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Rice tariffication will be very beneficial – DA chief
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Published September 6, 2019, 5:50 PM
By Ellson Quismorio
Department of Agriculture (DA) Secretary William Dar on Friday said the problems being caused right
now by the Republic Act (RA) 11203, the Rice Tariffication Law, are just “birth pangs.”
Department of Agriculture Secretary William Dar (Department of Agriculture - Philippines / FACEBOOK /
FILE PHOTO / MANILA BULLETIN)
Department of Agriculture Secretary William Dar (Department of Agriculture – Philippines / FACEBOOK /
FILE PHOTO / MANILA BULLETIN)
“We have to contend with the initial birth pangs [of the law] and these are what we are managing,” Dar
told the House Appropriations Committee during his defense of the DA’s proposed P71.8-billion budget
for 2020.
“At the end of the day, this law will be very beneficial,” Dar further claimed.
The Rice Tariffication Law is being blamed for the huge drop in farm gate prices of local palay (unmilled
rice). This is because the law liberalized the importation of cheaper rice varieties to the Philippines,
which already has higher production costs compared to neighboring countries as far as the crop is
concerned.
But Dar refused to call this and other difficulties connected to RA 11203 as a negative impact of the law,
since it remains to be seen if they will persist. The tariffication measure was enacted only last February.
Dar, who first served as DA chief over 20 years ago, said the real intent of the law is “to make rice
farmers productive, competitive, and with higher income.”
A key mechanism for this is the Rice Competitiveness Enhancement Fund (RCEF), a provision under RA
11203 which gives local rice farmers a P10-billion annual assistance over the next six years.
The RCEF – which will result from government’s tariff collections on imported rice – covers various areas
of assistance, most notably modern seeds distribution and farm mechanization.
“The government has collected P9.2 billion in tariff so far…We can reach P10 billion and beyond, the
possibility of P15 billion is there,” the DA chief told Albay 1st District Rep. Edcel Lagman during the
latter’s interpellation of him.
However, Dar admitted that assistance from RCEF has yet to be rolled out to local farmers since
“kakarating pa lang nung pera (the money had just arrived).”
Dar also said the DA’s proposed budget of P71.8 billion for next year is a 12 percent increase from the
agency’s 2019 appropriation, but this was mostly due to the direct addition of RCEF to its budget.
The Bureau of Plant Industry (BPI) said during a House hearing earlier this week that some 1.2 million
metric tons of imported rice have already arrived in the country between February and August 23.
The farming of rice – the Philippines’s most important crop and staple food – employs some 2.5 million
Filipinos.
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Gordon: Mo
The Philippine Rice Tariffication Law: Implications and Issues
2019-05-23
Annette M. Tobias1
1 Science Research Specialist II, Socio-Economics Research Division (SERD),
Philippine Council for Agriculture, Aquatic and Natural Resources Research and
Development (PCAARRD), Department of Science and Technology (DOST),
Los Baños, Laguna, Philippines
e-mail: annettetobias@gmail.com
ABSTRACT
The Philippine rice sector has always been the center of government agricultural policies. The focal
points of the policies revolve around promoting food self-sufficiency, providing high income to rice
farmers while making prices affordable to the consuming public. The accession to WTO provided for the
revision of the quantitative restrictions (QRs) and reduce tariff protection. Rice was exempted from
tariffication. The Philippines opened up imports on rice under a minimum access volume (MAV) which is
in operation equivalent to QRs. The QR regime mandated for conversion into tariff protection from
2005- 2012 and a waiver to maintain QR up to June 30, 2017. The Philippines’ membership to the WTO
for 24 years aimed to counter the impact of the expected influx of cheap rice imports. The Rice
Tariffication Law signed into law by President Rodrigo Duterte on February 14, 2019 amends the
Agricultural Tariffication Act of 1996 that imposed tariff to agricultural imports except for rice. The law
was prompted because of the surging inflation of rice price during the last quarter of 2018 after the rice
stocks of NFA ran out. As Filipinos continue to struggle with inflation, the government found ways to
temper rising inflation.
Overview of Philippine rice industry
The Philippines became self-sufficient in rice in the 1970s and was a rice exporter to neighboring
countries such as Indonesia, China, and Myanmar. However, with the rapid increase in population and
limited land resources to produce the total rice requirement, the country slowly turned into a net rice
importer. The Philippines is the second largest rice importer in the world next to China (Simeon, 2019).
In 2017, the country imports rice mainly from Vietnam (52%) and Thailand (29%) (Santiago, 2019).
