Dangers in removing rice import restrictions

The multi-billion-peso rice industry is a major source of employment, income and nutrition for Filipinos. It consists of some 2.5 million small farmers plus several hundred thousand farm laborers and others engaged in the supply of farm inputs and machinery, milling/processing, warehousing, transport, other services and related economic activities. All in all, close to 20 million individuals, or around one-fifth of our population, depend directly or indirectly on the industry.

During the presidential campaign, then Mayor Rodrigo Duterte promised to achieve self-sufficiency in domestic rice production within two years of his presidency. This commitment has been reiterated by Agriculture Secretary Emmanuel Pinol, who has also advocated the complementary policy of extending the quantitative restriction (QR) on rice importations. Lately, however, National Economic and Development Authority Director-General Ernesto Pernia and several other economic advisers of the President have recommended the lifting of the QR, which action will undermine President Duterte’s pledge of rice self-sufficiency.

The proponents of removing the rice QR claim that Filipino consumers will benefit because, even with a proposed tariff rate of 35 percent, cheap rice imported from Vietnam and Thailand can be sold at prices lower than those of locally produced rice.

Rice trade deregulation, however, will cause a drop in the incomes of all rice farmers. About 60 percent, or 1.5 million farmers, whose production costs exceed their Vietnamese or Thai counterparts’, will face severe cuts in income. For the 550,000 who are expected to be displaced altogether, they will find the cheap imported rice unaffordable! At present, it remains unclear what realistic support/adjustment measures will be extended by the current administration to affected farmers and other stakeholders in the rice industry.

The much ballyhooed boon for consumers may turn out to be temporary, minimal and unsustainable. Recent studies by the NEDA’s Philippine Institute of Development Studies and independent economists like Manuel F. Montes estimate that, with the financial incentives of bringing in cheap rice and the resultant reduced production of the staple locally, Philippine rice imports may balloon to four to five million metric tons annually. Historically, the country’s largest import volume in a single year has been two million tons. With our limited port, storage and shipping/transportation facilities, it is doubtful if we can handle importations of double this magnitude.

 Given the extremely limited amount of rice traded globally, Filipino consumers will be at the mercy of the profit-maximizing speculators in exporting countries and their counterparts in the Philippines. It may be recalled that, in 2007-2008, the international price of rice skyrocketed from $300 to $1,200 per metric ton, and domestic retail prices in importing nations jumped by almost 100 percent. This was due to shortfall in supply, market speculations, “panic buying” by importing countries and import restrictions imposed by major exporters like India, Vietnam and Thailand which wanted to secure adequate supplies for their local populations first.

 Reliance on external sources of rice should also take into account the adverse effects of climate change and more frequent, more severe and more unpredictable weather events on food security. The International Food Policy Research Institute, reporting on the “Impacts of Climate Change in Agriculture,” estimates that rice prices will increase by 32-37 percent, yield losses in rice will be 10-15 percent, and 20 million hectares of the world’s rice growing area will be at risk, particularly Bangladesh, India and Vietnam (the last two being major exporters to the Philippines).

 In light of the above, we must implement immediately the necessary policies and programs (on technologies, practices, markets) that will improve the productivity and competitiveness of our rice farmers and their industry. These measures can also provide feasible choices to farmers in the context of an inclusive market-oriented agriculture that promotes crop diversification and product development.

 As we seek to enhance our farmers’ capacity to meet our domestic requirements for rice, we should strike a balance between ensuring decent income and livelihood for our farmers and consumers’ need for affordable, safe and readily available food. A “win-win” outcome to the challenge of security in food in general and rice in particular will demand well thought out, comprehensive and dynamic solutions that go beyond the mere textbook application of theories of “comparative advantage” and “free trade.”

(Montemayor, president of the Federation of Free Farmers, served as Secretary of Agriculture in 2001-2002. Dar, president of the InangLupa Movement, was Secretary of Agriculture in 1998-1999. Torres, president of the Trade Union Congress of the Philippines, was Secretary of Labor in 1990-1992 and Executive Secretary in 1995-1998.) - Leonardo Montemayor, William Dar and Ruben Torres