Managerial Economics

RICE TARIFFICATION LAW

President Rodrigo Duterte signed into law an act that will lift import restrictions on rice,
a measure the government hopes will make the food staple more affordable for
Filipinos. The president signed Republic Act No 11203 "An Act liberalizing the
importation, exportation, and trading of rice, lifting for the purpose the quantitative
import restriction on rice." on Thursday, February 14 – the day before it was to lapse
into law.

The law seeks to amend Republic Act (RA) No. 8178 or the Agricultural Tariffication Act
of 1996 and replace the quantitative restriction (QR) on rice imports.Instead of limiting
how much rice will enter the country, rice imports will just be slapped witn a tariff.

Rice from Southeast Asian countries will pay a 35% tariff or the import duty rate
commitment of the Philippines for rice importation, pursuant to the ASEAN Trade in
Goods Agreement. However, for non-ASEAN member states, the tariff is at 50% or the
tariff equivalent calculated in accordance with the World Trade Organization agreement
on agriculture upon the expiration of the waiver relating to the special treatment for rice
of the Philippines, whichever is higher.

This deregulation of rice will mean imported rice flooding the country, to the
disadvantage of Filipino rice farmers and local rice industry as a whole which can't
compete with the prices of rice from countries like Thailand and Vietnam.

However, this increased supply of rice is expected to benefit rice consumers who will
have access to more affordable rice.

The law creates a Rice Competitiveness Enhancement Fund that will go to programs
aimed at increasing the income of Filipino farmers. The fund shall amount to P10 billion
annually for the next 6 years.

The fund seeks to provide various forms of assistance to rice farmers, such as
development of inbred rice seeds, rice farm equipment, and skills enhancement. Under
the measure, the fund would be allocated and disbursed to rice-producing areas. –
Rappler.com

Please answer the following questions and submit on September 28, 2019

1. What will be the implication of this law on the economy of the country giving
emphasis on the supply and demand changes by employing the “demand theory”
concept for: (i) rice and (ii) palay?

2. Would the changes (in supply) be elastic or inelastic? Defend your answer.
3. What will be its impact on the income of rice farmers? Discuss by giving a
hypothetical situation with realistic assumptions such as “without” the law (RA
11203) and “with” the law.

4. What will be the effect of RA 11203 in the “Circular Flow” model?

5. So far, what has been its immediate general impact after its implementation? Is
the law socially and economically sound? Defend your answer.

6. If you are a Manager of a local large-scale Rice Trading and Processing

Company, what will be your new operational strategy to counteract the impact/s
of the law on the rice industry?