LAST week, the Senate conducted another hearing on the issue of smuggling of agricultural products. As usual, it has practically become an inquisition session, with the usual detractors of the Department of Agriculture (DA) serving as "suki" resource persons. Notice that in these hearings, hardly are the processors and traders, and more importantly, consumers, invited despite decision made in this august body will also have a great impact on them.

However, I am confused because our honorable senators and their resource persons seem to be barking on the wrong tree. They blame the DA for the proliferation of smuggling activities on agricultural/food products.

From a layman's perspective, I believe that smuggling can come in three forms: misdeclaration, undervaluation and outright smuggling. The first involves a product which is imposed a higher tariff (e.g. premium pork cuts) but will be declared as a product of lower tariff value (e.g. offal or skin). In the process, the government loses money because the importers pay a lower tax for a product which is imposed a higher tax as it is considered as a "luxury" item, consumed by the rich who can afford it.

The second entails lowering the tax on a product which is imposed a higher tax rate. For instance, instead of imposing a tax rate of 20 percent, the inspecting official merely imposes a tax rate of 10 percent for monetary consideration. Expectedly, the government loses money in this transaction.

And the third is outright smuggling wherein the product entered the country without passing through our customs. The government loses money big time in this illegal activity because there are no taxes paid.

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The DA's role in the importation scheme is to inspect and issue (if warranted) sanitary and phytosanitary (SPS) clearances on imported items to protect public health and safety. Because of this function, DA officials can possibly be involved in the first two forms of smuggling but not in the third because no issuance of SPS is involved. And even if DA officials are involved in misdeclaration or undervaluation (as it issued SPS), the main agency that is responsible for the assessment of the value and nature of the imported product is the Bureau of Customs (BoC). Why is the DA being blamed foremost for the smuggling of agricultural products when the main assessment responsibility is on the shoulder of BoC?

While Republic Act 10845 or the "Anti-Agricultural Smuggling Act of 2016," did not specifically mandate BoC as the sole agency that can file criminal cases against smugglers, its rules and regulations (refer to Customs Administrative Order 2-2017) clearly authorized BoC to apprehend and file criminal charges against suspected smugglers (refer to its Sections 4.4 and 4.6). Nowhere in these legal fiats does the DA is given the police power to apprehend and file criminal charges against smugglers. In fact, in the recent confiscation of pork products suspected to be contaminated by the ASF virus, the assistance of the Philippine National Police-Criminal Investigation Division Group was sought by the DA to apprehend culprits and file corresponding criminal cases. Thus, it baffles me why the DA, without any police power granted by proper authorities, is being blamed for the non-apprehension and criminal prosecution of these smugglers?

Liberalization and smuggling

Another accusation being leveled, which verges on sheer stupidity, is that import liberalization encourages smuggling. Import liberalization lowers tariffs on imported products so that their entry can lower prices of basic food required by our consumers and tame inflation. If one lowers the tariff, there will be less incentive to smuggle because the profit to be obtained in such illegal activity will be small compared to the risk and penalty of being caught.

It is actually when tariffs are high or there is a ban on importing products demanded by the consumers that smuggling thrives. The simple reason is smugglers will gain windfall profit because they do not pay the high tax imposed on the imported product. And even if they are caught in a smuggling operation and penalized, the windfall gains from the second smuggling activity, if successful, can easily recover the loss incurred in the previous failed attempt.

A good example of this is that when we lifted the import ban and liberalized rice trading, there were lesser incidences of rice smuggling. When we liberalized imports of temperate fruits, there were lesser attempts in smuggling these products.

Why trade liberalization

Prior to the Covid-19 pandemic, the Food and Nutrition Research Institute noted that 4 out of 10 Filipino households suffered from hunger. During the pandemic, it rose to 6 out of 10. Again, it was reported that protein deficiency rises as our kids grow older and, thus, 47 percent of our children ages 13 to 17 years old are protein deficient. Moreover, almost 29 percent of children 5 years and below suffered from stunting prior to the pandemic and it has expectedly worsened during the Covid-19 era. In fact, the Philippines has the highest incidence of infant and child stunting in Southeast Asia. More recently, the Social Weather Station survey report on the hunger incidence in the country also noted a rise from 10 percent to almost 12 percent.

Why is this so? Obviously, ordinary Filipinos cannot afford to buy nutritious food because many of them lost their jobs (and hence incomes) during the pandemic. Also, prices of local food commodities are very high compared to neighboring countries.

For instance, based on the data of the Food and Agriculture Organization and the Philippine Statistics Authority, Filipino consumers pay double for pork compared to Thai consumers and 73 percent more compared to Vietnamese consumers. In addition, Filipinos are paying more than double for chicken compared to the Thais and around 44 percent higher compared to the Vietnamese. We pay more than double for the price of our domestic sugar compared to the international price.

This happened because of the long years of protection we extended to local producers in the guise of nationalism. There was no attempt to link protection to improve their efficiency and competitiveness. As a result, because the local market is a captive market for them due to protectionism, prices and the quality of our food commodities never significantly improved. In contrast, neighboring countries like Malaysia, Thailand and Vietnam tied the protection extended to their local producers to improving their efficiency and competitiveness in the world market.

It is for this reason why after almost 25 years in the poultry business, one of the resource persons in the Senate hearing was threatening that he would just close his business operations if there is a push for further liberalization of agricultural trading. Curiously, in business, if one is in the business for so many years and has not made it competitive and efficient through all those years of being pampered by government protection, either one has to close shop or shift to other business ventures. But this is not happening here because market forces are not allowed to operate in our economy because of a strong political lobby of vested interest groups who benefit enormously from protectionism at the expense of our poor and hungry consumers.

Moderating greed

Gradual trade liberalization is an instrument that will force uncompetitive firms to become competitive while at the same time benefiting the more than a hundred million Filipino consumers who have long suffered from high prices and products of poor quality.

If the purpose of policymaking is to obtain the highest benefit to the greatest number of our people, gradual trade liberalization is a must. This is particularly true in a crisis situation like this wherein half of our people are now experiencing hunger.

Should we just allow around 50 million to go hungry in order to guarantee hefty profit margins for these local producers? As policymakers, should we not force these vested interest groups to "moderate their greed" to at least serve the interest of the vast majority of our people?

Should we consider those trying to protect the interest of a hundred million Filipinos as "hayop," while those who profit from their misery our savior? Aren't these the very same people who threatened a "pork holiday and food blockade" during the height of the Covid-19 pandemic just because their profit margins were being affected by the temporary trade liberalization of agricultural products by the government, which was in response to the Covid-19 pandemic? Were they not aware that millions of Filipinos were already suffering from hunger and malnutrition aggravated by Covid-19 then but they could not sacrifice a little because it will affect their profit margins?

"Hayop talaga!"

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