The Rice Tariffication Law

The Rice Tariffication Law

Photo courtesy of Change.org

The Rice Tariffication Law or RTL has once more emerged on many discussion tables in coffee shops and even online following calls for its repeal or suspension.

Last month, Finance Secretary Benjamin Diokno said he would recommend to President Marcos the retention of the RTL, adding that rice used to be a major driver of inflation upticks prior to the RTL, which opened the floodgates for cheap rice imports.

“That’s a really good law, it had a major contribution to our desire to control inflation. I think it’s not smart to go back to the old system,” Diokno said.

“It’s been our problem for the past years. Yes, I will recommend (to President Marcos) that we don’t go back to the old system,” he said.

The reason for its being on the discussion table again is that more than three years into RTL’s implementation, many farmers are still calling for the reassessment, suspension, and eventual repeal of the law.

We understand President Marcos previously supported the proposal to review the law.

In his first executive meeting as agriculture secretary, Marcos asked the agency about its stand on the RTL, then added “Give me a short memo on whether we should or we should not ratify (the law), the pros and cons.”

In 2018, inflation in the country hovered around five to six percent, hitting a high of 6.9 percent in September and October of that year.

The law was enacted in 2019 and the Philippines saw average inflation of 2.4 percent in 2019 and 2020.

The economic team of the previous administration, of which Diokno was also a part, has been vocal about its stand against calls to amend the law.

The country’s economic managers said the law gave way to the Rice Competitiveness Enhancement Fund which has an annual appropriation of P10 billion to fund programs for farm mechanization, seed development, propagation and promotion, credit assistance, and extension services.

Any excess in tariff revenues is allocated for financial assistance to rice farmers, titling of agricultural rice lands, expanded crop insurance program, and crop diversification program.

Last year, the government raised P18.9 billion from rice tariff collections.

Data showed the government had already collected P8.35 billion as of May this year.

Is “rice tariffication”a new policy measure? Old agriculture hands say rice tariffication was put forward as early as 1986 by a group of economists from the University of the Philippines at Los Baños, when they wrote a compendium of policy papers that comprised the “Agenda for Action for the Philippine Rural Sector” or “Green Book.”

It was written during the Aquino administration to dismantle the perceived monopolistic enterprises that controlled specific agricultural commodities during the 8-year (1972 to 1981) martial rule of President Ferdinand Marcos Sr.

One of those commodities was rice, wherein the “Green Book” recommended the lifting of the monopoly on rice trading of the National Grains Authority (now National Food Authority), allowing greater private sector participation.

Why is rice tariffication preferred to the lifting of quantitative restrictions (QRs) on rice imports (or import bans)? According to the Department of Agriculture at that time, rice tariffication was desirable because it is a far superior policy instrument, being transparent, and any individual or group willing to pay for the tariff can import rice.

On the other hand, DA said, import quotas or QRs are opaque transactions, particularly if these are government-to-government (G-to-G), and hence breed corrupt practices.

One may ask: Then why did not the previous governments implement rice tariffication immediately?

Some observers say they feared then that it would hurt palay farmers because the entry of cheap imported rice would pull down palay prices.

DA said a simulation exercise done by the Philippine Institute for Development Studies, a government think-tank, as early as 2015 on the impact of rice tariffication showed that palay prices would fall with the entry of cheap rice imports.

In addition, the study indicated the volume of rice imports that would enter the country at varying tariff levels and recommended the appropriate tariff that should be imposed to afford protection to our rice farmers.

The ‘Left’ then was a considerable force to reckon with in policy-making during that time, and their populist perspective was accepted as sound policy advice, particularly during the Cory administration.

We will tackle the subject in a later column. (ai/mtvn)

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