PRESIDENT Duterte ordered the suspension of rice importation in early April supposedly to protect the country’s farmers. This announcement was made during his visit to farmers in Nueva Ecija where he instructed Secretary Manny Piñol to do the necessary.
Rice is a staple food for Filipinos around the world. It is so integrated in our culture, history and of course, diet that our country is even host to the International Rice Research Institute (IRRI) since 1959. Being host to IRRI brought so much pride to our country then because of leadership in rice science and research.
The Philippines recorded net imports of rice for the longest time. This practice was considered by Filipinos as embarrassing.
This year, the quantitative restriction (QR) which is essentially an import quota on rice will already expire. The QR limits the volume of rice that can be imported by the Philippines annually. Any kind of restriction of trade like tariffs and quotas are protectionist measures. In this case, QR is intended to protect local rice farmers from cheaper imported rice.
In a recent report of the Philippine Institute of Development Studies (PIDS), it was found out that rice that is produced abroad are cheaper than those which are produced domestically. This difference is attributed to the lower cost of palay production in other countries than here in the Philippines.
One reason for this cost difference is geography. The countries that are exporting rice have wide flat plains watered by large river systems which makes it more suitable for agriculture. Countries like India which has the Ganges River, Thailand which has Chao Phraya, and Vietnam which has Mekong River.
Meanwhile, the Philippines is an archipelago, surrounded by oceans which cannot be used for watering agricultural crops. As a result, the cost particularly in irrigation goes up before enough rice is produced to address the domestic demand.
Another reason that makes the cost of rice production here is that there is a collusion within the supply chain, thus creating a rice cartel dictating essentially higher prices.
Inasmuch as we really would like to be self-sufficient especially in rice production, it is not something that is desirable nor practical for the Philippines, according to the Foundation for Economic Freedom (FEF).
FEF suggested is forging a rice security pact with our fellow Asean members to guarantee rice supply in case of a shortage. This is an alternative to the President’s call to disallow importation by both private importers and the National Food Authority.
However, the PIDS policy report provided two options. The first one was to extend the QR for two more years. This is to give enough time for our rice farmers to become more competitive. At this point in time, there are subsidies that have increased in amount intended to support farmers, particularly for the National Irrigation Administration (NIA).
The Department of Agriculture is also undertaking necessary programs for the agricultural sector, including rice production. These are indications that there is sufficient production support for rice and other agricultural products.
Why two years? It is because the effect of these policies and programs are not immediate. We may have to wait for a few years before the full effect of the policy changes are felt. We may experience severe shortage of rice if we cut importation immediately without assurance that the rice supply can address the domestic demand.
Another option presented by the PIDS is imposition of tariffs. Tariffs are taxes imposed on imported products. The tariffs collected on the importation of rice should be earmarked to become safety nets for rice farmers, especially to mitigate the adverse effects of the increase in imports like much lower domestic price.
Without the QR, importation of cheaper rice will increase thereby pushing the price of rice further down. This will benefit the consumers but will negatively affect the farmers, that’s why there are safety nets installed. This is to basically compensate the farmers’ loss of income.
Bottomline is, despite the seemingly high supply of rice, we are still bound to import rice because the domestic supply cannot suffice the domestic demand. Disallowing importation altogether may result to problems in supply within the country.
In the end, we will still import rice and some people who ordered the stop of importation to take their word back because they did not think about it before giving impossible promises to the hopeful farmers.