Anyone who has ever been seriously sick and has been made to ingest awful tasting medicine knows what the term “bitter pill” is all about.
In two years—give or take a few months—the Philippines becomes part of a united Asean market. This early, the government must decide whether to deny or to give the bitter pill to a number of ailing industries, foremost of which is agriculture.
The main question: to protect or not?
In his 2013 discussion paper ‘Philippine Agriculture to 2020: Threats and Opportunities from Global Trade’ by UP-trained economist Dr. Roehlano Briones, two models of agricultural development were compared. The paper was prepared for the Philippine Institute for Development Studies (PIDS), a government think tank.
The first model showed a protectionist approach typical of the country’s current highly conservative outlook; the second is the “alternative,” which advocates the engagement of Philippine agriculture with the global market through trade and specialization on comparative advantage.
The second option, “entails more liberal trade policies [lowering of tariffs and non-tariff barriers]as well as directing expenditure support on a more neutral basis, i.e. greater outlays towards products with lower support, which typically are the export-oriented commodities [i.e. products for which the Philippines has comparative advantage].”
After a thorough analysis of both models, Briones concluded that the strategy of curtailing imports resulted in substantial price increases for most agricultural products presenting “a substantial burden to the poor.”
This is reflected in the prices of our country’s staple food, rice. According to the National Economic and Development Authority, Filipinos sometimes have to pay twice as much for the same rice that can be bought in other countries. The local production of rice has not helped lower prices; even the National Food Authority has admitted that transporting palay from the provinces to Metro Manila adds as much as P1 per kilo to the cost of rice.
Unfortunately, politicians have long pushed for protectionist policies over rice because they consider the country’s staple food a political issue, not an economic one.
To make a long story short, lowering trade barriers will benefit Juan de la Cruz because it allows him to purchase products at lower prices because these are more efficiently produced elsewhere and are therefore cheaper than those produced locally.
Much has been said about the evils of trade liberalization that have no basis in economics or real-life experience.
Protectionism has been sold hand-in-hand with nationalism to promote the idea that Filipino farmers and the Filipino people benefit when trade barriers shield their products from foreign competition. Our farmers supposedly benefit because protectionism supposedly strengthens their sector, while providing consumers with affordable, locally-grown agricultural products like rice.
As far as I know, this has been proven true only in one country—North Korea.
Essentially, Briones says that farmers provided alternatives are most likely to transition from growing crops that are not profitable to crops that can bring them more income. Take, for example, rice farmers who only earn an average of P16,000 per hectare per crop, as opposed to farmers who grow onion bulbs that can earn an average of P300,000 per hectare per crop.
In my home province of Batangas, a number of smart farmers have long shifted to high value crops like coffee, pepper, and yes, onion bulbs.
Revenues from tariffs imposed on imported agri products may be invested back into the sector by way of irrigation, farm-to-market roads, post-harvest equipment and facilities, credit, research and development, extension services, other market infrastructure and market information. This is especially true because the Republic Act 8178, also known as “The Agricultural Tariffication Act” mandates that tariffs from imported agricultural products go to the Agricultural Competitiveness Enhancement Fund, which in turn can be used to fund agriculture development initiatives.
While the law—enacted in 1996—endeavors to make the country’s agricultural sector viable, efficient, and globally competitive, it has not, until today, been fully implemented and nor been fully maximized.
RA 1878 abolishes restrictions on the importation of agricultural products while protecting Filipino firms against unfair trade through the strict implementation of anti-dumping and countervailing measures.
The key, if the law were to be allowed to accomplish its objectives, is honest, transparent, and conscientious implementation.
The intent of RA 8178—an Act of Congress—should not be diluted by administrative and/or department orders whose only purpose is to circumvent the spirit of agricultural tariffication.
As it is, despite RA 8178, virtual monopolies in the importation of agricultural products continue to exist. Whether wittingly or unwittingly, undue regulation, in the form of restrictions outside of what the law provides, has allowed certain quarters to grant “special favors” to a select few.
This is the kind of perversion to the Agricultural Tariffication Act that we must guard against. When, lost in implementation, a noble concept is reduced (again!) to nothing more than a tool for corruption.