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What Filipinos should know about this thing called ‘QR’

In Photo: A farmer walks along a path of a rice field at the foot of Mount Arayat in Pampanga.

Conclusion

EXPERTS and government officials have said the scrapping of quantitative restriction (QR) on rice would spell the displacement of farmers.

Former Labor Undersecretary Rene E. Ofreneo said the entry of imported cheap rice in the country might force rice farmers to shift to planting other crops.

“The effect would not be immediate, but, the way I see it, there will be continuing labor erosion,” Ofreneo told the BusinessMirror. “You can imagine the displacement in the farming population. There would be a need for adjustment.”

Ofreneo said even if rice farmers decide to shift to planting high-value crops (HVCs), such an alternative wouldn’t be an assurance that they would stay in the agriculture sector. They could face problems in terms of planting technicalities, he explained.

“The shift from rice farming to HVC is not that easy. It will take time,” Ofreneo said. “How do you shift overnight, especially if your areas and systems are meant for planting rice [and not for other crops]?” According to Ofreneo, who is also dean of the University of the Philippines School of Labor and Industrial Relations, a farmer has “a lot to consider”.

“First, the water infrastructure; second, do you own the land; third, do you have the know-how [in farming HVCs] and use of related planting technologies; fourth, do you have the capital?” The labor expert and BusinessMirror columnist recommends the government lay down programs that would promote and boost research and development in the farm sector, particularly cultivating good plant varieties. Ofreneo added the government should also look at the agricultural credit woes that hurdle farmers to borrow capital from banks.

Both Agriculture Secretary Emmanuel F. Piñol and Undersecretary Segfredo R. Serrano said it’s undeniable that there would be farmers who will be discouraged to plant rice due to the possible influx of imported cheap rice.

Price hikes

OTHER stakeholders in the agriculture industries have warned that with the expiration of the Philippines’s waiver, prices of some commodities in the market would also increase.

For one, the price of hot dogs, canned goods and chicken nuggets could spike as the raw material used in producing the processed meat products, which is mechanically deboned meat (MDM), was part of the concessions made by the Philippines.

“The use of MDM in processed products has allowed us to maintain affordable protein-filled wholesome processed meats and its use [are] regulated by the National Meat Inspection Service since March of 2015,” Pampi Executive Director Francisco Buencamino said. “The main advantage of using this ingredient is the control in product costs that make processed meats affordable to the consumers.”

Under Executive Order 190, the tariff on MDM, currently at 5 percent, shall revert back to its original rate of 40 percent. The 35-percent tariff difference would mean a 12 percent to 17 percent of processed-meat products pricing, Buencamino told the BusinessMirror.

Signed two years ago by then-President Benigno S. Aquino III, EO 190 (www.gov.ph/2015/11/05/executive-order-no-190-s-2015/) modifies the Most Favored Nation (MFN) rates of duty on certain agricultural products under the tariff and customs code of the Philippines, as amended, in order to implement the country’s tariff commitments under the World Trade Organization decision on waiver relating to special treatment for rice of the Philippines.

Sizzling issue

OTHER products that could increase in prices include pork sisig (sizzled pork) and French fries, as the ingredients for the two were part of the concessions made by the government.

The tariff of pork offal, which is used in sisig, was brought down to 5 percent from 40 percent. Frozen potatoes’ tariff was put to zero from 10 percent during the duration of the Philippines’s waiver on special treatment on rice.

For its part, consumer-protection group Laban Konsyumer Inc. (LKI) urged the government to immediately make the final decision in extending EO 190 to avoid confusion among Filipino consumers.

“The time clock ends on June 30, that’s the default [according to EO 190],” LKI President and former Trade Undersecretary Victorio Mario A. Dimagiba said in a public hearing on EO 190. “We need an EO directing the Bureau of Customs [BOC] not to apply the 40-percent duty.”

Post-QR regime

DESPITE the disparities and contradictions in statements and positions on the country’s rice QR (quantitative restrictions), economists, government officials and even non-governmental organizations agree on a single pronouncement: the rice sector needs support.

Under Philippine Development Plan (PDP) 2017-2022, the Duterte administration vowed to allocate all the tariffs collected from rice imports for programs aimed at helping farmers cut production cost.

“Replace quantitative restrictions on rice with tariffs,” the PDP read. “The tariff proceeds from rice imports will be plowed back to the rice sector.”

While the PDP is cognizant of the adverse impact of the scrapping of the rice QR on small farmers, the government said the tariff collected from imports will be used to help them recoup their losses.

The Duterte administration said it has decided to scrap the QR on rice because of its potential impact on rice prices nationwide.

Rice, the government noted, accounts for 30.6 percent of the total food expenditure of the poorest 20 percent of households based on the 2012 Family Income and Expenditure Survey. “It can help lower the price of rice, and this will benefit the general public, including farmers who are net consumers of rice,” the PDP read.

Rice Watch and Action Network (R1) coordinator Hazel Tanchuling urged the government to immediately put in place measures to ensure the competitiveness of the rice sector before it talks about converting the QR on rice into a specific tariff rate.

“As we looked into the 2017 budget, this is not reflected in the allocation of their programs,” Tanchuling said.

She added the Department of Agriculture direly needs to enhance its efforts, as local rice production even decreased to only 17.6 million metric tons (MMT) last year, from 18.9 MMT in 2014 and 18.1 MMT in 2015.

Time’s tale

IT was Piñol who first pronounced that the Committee on Tariff and Related Matters (CTRM) decided to extend EO 190, which put into place the Philippines’s concession made under the 2014 waiver, while Republic Act (RA) 8178 is being amended.

“As a gesture of goodwill and to avoid disputes, the Philippines would maintain the concessions while RA 8178 has not yet been amended,” Serrano said.

However, Serrano said retaining the concessions while RA 8178 is being amended is not an assurance that trading partners will not file a complaint before the WTO against the Philippines for not converting the QR.

“It’s not a guarantee. What we are saying to interested parties, our trading partners, is that the Executive branch cannot intervene in the enactment of a law,” he said. “That’s the domain of the Legislative branch, which has its own process.”

For Tanchuling, however, “the [biggest] challenge lies in the government’s political will to ensure the local rice industry is competitive within two years.”

One thing is for sure, the impending lifting of the rice QR is not just a concern of Filipino farmers but of consumers.

Only time will tell if the country shall truly savor cheaper commercial rice or will be at the mercy of volatile and susceptible rice market.

Image credits: Nonoy Lacza

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