A few days after we celebrated the coming of the New Year, the Philippine Statistics Authority released a report that reminded us of this harsh reality: The Philippines is still a net food-importing country. In a report published on January 3, the PSA revealed that the agricultural trade deficit in the third quarter of 2018 expanded to $1.86 billion, from $1.3 billion a year ago. For the period, agricultural exports declined by 4 percent, while payments for imports rose 15.5 percent, according to PSA data.
When a country records a deficit in trade, it means that its import bill is bigger than its export earnings. In the case of the Philippines, figures from the PSA showed that expenditures for imports in the July-to-September 2018 period went up to $3.54 billion, from last year’s $3.06 billion. In contrast, export receipts settled at $1.68 billion, 4.3 percent lower than last year’s $1.76 billion. These figures mirror the country’s overall trade performance in September, when the balance of trade in goods recorded a deficit of $3.93 billion, more than double the previous year’s $1.75 billion.
While the share of payments for agricultural products in the country’s total import bill got bigger, that of farm exports declined to less than 10 percent, according to PSA data. This, after the Philippines’s balance of trade recorded deficits with four of its five major trading partners. Worth noting is the country’s total trade deficit with Asean, which was the largest at $1.07 billion. The Philippines imported more agricultural products from neighboring Southeast Asian countries. The United States, which recorded a trade surplus of $470.68 million with the Philippines, was the country’s second top source of food imports.
Japan was the top buyer of Philippine agricultural products, such as fruits, nuts and fish. The preference of Japanese consumers for Philippine fruits allowed the country to enjoy a trade surplus of $273.38 million in the third quarter of 2018. This, despite the fact that Manila continues to push for the further reduction of import tariffs on Philippine fruits under the Philippine-Japan Economic Partnership Agreement.
What caused the trade deficit to balloon is the increase in the country’s payments for cereals, including rice and wheat. PSA data showed that the country purchased $826.47 million worth of cereals, 82.4 percent higher than the $453.25 million recorded in the third quarter of 2017. Payments for imported cereals accounted for 23 percent of the total agricultural import bill. Meat products, including mechanically deboned meat (MDM), were the other major food items bought by the Philippines.
Importing agricultural products is not entirely bad, as no country can produce all the requirements of its industries and citizens. Case in point is MDM, a raw material used in manufacturing processed food items, which is not produced in the Philippines. But crops, such as rice, can be grown in the country and need not be imported in huge quantities, if only the right farm policies were put in place right after the Philippines joined the World Trade Organization.
Expanding shipments of Philippine agricultural products is an ideal strategy, as this would help create jobs and increase incomes of Filipino farmers. For years, the government has been planning to “diversify” Philippine exports and reduce its reliance on electronics to boost export receipts. The government also tried to open markets by forging agricultural trade deals. The Asean market, for example, offers opportunities that remain untapped.
The government must help food exporters by rolling out policies that would hasten their growth. A “stimulus package” exclusively for agribusinesses would be a good start. Providing the right policy environment that would encourage aspiring entrepreneurs to go into agribusiness would also boost government efforts to improve farm-sector productivity.