it relied on the import quota to shield
farmers from competition.

Because of the failure of agricultural modernization due to


poor institutions and weak policies, including the short-sighted
quantitative restrictions on rice, the country’s agricultural
production has stagnated. In terms of efficiency and
productivity, the Philippines has lagged behind its ASEAN
counterparts such as Vietnam and Thailand. Our farmers incur
higher costs of production and hence could not compete with
the more efficient rice-producing farmers from Vietnam or
Thailand. The ultimate effect has been the deterioration of the
well-being of our farmers.

Worse, those who suffered the economic burden of the


quantitative restrictions were the whole Filipino population
(for we are all consumers including the farmers themselves
who in the main are net consumers).

A consequence of the import quota was higher food prices.


Higher rice prices heavily contributed to over-all inflation. This
was most pronounced in the inflation spike in 2018. The main
culprit was the surge in rice prices, resulting from the
mismanagement of imports that resulted in a rice shortage.
Rice makes up for about 10% of the consumer basket. For the
poorest Filipinos, rice accounts for about 23% of its total
consumption spending.

But the unusual rise in inflation in 2018, which many critics


mistakenly blamed on the effects of the comprehensive tax
reform package, became an opportunity to introduce a hard
reform. The higher-than expected inflation was triggered
principally by the unwarranted spike in rice prices, resulting
from the mismanagement of imports to meet supply. This
forced the hand of government to remove the quantitative
restrictions and shift to the tariffication of rice imports.

Tariffication is still a form of protection. The high tariff (35% of


declared value) drives up the price of imports and the revenue
derived from the tariff is earmarked to benefit farmers. The
Rice Tariffication Law’s also provides funding of P10 billion to
provide seeds, mechanization, technical assistance, and
credit. Any amount above P10 billion that can be generated
from the tariff can be used for cash transfers and other forms
of financial assistance to the farmers.

In other words, the law still maintains a significant degree of


trade protection, but it does not impose the supply bottlenecks
and institutional monopolies. Moreover, it has created a
significant budget to enhance the productivity and well-being
of rice farmers.

What was supposed to be a limited period of quantitative


restrictions had a short-term objective of giving time for local
rice producers to become more efficient and productive. But
after a generation of an import-quota regime, the intended goal
of making our rice industry competitive and improving rice
farmers’s income has not been realized.

Rice tariffication is thus a most significant reform. However,


because the country’s reliance on the quantitative restrictions
lasted so long, the farmers face hard adjustments in the early
implementation of the reform, the so-called transition pains.
Imports have significantly increased. The country is projected
to import about 2.4 million metric tons of rice in 2019. The
retail prices of rice have fallen greatly, relative to 2018 prices,
and prices are anticipated to go down further. This is good for
the consumers, but rice farmers face an enormous challenge.

Two problems have arisen. First, retail prices have not fallen
as much as farm-gate prices have. This suggests a role for the
Department of Trade and Industry and Philippine Competition
Commission to investigate whether there is market power at
the wholesale/trader segment. Consumers have not yet
realized the full gains of the reform.

B. Implementation in the Philippines [SHANON]


1. Implementing Rules and Regulations
2. Challenges in its Implementation
3. Lapses in its Implementation

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