TARIFFICATION LAW’S IRR

February 19, 2019

The National Economic and Development Authority (NEDA) is taking the lead in crafting the
Implementing Rules and Regulations (IRR) of the recently signed Rice Tariffication Act or RA 11203,
ensuring the country’s smooth and timely transition to a new rice regime.

“We laud the signing of the historic Rice Tariffication Act. This ushers in a new rice policy that will set in
motion big reforms in the agriculture sector and will ensure the availability of cheaper rice (closer to
world prices) in the market,” Socioeconomic Planning Secretary Ernesto M. Pernia said.

Signed by President Duterte on February 14, 2019, the law amends the two-decade-old Agricultural
Tariffication Act of 1996 and replaces the quantitative restrictions (QR) on rice imports with tariff.

“We, at NEDA, have always been pushing for key reforms that will make the Filipino staple food
accessible and affordable for everyone. We are confident that the full implementation of the law will
have the resolute support of everyone,” Pernia said.

In anticipation of the signing of the bill, government agencies started preparing for its implementation as
early as January 2019. Technical working groups were created to discuss key provisions of the bill and
provide inputs to the draft IRR.

The IRR Drafting Committee has members from NEDA, Department of Budget and Management,
Department of Agriculture, and other concerned government agencies.

The first draft of the IRR formulated during a two-day workshop last week was presented to the National
Food Authority (NFA) Council on February 18, 2019.

Pernia said the revised draft IRR will be subjected to public consultation in the coming days.
The draft IRR contains provisions on the removal of NFA’s regulatory powers and the streamlining of
import requirements. It also provides details on the necessary institutional arrangements that will
enhance competitiveness and institute safety nets to assist local farmers affected by the removal of the
QR on rice imports.

“Anyone, whether a small or a big trader, can now import as long as they have secured a Sanitary
Phytosanitary (SPS) clearance from the Department of Agriculture and paid the corresponding tariff. By
removing NFA’s decades-old monopoly on rice importation, we promote greater participation of the
private sector and enhance competition in the market,” Pernia said.

He added that safety nets are included in the new law that address concerns of many farmers.

“The law provides sure and transparent support to farmers through a comprehensive assistance program
to the tune of at least P10 billion a year for the next six years,” Pernia said.

In particular, the Rice Competitiveness Enhancement Fund (RCEF) will be used to provide key
interventions to support farmers and enhance their competitiveness and profitability, including farm
machinery and equipment to improve farm operations, rice seed development, propagation, and
promotion, expanded rice credit, and extension services.

A portion of the rice tariff revenues in excess of PhP 10 billion will be used to provide direct financial
assistance to rice farmers affected by the removal of the QR and for diversification to high-value crops.

A mandatory review of the RCEF will be conducted by Congress on the sixth year.

Pernia said that the law also grants the President the power to increase, reduce, revise or adjust existing
tariff rates to safeguard Filipino farmers. In case of imminent danger of rice shortage, the bill empowers
the President, for a limited period and for a specified volume, to allow importation at lower tariff rates
for the benefit of consumers.
The bill also enables the President to increase the applied tariff to more than 100% (but not to exceed
the specified bound rate) if warranted.

Pernia said that a special safeguard duty on rice will also be imposed to protect the rice industry from
sudden or extreme price fluctuations. A safeguard duty is a temporary increase in import duty of an
agricultural product to deal with import surges or price falls, under the WTO Agreement on Agriculture.

“The new law not only puts in place a new and efficient rice regime but also widens the horizons of
productivity and sustainability of the country’s rice sector. With this law, concerned government
agencies, including NEDA, are mandated to craft a Rice Industry Roadmap. This development plan will
detail strategies related to research, production, and governance mechanisms, among others.”

The law provides a maximum of 180 days from the law’s effectivity date for the formulation and
adoption of the Roadmap.

-END-

http://www.neda.gov.ph/neda-leads-crafting-of-rice-tariffication-laws-irr/

Home>FFTC Agricultural Policy Articles>Overview of agricultural policy>Philippines

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. For non-
ASEAN countries, 40% tariff is imposed. The collected tariffs will be used to fund mass irrigation,
warehousing, and rice research.
Objectives of the tariffication law

Fulfill our international commitment when we joined the World Trade Organization in 1995. Replace the
QR on rice with another form of protection that is more transparent and generate revenues to support
the sector – or a tariff.

