Republic Act No. 11203, better known as the “rice tariffication law” or RTL, is now one year old. The purpose of the RTL is fully reflected in its title: “An Act liberalizing the importation, exportation, and trading of rice, lifting for the purpose the quantitative import restriction on rice, and for other purposes”. Farmer leaders simply call the law as the “rice trade liberalization law”, for the law allows any private rice importer-distributor to import any volume of rice. The only requirement: a sanitary permit from the Bureau of Plant Industry.
The enactment of the RTL was bitterly opposed by all farmer organizations and some officials of the Department of Agriculture (DA). Their main criticism: the rice tariffication law gives up the power of the government to protect the rice industry, especially the small rice farmers numbering 2.5 million.
First, RTL sets a low tariff of 35 percent on imported rice sans any production subsidy. This means Filipino rice farmers can only compete with the Thai and Vietnamese rice farmers if the former also enjoy the subsidy and other assistance given to the latter, including better enabling production environment such as reliable irrigation. The assistance that the RTL promised to the Filipino rice farmers is paltry and haphazardly formulated: a program of mechanization and seed assistance, which was not even ready or in place when the law was passed.
Another criticism: RTL downsized the National Food Authority (NFA) and limited its role to “buffer stocking” for emergency situations and disaster relief. RTL removes the various regulatory powers of the NFA, from import licensing to warehouse inspection. This means big private importers can now import any volume of cheap rice and dump this in the domestic market without worrying on the situation of the Filipino rice farmers, millers and town traders.
Shortly after the passage of the law, horror stories on the catastrophic collapse of palay prices around the country mushroomed. Palay farm gate prices went down to as low as P8-P10 a kilo, well below the estimated production cost of P12 a kilo. An increasing number of palay producers are now contemplating the idea of giving up rice farming and selling their lands.
Surprisingly, the collapse of palay prices and the extraordinary hardships being experienced by the Filipino palay producers was first raised to the mass media by the domestic rice millers and viajeros. They too were affected by the “gaming” operations by the big private importers-distributors, which found the rice importation-distribution business suddenly wide open to the private sector. No need to knock at the doors of the NFA or any government agency.
Per monitoring by the US Department of Agriculture, as much as three million tons of rice were imported by these corporations within months after the RTL passage. This huge volume of imports made the Philippines the world’s biggest rice importer in 2019. This volume of imports is thrice the normal annual of imports made by the then NFA to fill in the production gaps in the country.
These imports were immediately packaged by the big private importers for distribution in the malls and commercial outlets, many of which they also own. Thus, a large part of the locally-produced palay became “homeless”, that is, no market to sell to. Hence, palay prices plunged down to as low as P7-P8 a kilo in far-flung areas.
The plight of the domestic palay producers prodded the new Agriculture Secretary, William Dar, to seek the assistance of LGUs in rice-producing provinces in buoying up palay prices. Eventually, President Rodrigo Duterte himself got involved. He helped mobilize additional government funds to help the NFA procure more locally-produced palay. He even issued a statement on his plan to ban any rice importation during rice harvest seasons at home.
Ironically, the above market intervention measures clearly contradict the intent of the law: to have a fully deregulated rice market. Hence, some neo-liberal economists criticize the executive department for subverting the RTL! Their reasoning: let the rice and palay market situation stabilize for a year or two. The basic idea: let the fittest or more efficient survive and grow. Those who cannot survive, let them shift to the planting of new crops, preferably higher value-adding crops.
The problem is that the experience of farmers in other crops under the regime of “agricultural deregulation” pushed by the IMF-World Bank for the Philippines in the last four decades (1980s to the present) show that most of the losing farmers do not shift to new crops. They simply opt out of farming and sell their lands to the local elite, land speculators and realtors.
This precisely is the scenario that is beginning to take place in the rice sector under “rice tariffication”. Consecutive rice farming losses for a year or two shall shrink the country’s palay production sector, a sector that has been shrinking gradually through the years because of rising cost of farm inputs, limited government assistance, urban encroachment and unchecked land conversions. With RTL, the rate of rice land shrinking has become faster. In the rice fields near the urban or peri-urban areas, puro sementado na ang mga palayan kasi nabenta na sa mga realtors.
Today, the above government efforts to buy more locally-produced palay have somehow boosted palay prices to rise to P14-P15 a kilo in some provinces. This, however, is still low compared to the P19-P21 a kilo in the pre-RTL period. And if the labor of the rice farmer is given value based on the equivalent minimum wage in a given rice-producing region, rice farming easily becomes a losing proposition. And in areas of the country untouched by the above palay-price-boosting exercises, palay prices remain stuck at P10-P12 a kilo.
Overall, rice farmers are angry and furious at the RTL. Farmer organizations in the country are still agitating for a repeal or reform of the RTL. Specifically, they want the government’s role in rice procurement and trade be restored and strengthened. They also want an alternative “rice road map” crafted based on joint and transparent government-farmer dialogue-consultation and planning.
The road map should include the formulation of “equalizing incentives” to Filipino rice farmers such as the adoption of support programs extended by other countries to their rice farmers. For example, the governments of China, India, Indonesia, Malaysia, South Korea, Thailand and Vietnam all intervene heavily in rice production and international/domestic rice trade, to shield their palay farmers from market volatility and production losses. Thailand alone spends roughly $2 billion a year as subsidy, in the form of price support, to their palay producers.
In contrast, the RTL provides for a paltry P10 billion Rice Competitiveness Enhancement Fund (RCEF), half of which is allocated for the mechanization of rice farming and one-fourth for the development-propagation of high-yielding seeds. These twin RCEF programs are work in progress because the development and promotion of appropriate technology takes time and requires huge bureaucracy to administer. They also require skills or human resources development as well as testing on their adaptability to different soil and land situations. Note that rice farms in the country have varying sizes, topography, ownership, access to irrigation, etc. It is difficult to develop a one-size-fits-all solution to rice mechanization.
Hence, some agricultural experts are suggesting that the RCEF should be re-organized and should re-focus on agricultural credit and insurance, both of which are badly needed in agriculture. Also note the inadequacy of the RCEF fund given the fact that the palay production sector is worth at least several hundred billion pesos. Former DA Secretary Manny Pinol estimated the 2019 palay losses of the farmers to be around P120 billion; however, farmer leaders put the total palay losses to reach as high as P200 billion. How can P10 billion RCEF fund, allocated mostly for mechanization and seed development, cure these huge losses?
Incidentally, DA, under Secretary Dar, failed to utilize some trade flexibility measures allowed by the rules of the World Trade Organization (WTO). Specifically, DA failed to use its authority to recommend to the Tariff Commission the adoption of provisional safeguard measures to stem the flood of rice imports. Under the WTO rules, a Member State may impose safeguard measures when imports “are found to cause or threaten serious injury to a competing domestic industry”.
But what happened? After a non-transparent system of “investigation”, the DA found no reason to initiate a process of instituting safeguard measures for rice based on a finding that “serious injury” was being inflicted on the Filipino palay farmers by the surge of rice imports amounting to three million tons. The WTO defines “serious injury” as “a significant overall impairment in the position of a domestic industry”, which can be established based on an investigation of the “increase in imports, the market share taken by the increased imports, as well as changes in the levels of sales, production, productivity, capacity, utilization, profits and losses, and employment of the domestic industry”. The DA found no “serious injury” to warrant the imposition of safeguard measures!
Clearly, the country needs better agricultural and economic officials with 20-20 vision. The country needs officials who have the backbone to assert the survival and growth of local industries, especially industries involving millions of small producers.