Mixed signals on rice

BBM’s administration is giving mixed signals on rice policy, a gut issue of importance to the masa. That’s not good. It makes our government look confused, like it is being managed by clueless katzenjammer kids. There is no doubt that it is a controversial issue, but once BBM makes a decision, everyone down the line must support it.

On June 5, the newspapers carried a story announcing a decision of BBM, as chairman of the NEDA Board, reducing imported rice tariff for both in- and out-quota rates from 35 to 15 percent until 2028. NEDA Secretary Arsi Balisacan explained that the newly approved tariff rates aim to ensure affordability of rice, an essential commodity, while at the same time balancing the interest of consumers and local producers.

“The Department of Agriculture is aiming for a reduction (to) P29 per kilo, at least for the poor, because we will complement this tariff reduction with direct subsidies to the poor and the vulnerable, so they can access the food (rice),” Balisacan said. “But overall, with the tariff reduced from 35 to 15 percent, everybody will benefit from that. This is crucial because world prices are still increasing,” he added.

On June 15, the newspapers carried a story about how Agriculture Undersecretary Asis Perez told a Senate hearing that the Department of Agriculture (DA) wanted to raise the tariff on rice to 50 percent, in direct opposition to the reduction approved by BBM. Perez, a lawyer rather than an agriculturist or economist, said the DA was consulted regarding the rice tariff reduction before the NEDA Board approval.

“Our recommendation is very different (from the 15 percent tariff). Our recommendation during the discussions at the CTRM (Committee on Tariff and Related Matters) – was to bring (the rice tariffs) back to 50 percent,” he told the Senate committee on agriculture, food and agrarian reform during a hearing on the proposed amendments to the Rice Tariffication Law.

The CTRM is a Cabinet-level inter-agency committee that tackles matters relating to tariffs chaired by the Trade and Industry Secretary and co-chaired by the NEDA Secretary. It submits its recommendations to the NEDA board, which is chaired by President Marcos.

It is a question of primary objectives. The economic managers, aware of the political pressure on the President, are most concerned about how to immediately bring down the retail price of rice which is now P48 to P55 a kilo for some varieties, way above the affordability level for many Filipinos.

Balisacan clarified that the P29 per kilo rice price “is the target cost of rice for the poor, those who are targeted for the 4Ps. So, it’s not a general price,” he said. Balisacan said the government would continue supporting domestic production through tariff cover as well as increased budgetary support to improve agricultural productivity.

The economic managers are hoping a sharp reduction in the tax that rice importers pay will immediately bring down retail prices. Traders who have large inventories will unload their stocks right away for fear of losing money, and that will bring prices down even before new imports paying lower tariffs arrive. But lower import taxes, if that causes a drop in retail rice prices, will also make traders lower their local palay buying prices and farmers will complain.

The howl of protest from the usual groups claiming to represent farmers was expected. Rice farming is very protectionist. A cabal of rice traders who provide logistics and financing to farmers, use farmers for political cover to protect their interests.

It didn’t help that the reduction in the tariff did not follow legal procedure on revising tariff which allows the President to move only if Congress is not in session. Second, Vietnamese traders are reportedly starting to sell at lower prices.

A fixed tariff for four years might not be advisable given rice market volatility. What if India lifts its rice export ban. That will lead to a significant decline in world rice prices. A 15 percent tariff at that time will hurt our local rice farmers. The best, some rice academics suggest, is a variable tariff system, like what Bangladesh adopted. High during harvest season; low during lean months. This will protect our local farmers during harvest season and protect consumers in the lean months.

The new BBM order should have recognized that nuance. Instead of imposing the lower tariff rate up to 2028, it should provide for the ability of the government to easily change the rate depending on developments in the rice market, here and abroad. The government should also keep the rice traders guessing, something a variable tariff system makes possible.

Balisacan said the President would issue an executive order to implement the new tariff program. Maybe it is not too late to provide for this nuance in the order.

But what is worrisome is how BBM’s team members are giving mixed signals. There was enough time to share alternative views while the policy was being formulated. But once done, the administration must speak with one voice. Otherwise, they give the impression that they don’t know what they are doing.

There is also something to be curious about Usec Perez. His boss, the DA Secretary, agreed with his fellow cabinet members on the tariff reduction. Perez should have told the Senate that he cannot speak about the details of internal discussions on the issue due to executive privilege and also, because a decision has already been made by his superiors which binds him.

I am told Perez was the lawyer of the group that sued for the banning of genetically modified food. But now he must defend the DA position in favor of genetically modifying many food crops to improve the quality and quantity of harvests so we can be more food secure.

Hay naku. A bunch of amateurs in government and our lives depend on them.

Boo Chanco’s email address is [email protected] Follow him on X @boochanco