THE Department of Finance (DOF) is pushing for the reduction of rice tariffs to as low as zero percent to cushion the impact of rising world market rice prices and temper the increase of the price of the staple locally.
Finance Secretary Benjamin E. Diokno said reducing the rice tariffs temporarily to zero or up to a maximum of 10 percent would help in “arresting” the surge in local rice prices.
Diokno pointed out that the proposal is part of the DOF’s slate of recommendations to ensure that the country would have sufficient rice supply at “reduced prices.”
The tariff reduction proposal will cover both the Asean and most favored nation (MFN) rates for rice imports, Diokno added.
“It is crucial that the government continue to adopt a comprehensive approach to help ensure that rice supply remains sufficient at reduced prices,” he told reporters in a recent press briefing.
The reduction on rice tariffs would bring the “greatest good to the greatest number” of Filipinos in the country, he stressed.
Diokno said the earliest possible time that the executive branch would be able to modify the tariffs on rice would be next month, when Congress is no longer in session. Congress is set to adjourn session by the end of the month.
Under existing laws, the President can modify tariffs when Congress is not in session, upon the recommendation of the National Economic and Development Authority (Neda).
The Neda had earlier signaled that the state could implement a calibrated reduction in rice tariffs to reduce the price of imported rice. (Related story: https://businessmirror.com.ph/2023/09/06/neda-eyes-calibrated-cuts-in-rice-tariffs-to-ease-prices/)
Diokno explained that the tariff reduction on rice imports is “forward looking” since global rice prices continue to increase.
15-year high in prices
The United Nations’ Food and Agriculture Organization reported that global rice prices in August reached a 15-year high driven by the domino effect caused by India’s export restrictions on rice.
Diokno also pointed out that given the current market conditions, he sees the price ceiling imposed by the state on rice to be lifted after just a month. He noted that rice farmers are already harvesting, which would boost domestic supply and influence price movements.
He also pointed out that the price ceiling can be removed earlier prior to lowering of rice tariffs.
Nonetheless, he said that the proposed further reductions on rice tariffs could last for at least a year, citing previous tariff reduction durations.
“If the increase in rice prices is drastic, then the reduction [in tariffs] should be drastic,” said Diokno, noting that the DOF is okay whether the rice tariffs are at zero or 10 percent, whichever the Tariff Commission (TC) recommends.
The Philippines currently slaps a uniform 35 percent tariff on rice after reducing MFN rates as part of the national government’s anti-inflation measures. The 35-percent MFN rate on in-quota and out-quota imports would expire by end of this year and shall revert to 40 percent (in-quota) and 50 percent (out-quota), respectively.
The DOF’s disclosure came on the heels of a petition by the Foundation for Economic Freedom (FEF) before the TC, asking it to reduce the country’s rice tariffs to 10 percent.
FEF was one of, if not the first, to lobby for the reduction of tariffs on rice imports as a measure to temper and eventually pull down domestic rice prices.
The rise in imported rice prices, FEF argued, has been the “main cost push” for the increase in domestic rice prices.
“This tariff decrease would tackle the demand-supply gap for rice, address food inflation, and ease the rice prices that hurt the everyday Filipino consumer,” the group said in a recent statement.
“The high cost of imported rice with the tariff is causing traders to scramble for scarce palay stocks, leading to high prices cascading down the value chain,” the group added.
Based on its calculations, the FEF said the landed cost of imported rice at zero tariff—even at a quotation of $600 per metric ton—would be at P39 per kilogram.
This, the group claimed, would allow retailers of imported rice to meet the P45 per kilogram price ceiling on well-milled rice.
Nonetheless, FEF has thrown its support behind deeper rice tariff reductions, arguing that the closer the tariffs are to zero, the greater the impact it would have on the local market.
“FEF submits that reducing tariffs will bring significant relief to the domestic rice market. The greater the reduction—down to zero or close to it—the greater the relief. A cut down to a 10-percent rate will have a significant impact,” the FEF said.
Meanwhile, the Federation of Free Farmers (FFF) is opposing the reduction in rice tariffs, claiming that it would not have a significant impact on domestic prices.
“A tariff reduction will only further discourage our farmers from redoubling their productive effort,” the group said.
“It will make our food security even more dependent on external players and factors nor is there any guarantee that importers and traders will pass on any tariff savings to consumers,” it added.
The FFF explained that domestic rice prices are bound to fall since harvest season has started, which is expected to pick up in the coming months.
“There is still some time to prepare for this contingency. We should provide our farmers with the right price incentive in the coming harvest season, so that they will scale up production during the next production cycle,” it said.
Image credits: Nonie Reyes