Ensure the availability of rice in the domestic market for the accessibility of greater majority of the
population by allowing more private traders (big or small) to participate in importing rice.

Lower domestic rice prices to levels that would be affordable to greater majority of the population.

Make domestic market function effectively and efficiently with much reduced/no government
intervention.

Provide farmers equivalent protection with the imposition of 35 % or higher tariff rates on rice imports
and preferential assistance to rice farmers, adversely affected by tariffication.

Provide opportunity for farmers to earn more in the world market. The law also lifted the restriction on
rice exports to encourage farmers to produce much better quality heirloom/ traditional rice geared to
exports.

Key provisions of the rice tariffication act

Tariffication. Tariffs are set at 35% tariff rate on all rice imports from ASEAN countries, and a 40% tariff on
all imports from non-ASEAN countries.

Lifting of quantitative restriction on imports and exports. Removal of the QR will also increase imports
and depress “palay” prices.

Powers of the President. Upon the recommendation of NEDA and as advised by the National Food
Authority Council (NFAC), the President “may increase, reduce, revise or adjust existing rates of import
duty up to the bound rate” of rice tariffs. In case of “imminent or forecasted shortage,” the draft IRR
provides that the President may allow the importation of rice at a lower applied tariff “for a limited
period and/or specified volume” to address the situation.

Creation of the Rice Competitiveness Enhancement Fund (RCEF). A fund that will be created from tariff
revenues of rice imports and will be used to directly support rice farmers and fund innovative
undertakings of the government to further strengthen the rice industry. It aims to provide key
interventions to support farmers and enhance their competitiveness and profitability, including farm
machinery and equipment to improve farm operations, rice seed development, propagation, and
promotion, expanded rice credit, and extension services. The RCEF will be allocated to rice producing
areas and earmarked as follows:
50% will go to the Philippine Center for Postharvest Development and Modernization (PhilMech) to
provide farmers with rice farm machineries and equipment;

30% will be released to the Philippine Rice Research Institute (PhilRice) to be used for the development,
propagation and promotion of inbred rice seeds to rice farmers and the organization of rice farmers into
seed growers’ associations engaged in seed production and trade;

10% will be made available in the form of credit facility with minimal interest rates and with minimum
collateral requirements to rice farmers and cooperatives to be managed by the Land Bank of the
Philippines and the Development Bank of the Philippines; and

10% will be set aside to fund extension services by PhilMech, Agricultural Training Institute (ATI), and the
Technical Education and Skills Development Authority (TESDA) for teaching skills on rice crop production,
modern rice farming techniques, seed production, farm mechanization, and knowledge/ technology
transfer through farm schools nationwide.

Rice industry road map. The Department of Agriculture (DA), together with relevant agencies, will have
to formulate a Rice Industry Roadmap to spell out the critical interventions that need to be put in place
to assist the small rice farmers, especially those that will be most affected by the tariffication. DA
Secretary Emmanuel Piñol issued Special Order No. 358 which created a National Rice Roadmap Team.

Issuance of Sanitary and Phytosanitary Import Clearance for Rice for the Sole Purpose. The law allows
unlimited importation of rice as long as private sector traders secure a phytosanitary permit from the
Bureau of Plant Industry and pay the 35% tariff for shipments from neighbors in Southeast Asia. This
covers even rice importation for the purposes of donation during calamities and emergency situations. In
these instances, the agency/office/organization or private entities, if they are based in the Philippines,
will be required to secure phytosanitary import clearances (SPSIC).

National Single Window Program. A proposed measure the setting up of a single window system for rice
by the Bureau of Customs to address rice smuggling.

Exclusion and transfer of the regulatory function of the National Food Authority (NFA) to the Bureau of
Plant Industry (BPI). NFA will retain its power to maintain a rice buffer stock which will be used in
emergency situations and to sustain the government's disaster relief programs. Rice for this purpose will
be sourced solely from local farmers.

