The National Economic and Development Authority (Neda) clarified that the government is considering the possibility of reducing the most favored nation (MFN) tariff rates for some agricultural commodities traded among members of the World Trade Organization (WTO).
The clarification came on the heels of the Neda’s statement on Thursday that the Economic Development Cluster (EDC) is looking at “legislation for the tariffication similar to that of rice for sugar, fish, meat and vegetables.”
Neda Assistant Secretary Mercedita Sombilla told the BusinessMirror over the weekend that lowering tariffs on commodities like sugar, fish, meat and vegetables is being considered. However, the EDC has not decided on the matter.
“There are discussions to lower it to encourage the free flow of those products [which] will lower prices. These are just possibilities but I don’t think we will do it. Yes, these are being considered,” Sombilla said.
To date, only rice has a quantitative restriction. Manila retained the quota on rice and converted the QRs of other agricultural products into tariffs after the Philippines joined the WTO in 1995.
Sombilla also noted that the farm commodities being considered by the EDC have “very low” tariffs. She cited, for instance, the MFN tariff rate for fish imports is only at 3 percent, while those from Asean countries can come in at zero tariffs.
The EDC said on Thursday that it has submitted a draft executive order (EO) that will remove administrative and nontariff barriers on the importation of food items to temper inflation to the office of the President for implementation starting this month.
Recommended to the President before Tuesday’s Cabinet meeting, the EO will zero in on fish, rice, sugar, meat and vegetables—considering that the rise in prices of these items has been the major contributor to inflation for the past two months. Fish and seafood, rice and meat, and vegetables accounted for 2.4 percentage points out of the 6.4 percent inflation rate in August.
To address inflation, the Freedom for Debt Coalition (FDC) said in a statement that the government should veer away from “band-aid solutions” and suspend the Tax Reform for Acceleration and Inclusion (TRAIN) 1.
FDC believes the TRAIN 1 is responsible for the nine-year high inflation of 6.4 percent in August. The increase in inflation cannot be addressed by a cut in tariffs for imported food items and the tariffication of rice.
“They resort to band-aid measures which have been proven to only exacerbate our vulnerability to supply shocks and exchange-rate fluctuations—leading to a systemic cycle that we can expect to rear its ugly head once more in another decade or so,” FDC President Rene Ofreneo said.
“These counter-inflationary policy directions—such as the urgent passage of the rice tariffication law and an overall cut in tariffs for imported food items—reveal that our economic managers and legislators continue to treat inflation as a short-term problem with emergency palliatives,” he added.
Earlier, local economists believe more expensive commodities could make it more difficult for the government to meet its target of reducing poverty to 14 percent by 2022, from the 21.6 percent recorded in 2015.
University of the Philippines School of Statistics Dean Dennis Mapa said urban and rural poor households, as well as near-poor households, are negatively affected because food inflation rates are high for Metro Manila at an eight- month average of 6.7 percent and areas outside the National Capital Region with 5.9 percent.
This is consistent with the findings of a 2008 study of Asian Development Bank (ADB) economist Hyun Son, which stated that a 10-percent increase in prices of food could lead to 2.3 million poor Filipinos while the same increase in nonfood prices could lead to an addition of 1.7 million to poverty.
Son also said that if there is a 10-percent increase in rice and fuel, prices will result in an additional 660,000 and 160,000 poor people in the Philippines, respectively.