Rice is a highly political commodity because it is the country’s main staple. It has always been the center
of government agricultural policies. The focal points of the policies revolve around promoting food self-
sufficiency, providing high income to rice farmers while making prices affordable to the consuming
public (Tobias et al., 2011)
The Philippines in the WTO
In 1995, the Philippines acceded to the WTO with the premise of revising QRs and reduce tariff
protection. Rice, however, was exempted from tariffication. 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 RICE TARIFFICATION LAW
The Rice Tariffication Law titled “An Act liberalizing the importation, exportation, and trading of rice,
lifting for the purpose the quantitative import restriction on rice, and for other purposes” was signed
into law by President Rodrigo Roa Duterte on February 14, 2019. This is also known as the Rice
Liberalization Act or Republic Act No. 11203, which amends the Agricultural Tariffication Act of 1996 that
imposed tariff to agricultural imports except for rice. Primarily, the law aims to lift the quantitative
restriction (QR) on rice imports and replace it with a general tariff. The Agricultural Tariffication Act of
1996 served as the Philippine government’s compliance to our obligation to WTO, lifting QRs and
imposing tariff to agricultural products. The law aims to protect local farmers from the entry of more
imported rice into the country through the imposition of 35% tariff on rice coming from member-
countries of the Association of Southeast Asian Nations (ASEAN) like Thailand and Vietnam. F
The whole rationale of Republic Act No. 11203 or the rice tariffication law (RTL) is to provide affordable
rice prices for consumers, coupled with the goal of raising the income of palay/rice farmers. These twin
objectives of the law would supposedly ensure food security for all, and secure the income of producers
and the need of consumers. Supply and demand should always remain balanced. Economists want the
public to believe this.
The implementation of RTL in March 2019 has, however, resulted in higher rice prices for consumers but
lower palay prices for rice farmers. This is not the balance that economists envisioned from the law.
The current farm gate price of palay is ridiculously low. It currently sells between P7 and P10 per
kilogram (fresh). In Central Luzon, the country’s rice granary, the average price of fresh palay is P10.60
(low P9, high P14). In Cagayan Valley, it costs P12.31 per kg (low P11, high P15). If one compares this
with the cost to produce a kilogram of palay at about P12.40 per kg, farmers are losing.
Under this current pricing scheme, no farmer will continue planting rice below production cost. The
impact on the farmer household level, such as higher incidence of malnutrition, school dropouts and
increased vulnerability to early marriage, are effects that cannot be ignored.
The National Food Authority (NFA) buffer stocking for 15 days is equivalent to 488,895 metric tons, and
the budgetary requirement for palay procurement is only P15.5 billion. The 30-day stock is equivalent to
977,790 metric tons, requiring a palay procurement budget of P31.5 billion. But the government can
only provide budgetary support of P7 billion. Under the RTL, the NFA is limited only to maintaining
buffer stocks (to be sourced locally) for emergencies and disaster relief. Only one import restriction
remains under the RTL, and this is the Bureau of Plant Industry sanitary permit. This is easy to secure.
The recommendation to engage the services of local government units (LGUs) in the market price
mechanism seems interesting but problematic. Are LGUs willing and capable to take on the task of
buying and selling palay, same as the previous role of the NFA? Do they have the necessary logistics to
purchase, store and deliver palay from farm to market places?
A World Trade Organization trade and food security expert has said that the government’s (pre-RTL)
tariffication should have looked first into the effects of tariffs before pursuing a rice deregulation policy.
The WTO did not require the Philippine government to deregulate the rice industry. What the WTO
required was simply to replace quantitative restriction (QR) with tariff as the standard form of global
trade policy, and not total rice deregulation measures for the domestic rice industry as now enshrined
under the RTL.
This was primarily why the Department of Agriculture (during pre-RTL) had warned of the adverse
effects of unilaterally liberalizing the domestic rice industry. As the only “state-trading enterprise
notified by the Philippines in the WTO, the NFA has exclusive or special rights or privileges, including
statutory or constitutional powers, in the exercise of which they influence through purchases or sales.”
What farmers now recommend to the government and lawmakers is to suspend the RTL
implementation during the competitive measures phase, a period crucial to making Filipino rice farmers
viable. Filipino rice farmers are not mere recipients of conditional cash transfers. They are key staple
food producers. Assistance along the lines of the pre-RTL palay price support of P20.70 will go a long
way, especially for cash-starved Filipino rice farmers. Farmers need at least eight cropping seasons (two
cropping seasons a year) to become competitive. The government should continue to regulate rice
imports and should provide direct farm and market support to farmers.
