RICE QUOTAS VIOLATE WTO PACT – DE LIMA

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Justice Secretary Leila de Lima believes that rice quotas imposed by the Department of Agriculture (DA) and National Food Authority (NFA) allowing government to monopolize the importing of rice may have violated the terms set by the World Trade Organization (WTO).

In her 12-page confidential opinion dated December 16, 2013, a copy of which was obtained by The Manila Times, de Lima advised Agriculture Secretary Proceso Alcala and the NFA that the Quantitative Restrictions (QR) on rice can no longer be imposed until negotiations for its extension are concluded.

De Lima said that in issuing her opinion, she risked being held in contempt by a Manila court that is hearing a petition against the restrictions. For that, she said the document should not be made public.

“Said opinion could be construed as an unlawful intrusion into the exercise of judicial powers and functions pertaining to a separate and coordinate branch of government and could subject this Department to criticism for violation of the independence of the judiciary, not to mention the judicial courtesy accorded to all courts,” she wrote on page two of her opinion.


She added that the document is only for Alcala’s “information and guidance.”

On December 14, 1994, the Senate, through Resolution 97, “pursuant to Section 21, Article VII of the Constitution, concurred in the ratification by the President of the Agreement” establishing the WTO, she said.

The WTO first granted the Philippines a 10-year “special treatment” for rice starting in 1995. Before the arrangement ended in 2005, an extension was granted in 2004. It lapsed on June 30, 2012.

Even before current negotiations for a second extension until 2017, the country had twice been denied appeals to postpone the special treatment expiration. The DA and the NFA, however, insist that the authority to implement the QR remains in effect during the course of the negotiations and unless challenged by WTO member countries.

With the expiration of the special treatment provision under the agreement, the DOJ cautioned the DA and the NFA against insisting on the continued implementation of the “quantitative import restrictions” and “discretionary import licensing.”

“Therefore, it is our opinion that the WTO provisions on the lifting of QRs as well as their exceptions, and the provisions on negotiations for its extension are already effective and should be complied with,” de Lima said.

“It is not for nothing that the Philippine Government gave its consent to the WTO,” she pointed out.

Annex 5 of the WTO agreement cites that the special treatment holds only during the 10-year “implementation period” from 1995 to 2005, and until the extension of that period, which ended on June 30, 2012.

Blind

In several public statements prior to and after the issuance of the DOJ opinion, agriculture officials maintained that the NFA has “continuing authority” to impose QRs by virtue of the “Agricultural Tariffication Act” (Republic Act 8178).

Supposedly, Section 5 of RA 8178 authorized the NFA “to establish rules and regulations governing the importation of rice and to license, impose and collect fees and charges for the said importation . . .”

This interpretation has been seen as the source of a seeming clash between local administrative regulations and international agreements, a view not shared by the DOJ.

“We are also quite aware that said law also gives the NFA [such]power[s]. . . However, in the exercise of such rule-making power, the NFA cannot close its eyes to the provisions of the WTO Agreement, which, by the acts of both the President and the Senate, became part of our body of law,” de Lima wrote.

The NFA “cannot pick and select which to honor and which to disregard. It cannot derogate from the terms that the President agreed to and the Senate concurred in,” she added.

De Lima noted that these agencies have “closed their eyes” to the country’s commitments under the WTO agreement, “picking and selecting” which provisions “to honor and which to disregard.”

At around 9:30 a.m. on January 2, 2014, the Bureau of Customs-Office of the Commissioner (BOC-OCOM) received a copy of de Lima’s opinion, addressed to Agriculture Secretary Proceso Alcala. The copy was assigned OCOM bar code number 1400023.

However, Customs and Agriculture officials denied knowledge of the existence of such an opinion, which may imperil the government-to-government (G2G) rice importation program of the DA.

De Lima said “the WTO provision on the lifting of QRs . . . are already effective and should be complied with.”

“Since the Philippines’ request for the extension of its QR on rice until 2017 is still pending, and there is thus no existing agreement to ‘extend’ such authority [or more accurately, grant a new one since the first one had already lapsed], the Philippine Government should honor and implement the effect of the expiration of the period granted to it,” she said.

Agreements must be kept

Supposedly, under the principle of pacta sunt servanda (latin for agreements must be kept), the country is bound by these provisions and could not impose restrictions unilaterally. To do otherwise, according to the DOJ, was an overestimation of the powers of the NFA and violates domestic and international laws.

“To renege on this agreement, consent to which was manifested by the act of both the President and the Senate in accordance with the Philippine Constitution, is beyond the power of a mere implementing agency like the NFA, which must exercise its rule-making and regulatory powers in accordance with, and not contrary to, applicable laws,” de Lima noted.

Earlier, Government Corporate Counsel Raoul C. Creencia warned NFA officials that the Philippines risks sanctions from the WTO if the government continues to impose the QR. Creencia advised the NFA in a February 3, 2014 letter that “other WTO member countries, which may be prejudiced by NFA and the country’s action on rice imports, may file a dispute.”

Warnings

Several top economists from the University of the Philippines have called for the abolition of import quotas, citing the increasing costs of rice in the market.

Dr. Roehlano Briones of the UP School of Economics and the Philippine Institute for Development Studies, the top think tank in Southeast Asia, said “consumers will benefit from cheaper rice” with the removal of the QR and the levying of moderate tariffs.

“The country should not seek for an extension for the QR in rice imports. Any licensed importer should be allowed to make his own commercial decisions, subject to payment of tariff and compliance with sanitary and phytosanitary standards,” Briones said.

His views are shared by National Economic and Development Authority (NEDA) Director General Arsenio Balisacan, who is also for the abolition of quantitative restrictions with some tariff protection.

The Philippine Statistics Authority-Bureau of Agricultural Statistics (PSA-BAS) has reported that rice prices today are 13 percent to 14 percent higher than last year’s. Well-milled rice retails for P40.06 per kilogram, and a kilo of regular-milled rice, P36.75.

Agriculture officials have told the Senate that quotas will protect the country’s 2.5 million farmers. The Senate hearings, which have shifted its focus from spiraling rice prices to rice smuggling, resume today.

However, UP economists have repeatedly pointed out that the protection of rice producers come at the expense of consumers, who are the “losers” under the current rice importation policies.

Former NEDA chief and Prof. Emeritus Gerardo Sicat said those who benefit from the government’s protectionist policies “are producers who can exclude market competition with government help” as well as rice smugglers who “make huge profits when high tariffs are in place.”

“The fact that low cost producers of rice in Southeast Asia can produce rice at a large advantage should be seen in another light: we can buy cheaper food for our people. The gains will be for the people, the consumers.”

According to UP School of Economics Dean Ramon Clarete, while NFA’s import controls are meant to protect local rice producers, this means Filipino consumers have to pay 40 percent more for rice.

“If [we buy]imported rice, we will pay 40 percent less. That is the effect of import restrictions,” Clarete explained.

Sicat stressed the need to “balance a wise import policy for rice” with “a domestic production program that helps our domestic farmers to produce rice.”

“Such a program includes higher investments in agricultural infrastructure, government price support and credit, and technical extension. Under this framework, rice farmers of high quality rice and high productivity can find niche markets even for export,” he said.

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2 Comments

  1. Either NFA / DA officials are ignorant of the WTO law or just pretending to be ignorant so they can continue their cash making program.

  2. An agriculture country like the Philippines that taught Thailand how to plant everything from rice to fruits and vegetables has an idiot for a president if it imports rice for domestic consumption. The country should be self-sufficient in rice a long time ago.