Special Rice Safeguard. The Implementing Rules and Guidelines (IRR) provides for a Special Rice
Safeguard to help protect local rice farmers from sudden or extreme price volatilities. These will be
imposed in accordance with RA 8800 or the Safeguard Measures Act and its IRR.

Priority beneficiaries of mechanization. There are 1,100 producing towns that have been identified as
priority beneficiaries of mechanization in the form of tractors, transplanters, harvesters, dryers, and rice
milling equipment.
Rice Farmer Financial Assistance program. Focuses on rice farmers, cooperatives, and associations
adversely affected by rice tariffication. Also allocates tariff revenues in excess of Php10 billion to the Rice
Farmer Financial Assistance program to compensate rice farmers who will lose income as a result of the
measure. A portion of the excess tariff will be allocated to titling rice lands, expanded crop insurance,
and crop diversification program.

Rice tariffication and inflation

The newly approved Rice Tariffication Law, approved by Congress on November 2018, will remove the
National Food Authority’s (NFA) power to import and distribute cheaper rice. With Senator Cynthia Villar
as the principal author, the measure was prepared jointly by the Committees on Agriculture and Food,
on Ways and Means, and on Finance. It is in substitution of Senate Bill Nos. 1476, 1689, 1839, taking into
consideration Proposed Senate Resolution Nos. 143, 146 and House Bill No. 7735, with Senators Ralph
Recto, Leila De Lima, Joel Villanueva, Risa Hontiveros, Grace Poe, Sherwin Gatchalian and Cynthia Villar
as authors.

Pres. Rodrigo Duterte signed into law the Rice Tariffication Bill which was imposed recently on March 5,
2019. 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. Further, according to Philippine Statistics Authority (PSA) data, rice
was the number one contributor to inflation in September 2018, while food items in the consumption
basket accounted for more than half of the inflation rate in the same month. Consumers bought regular-
milled rice at an average price of Php 37.89/kg (US$ 0.72/kg) and well-milled rice at Php 41.93/kg (US$
0.80/kg). Prices of rice have continued to go up since then. Farmers enjoyed the highest buying price for
“palay” which was recorded at Php 22.00/kg. The rise in rice prices, both at the farm-gate and retail
levels, contributed significantly to inflation. As Filipinos continue to struggle with inflation, the
government found ways to temper rising inflation. One way of doing it is by passing the Rice Tariffication
Bill.

On the other hand, according to the National Economic and Development Authority (NEDA), rice
tariffication will directly benefit farmers and the poor through lower rice prices and increased
government assistance to the agricultural sector. The newly-signed law provides for the establishment of
the Rice Competitiveness Enhancement Fund (RCEF), which will pipe in Php10 billion (US$ 190.84)
annually to the rice sector for the next six years. The RCEF is allocated for the procurement of farm
machinery and equipment, rice development, propagation and promotion, as well as expanded rice
credit and extension services.
Meanwhile, the NEDA is taking the lead in crafting the Implementing Rules and Guidelines (IRR) of the
Rice Tariffication Law along with the Department of Budget and Management, Department of
Agriculture, and other concerned government agencies to ensure the country’s smooth transition to a
new rice regime. This draft IRR takes into account the feedback and concerns brought up by various
stakeholders during the drafting of the bill and after it was signed into law.

The following sections present the objectives, key provisions and possible implications and issues
associated with the enactment of the Rice Tariffication Law.

Effects of rice tariffication

Positive

Lower retail prices for consumers. Possible savings for the consumers as it allows no limit in terms of the
volume of imports which will eventually stabilize prices. However, in the long run, the economy could
benefit more from the adoption of import tariffs than implementation of QRS which limit the entry of
commodities and may lead to unstable prices.

Address the rice shortage. Would address the urgent need to improve availability of rice in the country,
prevent artificial rice shortages, reduce the prices of rice in the market, and curtail corruption and cartel
domination in the rice industry.

Lower inflation rates. The law will also reduce government's role in rice importation and lead to more
rice imports by the private sector, thus, lowering rice prices and help tame inflation.

