Repeal Rice Tariffication Law

The major headlines are focused on the impeachment of Vice President Sara Duterte and the scandals caused by corruption in the implementation of the flood control projects. All of these have overshadowed a major economic issue that is threatening the livelihood of millions of farmers. This is the Rice Tariffication Law (RTL).

This law was enacted in February 2019 and was supposed to be a major agricultural reform in the Philippines. The law replaced the decades-old system of quantitative restrictions on rice importation with a tariff-based system. The RTL aimed to liberalize the rice market, stabilize rice prices and make rice affordable to Filipino consumers.

The RTL therefore removed the longstanding import quotas on rice and allowed private traders to import rice from other countries subject only to the payment of tariffs. A 35 percent tariff is imposed on rice imports from ASEAN member-states and 50 percent or more from non-ASEAN countries. The revenues generated from these tariffs are earmarked for the Rice Competitiveness Enhancement Fund (RCEF), which is intended to help local farmers cope with increased competition from imported rice.

The RCEF was supposed to support mechanization, seed development, credit assistance and farmer training.

When the imported rice entered the market at lower prices, farmgate prices dropped sharply. In some provinces, prices went as low as P12-14 per kilo, far below the average production cost of P15-17 per kilo. This left many farmers operating at a loss, pushing many to stop planting rice completely.

Since the passage of the RTL, there have been strong opposition from farmers’ groups, agriculture advocates and local government units in rice-producing regions. These opponents argue that the law favors traders and consumers at the expense of Filipino farmers who have been left to face the full force of globalization without adequate government support.

The move towards the modernization of rice cultivation has also been hindered by the lack of widespread infrastructure development, especially irrigation facilities. Rice farmers also have no access to affordable credit and support services. Many rice farmers are therefore stuck in outdated practices, making modernization a slow process.

There has been increasing support for the repeal of this RTL. Here are some arguments for the repeal of the RTL.

Re-imposing import limits would shield rice farmers from sudden price shocks and market over-saturation. This could help stabilize farmgate prices and revive interest in rice farming. The repeal could also lead to a boost in rural incomes. With improved price stability, farmer incomes could increase, improving the livelihood of millions of rural households who depend on rice cultivation. This repeal might also lead to rice self-sufficiency in the Philippines. Limiting rice imports could encourage the government and the private sector to invest more heavily in self-sufficiency programs which could reduce reliance on importation of rice from other countries.

There are sectors, however, who are objecting to the repeal of the RTL. These sectors are primarily representing the consumers of rice.

The contention is that a repeal of the RTL would lead to a rise of the price of rice, the basic staple of the Filipino family. Without the cheap imported rice, prices in urban markets are likely to increase. This could worsen inflation, especially for the poorest Filipinos who spend a large share of their income on food.

These arguments of choosing whether to prioritize food security over lower consumer prices has been a debate for the last several decades. I remember this was highly debated when I was a member of the Cabinet during the presidency of Corazon Aquino decades ago.

The argument for food security or removing reliance on foreign rice is that it was also considered dangerous to rely on importation. If the sources of imported rice like Vietnam or Thailand are unable to supply our needs for some reason, it would create a dangerous and unstable environment in the Philippines. There was a strong argument that the Philippines must become self-sufficient in the production of rice and not rely on importation.

On the other hand, the fact is importation of rice when it is available does bring down rice prices for consumers, especially in urban areas.

One of the critics of the RTL is said to be Sen. Risa Hontiveros, who expressed concern over the suffering of Filipino farmers. She is quoted to have said, “The Rice Tariffication Law has broken the back of our local farmers. We promised them safety nets but what they got was neglect. It’s time to revisit and rethink this policy.” She also said the entry of cheaper imported commercial rice would “depress the price of palay,” leading to significant income loss for farmers – especially for households already on the poverty margin. She argued that government subsidies must be accelerated to mitigate these losses and prevent further impoverishment of farming families.?

There is an urgent need to reform the RTL by improving the equitable distribution of the RCEF, dismantle the monopolistic underground rice traders and enhance the access of farmers to credit, support services and infrastructure like farm-to-market roads and irrigation. The ultimate and ideal policy should be balancing the needs of farmers and consumers.