Agri group hits govt plan to scrap rice import restrictions

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Agri lobby group Samahang Industriya ng Agrikultura (Sinag) has scored the Duterte administration over plans to scrap farmers’ protection from cheap imported rice, saying the removal of the quantitative restriction (QR) on rice imports will not result in lower prices of the staple food, even as the government remains firm in its decision to let the import limitation expire next June.

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In a statement, Sinag Chairperson Rosendo So said the liberalization of the agriculture sector since the mid 90’s saw the dumping of agriculture imports but it did not result in the lowering of prices of most, if not all, agriculture products.

“The garlic industry, with almost 85-90 percent of our supply sourced from outside, did not result in the lowering of the prices of garlic,” So said, debunking claims by the National Economic Development Authority that more rice imports equals lower retail prices

“Our QRs on rice did not limit us to import more rice, in fact—we have been one of the top importers of rice in the last decade or so. This does not even include the flourishing trade of rice smuggling that continue to hound the local rice industry,” he said.

Govt firm on dropping QR
NEDA National Planning and Policy Director Reynaldo Cancio disclosed last week plans to remove the QR on rice, saying that the Duterte Cabinet is now working closely for the amendment of Republic Act (RA) No. 8178 or the Agricultural Tariffication Act of 1996, which had kept the QR on rice importation in place.

Socioeconomic Planning Secretary and NEDA director-general Ernesto Pernia reiterated the administration’s intentions to remove the QR this week, saying that increased competition would lead to better performance for the Philippines’ own rice industry as well as lower prices for consumers.

On the sidelines of the Smart Agriculture Forum organized by the European Chamber of Commerce of the Philippines, Pernia noted that higher rice imports is beneficial to consumers, as it would be offered in lower prices compared to locally-produced rice.

“As I’ve said, it’s actually better for consumers because imported rice is cheaper than the rice we produce locally, which is more expensive,” Pernia said.

Pernia’s view was echoed by Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, who said with the June 2017 expiration of the waiver granted the Philippines in 2014 that extended QR, moving to a tariff-based system under the terms of the country’s agreement with the World Trade Organization “could also help to encourage improved efficiency and higher quality in domestic rice production.”

Pernia also told reporters that another extension of the QR is bad for the country’s image.

“It’s not good to extend it for the fourth time. It doesn’t make us look good if we keep on extending,” Pernia said.

Asked about the farmers who may lose their jobs once the QR restriction is lifted and they are forced to compete with imported producers, Pernia said, “If they are absolutely poor, then there can be some assistance, some safety nets. More like the CCT-type support. But we don’t have a large budget for that. You have to be well-selected.”

At present, rice is the only commodity in the Philippines that enjoy special treatment in the WTO, which excluded the same from the agriculture liberalization.

Instead, rice farmers were protected through the imposition of a QR, which allows only limited volume of the grains to enter the country.

Under QR, Manila limits to 805,000 metric tons the amount of rice allowed to enter the country through the so-called minimum access volume (MAV).

MAV refers to the minimum volume of farm produce allowed to enter into the Philippines at reduced tariffs, while shipments outside MAV pay higher rates of 50 percent and would need approval by the National Food Authority.

“NEDA should have consulted the local agriculture industry so it would realize that rice prices are high because the cost of producing rice in the country is one of the most expensive in the region,” So said.

“Our cost of producing palay (unmilled rice) is around P10-12/kilo while our neighbors Vietnam and Thailand are only about P6-10/kilo,” he said, adding that rice farmers and the rice industry of these countries continue to receive subsidies provided by their respective governments.

The Philippines is an exception among most rice producing countries across the globe, which continue to support their local rice industries with various subsidy schemes. Even though under WTO rules, governments are allowed to provide subsidies up to 10 percent of the value of production (de minimis level), So said that Philippine subsidies are not even close to 3 percent.

“Our problem is that all previous governments did not fully support the development of the local rice industry—the very reason for the imposition of the QRs 20 years ago,” he said.

Instead of relying on imports that only help the rice farmers of rice exporting countries, SINAG said that the Philippines must pursue the genuine development of the local rice industry by supporting rice farmers in the production (price support to farm inputs, seeds, free irrigation, easy access to no-collateral credits and insurance coverage), post-production (dryers and storage facilities) and marketing stages; increase the farmgate support price of NFA to at least 5 percent of the total palay production; and incentivizing local rice millers to modernize their milling operations and facilities.

“The greatest tragedy of our times is the destruction of our capacity to produce our own staples,” he said.

Thin trade
The SINAG official said that Pernia should also realize that any discussion about the prospects for the local rice industry should look into the world rice market situation and recently, the impacts of extreme weather situation, as major considerations.

“Global rice production is pegged at 470 million tons; of these, only 39 million to 42 million tons are tradeable. This means that less than 10 percent of the rice produced globally is available in the world market,” So said.

Of the 39 million tons available for global trade; 5 million tons are already earmarked for China and around 3 million tons for Nigeria—in short; at least 20 percent of the available rice in the world market is already allotted annually to China and Nigeria.

Global rice trade is relatively thin compared with about 20 percent for wheat and 15-20 percent for corn. This thin market, coupled with climatic changes and the unpredictable political situation or natural calamities of rice exporting countries means that rice supply (and rice prices) have tended to be unstable in recent years.

Unlike other agricultural commodities with numerous exporting countries, there are only a handful of countries that are exporting rice; a precarious situation given that rice is the staple for nearly half of the world’s seven billion people.

As a result, rice-importing countries like the Philippines will become prone to the volatility of world rice supplies and the domestic/political situation of rice exporting countries.

According to the International Rice Research Institute (IRRI), the vast majority of climate change impacts and the overall impact of climate change on rice production are likely to be negative.

The main source of water for irrigation in both Vietnam and Thailand is the Mekong delta where rice is grown in vast low-lying deltas and coastal areas.

“For one, more than half of Vietnam’s rice production is in the Mekong River delta—the Mekong region will be most affected by sea-level rise. Vietnam and Thailand are our top two sources of rice imports,” So said.

Further studies suggest that about 20 million hectares of the world’s rice-growing area is at risk of occasionally being flooded to submergence level, in particular in countries like India— another major source of our rice imports.

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