Interventions to support rice farmers. RCEF will provide key interventions to support farmers and
enhance their competitiveness and profitability, including farm machinery and equipment to improve
farm operations, rice seed development, propagation, and promotion, expanded rice credit, and
extension services. Likewise, it will open up a window for farmers to export and contribute to the world
market.

Negative

New law lacks safety nets for Filipino farmers. Farmer groups clamor that the new law will make them
compete with cheap rice imports, making them more penniless. Measures should be in place to ensure
that Filipino farmers will not suffer with the rice tariffication law and that "safety nets" are available for
farmers. While it has its good points, the lack of government regulation worries stakeholders.
Potential displacement of farmers, NFA employees, accredited NFA retailers, rice millers and rice by-
product producers. Aside from the obvious displacement of rice farmers, NFA employees, and some
90,000 accredited NFA rice retailers nationwide, the deregulation of rice imports goes beyond the
industry. Some of the businesses and industries that will be affected by liberalized rice importation
includes the following:

Millers. There are around 6,600 registered rice millers all over the country, employing 55,000 workers.
Industry stakeholders, in a position paper, said that a complete milling facility costs from Php 30 million
(US$572,519.08) to Php 50 million (US$954,198.47)1 . This would place the value of the whole industry
itself at Php200 billion (US$ 3.82 billion) to Php300 billion (US$ 5.73) ( (Orly Manuntag, Confideartion of
Grains Retailers Association of the Philippines).

Animal feeds and beer industry. A by-product of the rice milling process, the rice bran is used for making
animal and aquaculture feeds. A shortage in local unhusked rice production would also mean there
would be a drop in its by-product. If feed mills produce less, it would cause a possible increase in the
prices of pork and chicken which use rice bran as major ingredient for its feeds. Another by-product
which comes from the milling process is the brewer's rice or “binlid” which is used in manufacturing
alcoholic drinks, particularly beer.

Biomass, construction industry. A drop in local rice output will also mean a decrease in rice hull, which is
used as fuel for biomass furnaces used in the provinces to provide electricity. Rice hulls are also used as
a binder for cement and land fillers (Orly Manuntag, Confideartion of Grains Retailers Association of the
Philippines).

Enable cartels of the rice trade and will throw poor sectors into a worsened state of hunger. There is no
guarantee that retail rice prices will be lower in the long run with unhampered importation. Relying on
rice imports makes the country vulnerable to higher world market prices as well as to rice production
and export decisions of other countries. In 2008, for instance, Vietnam, India and Pakistan restricted
their rice exports amid rising global rice prices. Thailand also raised the idea of creating a global rice
cartel similar to that for oil exporting countries.

Some salient issues on rice tariffication

Rice imports are cheaper than domestically produced rice. Under a free market, the market price of rice
will decline with the influx of cheaper rice imports.

Liberalizing rice imports will help, but will not solve the Philippines' inflation problem.

Tariff are set at 35% tariff rate on all rice imports from ASEAN countries, and a 40% tariff on all imports
from non-ASEAN countries. However, some experts claim these tariff rates are still too high, and lower
rates (10% to 20%) might be more feasible in keeping with the central goal of making rice more
affordable for Filipinos. While this will result in imported rice becoming more expensive, the flood of
imported grains will still threaten local produce and worse, affects the farmers.
To ensure that the rice to be imported will not be infested by pathogens or pests like bukbok (weevils),
the new law requires that all private players secure “sanitary and phytosanitary import clearances” from
BPI before they can import. Past experience tells us that this could be prone to abuse (Dr. Ramon Clarete,
University of the Philippines School of Economics).

The Rice Fund will be put to better use if it were focused instead on improving rice farmers’ access to
credit and crop insurance (Dr. Emil Q. Javier, National Academy of Science and Technology).

CONCLUSION AND RECOMMENDATION

Much has been said on the ratification of the Rice Tariffication Act. However, the main concern is the
negative impact of the rice tariffication law on local farmers, saying that the “over supply” of cheap rice
could adversely affect them following its implementation. On the other hand, the law is seen to help
expand the access of Filipinos to cheap rice that in return will prevent inflation pitch brought in large
part by the supply. Nevertheless, the core concern of the government should be on how to prevent 2.4
million rice farmers and farm workers from getting poorer because of the implementation of the new
law. Although special key provisions are already laid out to protect the farmers and the consumers, the
focus is on the proper implementation so that everyone should benefit from the law.

