THE imposition of a safeguard duty on rice imports to protect rice farmers from the detrimental effects of an import surge is not inflationary, a former ranking agriculture official said at the weekend, disputing the claim of economic managers.
Inflation won’t be an issue since the volume of domestic stocks is already high due to the influx of imported rice after the rice trade liberalization law took effect earlier this year, former Agriculture Undersecretary Segfredo R. Serrano explained.
The National Economic and Development Authority (Neda) had harped on the inflationary impact, which the DA cited as basis for scuttling the safeguard duty investigation.
“Considering the situation where you have a lot of stocks already, I don’t think so [that safeguard duties will be inflationary],” Serrano told the BusinessMirror in an interview.
“Kasi magse-safeguard ka if may excess [volume which is] prejudicial to your producers. How can it be inflationary if [a] lot of imported rice entered the market due to a deregulated industry?” Serrano argued.
Serrano said the economic managers should prove that it is inflationary given the current situation of the rice industry, wherein stocks are high while farm-gate prices are continuously declining.
The government, he added, could have opted to impose the safeguard duties and assess afterwards if the consequences of the trade remedy are indeed inflationary.
Besides, he explained, the safeguard duties could also be terminated if it is deemed to have served its purpose.
One can only say that it is inflationary “if your law enforcement agencies did not do their job, such as flushing out [rice] stocks,” he said.
Notice to WTO
Meanwhile, despite the termination of the preliminary safeguard duty probe, Manila is not closing its doors on using safeguard duties as a trade remedy against rice imports surge.
Manila submitted a formal communication to the World Trade Organization (WTO) Committee on Safeguards (CoS) on October 17 to inform member-states countries that it had terminated its motu proprio initiation of a preliminary safeguard investigation on the importation of rice.
“The said termination is being carried out without prejudice to the future actions that the country will take in invoking any safeguard measures on rice,” the Philippines said in its communication, which was made public on October 18.
The Philippines notified the entire WTO membership pursuant to Article 12.1a of the Agreement on Safeguards which stipulates that member-states shall immediately notify the CoS when initiating an investigation relating to the possible imposition of safeguard measures.
In a public notice dated October 10, Agriculture Secretary William D. Dar revealed that the DA has terminated its preliminary investigation on the application for general safeguard measure on rice imports.
A day after, Dar disclosed that they terminated the safeguard investigation on rice imports pending a dialogue with the government’s economic managers.
But on October 18, Dar, who vowed in September to capitalize the use of safeguard duties to protect rice farmers, explained that the government sidelined the imposition of the trade remedy measure due to inflationary impact.
End to safeguard probe rued
The DA should have properly explained why it terminated its motu proprio safeguard investigation, according to former Undersecretary Serrano.
“What I find very irregular is that there should be a reason for the termination. It means that the action was whimsical,” he said in an interview with BusinessMirror.
“Why would you conduct an investigation, then just terminate it,” Serrano said. He hoped officials would explain to the public the reasons for terminating the inquiry, “especially to the interested parties who were waiting [for the results].”
Serrano, who was the country’s longest-serving Agriculture undersecretary for policy and planning, said the DA should capitalize the use of trade remedy measures, such as safeguard duties, to protect rice farmers amid a deregulated industry.
“In a deregulated industry, safeguard measures should be strong. It shouldn’t be whimsical. We’re not exploiting the armaments provided by law. We should use these things to protect the industry,” he added.
Inventory up 57.7%
The country’s total rice inventory as of September 1 expanded by 57.7 percent to 1.842 million metric tons from 1.168 MMT recorded in the same period last year, Philippine Statistics Authority (PSA) data showed.
A total of 208 private entities, including big firms, imported more than 1.6 MMT of rice seven months after the government eased import restrictions on the staple, data from the Bureau of Plant Industry (BPI) showed.
Figures from the BPI, an attached agency of the Department of Agriculture (DA), showed that cooperatives, traders and institutions imported 1.614 MMT of rice as of October 4, after the rice trade liberalization law took effect on March 5.
The BPI data indicated that importers bought rice from India, Italy, Myanmar, Pakistan, Spain, Thailand and Vietnam.
Farm-gate price plunge
The DA’s investigation was initiated last September 11 following the plunge in the farm-gate prices of local rice to determine whether it should apply safeguard measures.
In its formal communication to the WTO-CoS last September 12, Manila explained that it initiated the investigation as the decline in the farm-gate prices of unhusked rice—which caused farmers to incur losses—coincided with the jump in imports.
Rice imports rose after the Philippines implemented the rice trade liberalization law, which removed the quantitative restriction on the staple and eased import rules.
“[The] continued increase in rice imports coincides with the drop in farm-gate prices of paddy resulting in income loss for farmers,” the Philippines said in its September notification.
“Skyrocketing rice imports significantly affect the Philippines’s ending stock, subsequently affecting the positioning of local rice in the market,” it added.
Since the passage of the rice trade liberalization law, Manila argued that “rice traders abruptly shifted from buying local paddy to importing rice as the latter is now more convenient to do.”
In a news statement on September 21, the DA said it initiated the preliminary investigation to “arrest” the influx of imports, “particularly this forthcoming main harvest season.”
The DA pointed out that the imposition of a safeguard duty on rice imports is one of the measures it is banking on to stabilize the supply and price of rice. Dar argued that at least 2.4 MMT of rice have entered the country, which “has gone beyond what is needed by the country.”
“So, I have taken the necessary steps and the direction where we will enforce legal measures during these times when we have greatly exceeded the volume needed to fill up the slack in national rice supply, most particularly in Metro Manila and major urban rice consumption centers,” he was quoted as saying.
“We will protect our small farmers by not allowing additional imports especially this main harvest season. We want them to benefit from the respectable farm-gate prices of palay set by the government through the National Food Authority,” he added.
The Federation of Free Farmers (FFF) earlier warned that the delay in the imposition of safeguard duties on rice imports could further hurt farmers, as the inflow of the staple is expected to continue amid the harvest season.
FFF pointed out that this “runs counter to President Duterte’s public instructions not to allow imports during harvest time.”
The imposition of safeguard duties, which could effectively double tariffs on rice imports, is a measure seen to deter further entry of imported rice.
Under the rules of the WTO and Republic Act 8800, general safeguard duties may be temporarily imposed on imports of rice, on top of regular tariffs, if there is evidence of a surge in rice imports and this surge has resulted in, or threatens to cause, serious injury to the rice farmers, FFF explained.
Image credits: CEASAR M. PERANTE