The newly-signed law provides for the establishment of the Rice Competitiveness Enhancement Fund
(RCEF), which will pipe in Php10 billion (US$ 190.84 million) annually to the rice sector for the next six
years. The RCEF is allocated for the procurement of farm machinery and equipment, rice development,
propagation and promotion, as well as expanded rice credit and extension services. RCEF is a package of
support programs to help the farmers and serve as safeguard to cushion the sudden effects of inflation.
However, it is imperative that DA to strongly support the local rice industry and diligently perform its
mandated functions in identifying eligible beneficiaries which include farmers, other farm workers, rice
cooperatives and associations. Most importantly, in crafting the IRR, research and development should
be highlighted since it has been proven to help develop improved technologies and increase farmers’
income.

REFERENCES

House of Representatives. An Act liberalizing the importation, exportation, and trading of rice, lifting for
the purpose the quantitative import restriction on rice, and for other purposes. Retrieved from
http://www.congress.gov.ph/legisdocs/ra_17/RA11203.pdf
National Economic Development Authority. Implementing Rules and Regulations of the Rice
Liberalization Act - AmBisyon Natin 2040. Retrieved from http://2040.neda.gov.ph/public-consultation-
for-the-drafting-of-the-implementing-rules-and-regulations-irr-of-the-rice-liberalization-act/

Punongbayan, JC. “[ANALYSIS] Will Rice Tariffication Live up to Its Promise?” Rappler. Retrieved from
www.rappler.com/thought-leaders/218393-analysis-will-rice-tariffication-live-up-to-promise.

Santiago, D. Philippines Rice Imports by Country. Retrieved from

http://www.philippinesaroundtheworld.com/philippines-rice-imports-by-country/

Tobias A, Molina I, Valera HG, Mottaleb KA, Mohanty S. 2012. Handbook on rice policy for Asia. Los
Baños (Philippines): International Rice Research Institute. 47 p.

http://ap.fftc.agnet.org/ap_db.php?id=960&print=1

Revisit rice tariffication law

By: Omi C. Royandoyan - 4 weeks ago

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.

As with any responsible government, it should keep its option for quantitative restrictions in case of
disasters, manmade (such as policy failures) or otherwise.

***

Omi C. Royandoyan is executive director of Centro Saka and founding chair of Alyansa Agrikultura.

https://www.google.com/amp/s/opinion.inquirer.net/124459/revisit-rice-tariffication-law/amp

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WHAT THE RICE TARIFFICATION LAW VIOLATES

APRIL 10, 2019

BY ROSARIO GUZMAN

The declared policy of the newly signed Republic Act (RA) 11203 or Rice Tariffication Law, now with
issued implementing rules and regulations, is apparently to ensure food security. Ironically, it is the very
same principle that the law puts at risk.
Food security is a precondition for economic development. A hungry population is a weak, unhealthy,
and disoriented labor force, simply put. A state that has secured the dietary needs and food preferences
for an active and healthy population is free to plan the economy to explore a wider range of products for
manufacturing. For instance, many developed states, especially after a war period, had prioritized
building their food stocks over building roads and bridges, and it made a lot of development sense.

The dimensions of food security as defined by the United Nations are availability, accessibility, utilization,
and stability of food – for all people at all times. These four dimensions also capture the issues of
sufficient quantities, affordability, adequate incomes and livelihoods including access to common
resources, food safety, nutrition and health, and cultural acceptability. [World Food Summit, 1996]

Food security is what the Rice Tariffication Law jeopardizes. The Philippines has now embarked on
imports liberalization of its staple – a dangerous path not just for the country’s food security, but more
importantly, for that elusive economic development.

Availability

The global rice market is narrow. Only 9.7% of global production ended up in the global market in 2018.
Contrary to what president Duterte and his economic managers are saying that Filipinos should no
longer aspire for self-sufficiency, the rice-producing world is consuming more than 90% of the rice
produced where it is produced. Even the country’s self-sufficiency ratio in 2017 was 93 percent. It is
inconceivable therefore that the government is declaring that rice-producing Philippines, whose average
self-sufficiency ratio in the last 30 years is 91%, should now simply rely on importation.

But economic managers pushing for import reliance contest the lone capacity of local production to feed
the nation. The problem, however, is that not even government statistics on average rice consumption is
accurate and updated. Yet, despite lack of wisdom, the Duterte government has painted a picture that
the country can never be rice self-sufficient.

It has been the mantra of the Philippine government to open up the local rice sector since the country’s
accession to the multilateral trading system of the World Trade Organization (WTO) in 1995. The average
annual self-sufficiency ratio in the pre-WTO years of 1991-1994 was 99.4%, which shrank to 89% from
1995 to 2016, only because of the policy of agricultural trade liberalization. Still, it is the Duterte
government’s thrust to widen the share of imports instead of strengthening local production. The
defeatist attitude negates the principle of availability of food at all times.

Indeed, global rice production has increased since the 2008 crisis, reaching record volume of 495 million
tons (milled basis) and exports of unprecedented 48 million tons in 2018. But the United States
Department of Agriculture (USDA) is projecting a shake-up in the Asian rice market in 2019. Carry-over
stocks of Thailand are the lowest in a decade due to the depletion of government stocks. The Thai baht
has also strengthened over the last months, making Thai rice prices more expensive. On the other hand,
Vietnam, the Philippines’ number one supplier, will be more competitive in the European market as
Burma and Cambodia lose their duty-free advantage in the European market once afforded by the
Everything But Arms agreement. China meanwhile, although a major importer in the last eight years, is
seen rising as a major exporter. The Philippine government is setting its sights on this volatile market.

Relying on importation, the Philippine economy as an importer of a wide variety of products is showing
innate lack of capacity. The peso is weakest in over a decade and currently among the weakest
currencies in Asia. The country’s dollar reserves is also lowest in a decade, reaching only 6.9 months’
worth of imports.

Accessibility

The government also argues that increased importation of cheaper global rice will benefit Filipino
consumers with lower local price. This, however, is misinformed on two accounts – one, global rice is not
necessarily cheaper (this should be self-explanatory by the narrowness of the market alone), and two,
the local market remains dominated by a trading cartel that can impose a higher mark-up depending on
the weakness of local production and other supply factors.

Despite fluctuations and recent global trends showing that export prices are going down, global rice
prices have actually increased since 2016. The Thai 5% broken rice for instance has become more
expensive from US$396 per ton in 2016 to US$405 in March 2019. Same with Thai 25% broken rice –
from US$385 to US$398 per ton in the same period. Viet 5% and 25% broken rice export prices (at
US$347 and US$328 per ton, respectively) have basically remained the same comparing 2016 and March
2019 prices, but that is after fluctuating wildly to as high as US$450 per ton in the first half of 2018.
In February this year, the landed cost of Thai rice with applied tariff, across all qualities (i.e. 25%, 15%,
10%, 5% brokens), ranged from Php36.73 to Php37.29 per kilo. The wholesale prices on the fourth week
of that month were Php37.61 per kilo for the regular milled rice (RMR) and Php41.13 per kilo for the well
milled rice (WMR). This shows a small difference between the landed cost and the local wholesale price.
On the same week, retail prices were Php40.65 per kilo for RMR and Php44.58 per kilo for WMR, or a
difference of only Php3.05 for RMR and Php3.45 for WMR.

Note that the wholesale and retail prices cannot be disaggregated as to whether they are imported or
local. But the point is that the landed cost of imported rice is not dramatically lower. The Philippine
Institute for Development Studies (PIDS) extrapolates the landed cost of rice by 1.2 times to come up
with its retail price, which if applied to the February 2019 landed cost would yield a still more expensive
imported rice ranging from Php44.08 to Php44.75 per kilo.

What is further inconceivable is for government to insist that cheap imported rice will pull down local
prices. From 1995 to 2010, based on National Food Authority (NFA) data, the landed cost and wholesale
prices of imported rice were higher than the wholesale and retail prices of local rice. From 2011, when
global production picked up, to the last available data in August 2018, prices of domestic rice have been
markedly higher than prices of imported rice. Indeed global rice has become cheaper due to increased
production and exports after the 2008 crisis, but this did not translate to cheaper local prices. In fact
what the Philippine market had from 2011 to 2014 was record increase in smuggled rice and escalating
rice prices at an annual average of Php1.20 increase per kilo. This only indicates clearly how the local rice
cartel can make super-profits from favorable global market trends.

Recent Philippine Statistics Authority (PSA) data show a continuous weekly drop in rice prices starting on
the first week of February and lower wholesale prices of WMR and RMR by the fourth week of March
relative to their prices a year ago. But retail prices are still higher than in the previous year. Yet, farmgate
price has continuously declined in the same period, reaching Php18.87 per kilo, or a Php1.59 drop from
March 2018.

Affordability is a dimension of accessibility, which the Rice Tariffication Law has wrongly assumed. What
is worse is that the law imperils the more important dimension of accessibility – which is people having
adequate incomes and livelihood – by subjecting the Filipino rice farmers to undue competition with
subsidized imports.
As it is right now, the Philippine economy registers the lowest number of jobs created in over 60 years
under nine administrations. In agriculture alone, 1.1 million jobs were lost in 2018 – unparalleled by any
administration. Wages have remained stagnant, with the nationwide average daily basic pay increasing
by only 6.8% in real terms in the last 12 years. The Rice Tariffication Law will worsen the jobs crisis and
poverty.

Stability

RA 11203 reduces NFA’s role from market stabilization (i.e. procuring palay from farmers and selling rice
to consumers) to simply maintaining buffer stock. The inane idea however is to keep buffer stock for
emergencies, whether caused by natural hazards or economic ‘shocks’ (which include otherwise normal
occurrences in the Philippine crisis such as inflation, rising unemployment or peso depreciation), while
reducing the agency’s power to procure locally.

Nothing replaces the role of stable local production in moderating the impact of emergencies. But the
Duterte government is hyping the creation of an annual Php10-billion Rice Competitiveness
Enhancement Fund (RCEF) from the projected tariff revenues from liberalizing rice imports. In current
dollar terms, this would mean US$190 million, which is trivial if compared with the subsidies given by
other states to their rice farmers – US$1 billion support by Vietnam and US$7 billion by Thailand. In
2017, the Indian government provided support price of INR1,550 per quintal for common variety, while
the average cost of production was INR1,117 per quintal. Philippine agriculture meanwhile is allocated a
mere 1.3% of the delayed 2019 national budget, or a projected cut of 1.8% or Php900 million from the
previous year’s agriculture budget.

Right to food, right to produce food

After the World Food Summit in 1996, the ethical and human rights dimensions of food security have
come into focus as the UN formally adopted the Right to Adequate Food. But neoliberal apologists and
policymakers, such as the Duterte government’s economic team, have gone around the UN definition of
food security to further justify open trading system and liberalization of traditional sectors such as
agriculture. Neoliberal policies, they argue, can bring about availability, cheap products and steady
supply.
These however clearly violate the people’s right to food, their right to access resources in order to
produce food such as having free land to till and state support as well as their right to produce food of
their own choice and decisions.

What the Rice Tariffication Law eventually abrogates is the people’s inalienable right to development – to
participate in, contribute to, and enjoy development processes, as their very basic right to adequate food
is not fully realized.

AGREEMENT ON AGRICULTURE DUTERTE ADMINISTRATION FOOD SECURITY PHILIPPINE ECONOMY

REGULAR MILLED RICE REPUBLIC ACT 11203 RICE IMPORT LIBERALIZATION RICE IMPORTS RICE SELF
SUFFICIENCY RICE TARIFFICATION LAW WELL MILLED RICE WTO IN AGRICULTURE

ROSARIO GUZMAN

Rosb is IBON's executive editor and head of the Research Department. She is also a member of the IBON
Board of Trustees.