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DoF defends plan to cut import tariffs on rice

By Luisa Maria Jacinta C. Jocson and Keisha B. Ta-asan, Reporters

THE GOVERNMENT’S proposal to reduce import tariffs on rice will “balance the interests” of farmers, consumers, and the poorest, Finance Secretary Benjamin E. Diokno said.

“The Executive department is currently discussing at the highest level the proposal to reduce import tariffs on rice as part of a comprehensive strategy to reduce prices for consumers and mitigate a potential shortage of the staple due to the impact of the ongoing El Niño phenomenon,” Mr. Diokno said in a Viber chat with reporters on Monday.

He made the statement amid calls by agricultural groups to reconsider the tariff cut as this would lead to an influx in imports and harm local producers.

The Department of Finance earlier proposed to temporarily reduce the 35% rice import tariff rates to 0% or maximum of 10% in order to tame prices.

Monetary Board member and rice expert Bruce J. Tolentino said cutting the tariff rates for rice imports to 0% would impact government revenues.

“The tariff should be low, not zero. We need some tariff revenue to finance the RCEF (Rice Competitiveness Enhancement Fund),” he told BusinessWorld in a text message.

The RCEF is a component of the Rice Tariffication Law (Republic Act No. 11203), which opened up rice importing to private parties, who must pay tariffs of 35% on inbound shipments of grain from Association of Southeast Asian Nations (ASEAN) countries.

Of these tariffs, P10 billion a year is allocated to RCEF for six years to modernize rice farming practices, including support for mechanization and the acquisition of high-yielding seed.

Mr. Tolentino said that lowering the tariff rates to about 10% is the “most effective and efficient” measure to lessen prices of rice.

“The current tariff of 35% on rice from ASEAN, and 50% on rice from non-ASEAN countries, is severely constraining and induces non competitiveness among domestic rice producers,” he said.

Mr. Tolentino said the lowering of tariffs should be for the long term, not temporary.

“The entire tariff structure for the Philippines should be relatively low and uniform to ensure that tariffs do not disadvantage domestic value addition,” he said.

Earlier, Mr. Diokno said the proposed cut in rice tariffs can only be approved when Congress is in recess. Congress is set to adjourn on Sept. 30 and resume session on Nov. 6.

Meanwhile, Foundation for Economic Freedom (FEF) President Calixto V. Chikiamco in a Viber message said the FEF supports the reduction of tariff rates to 0% if it’s “politically feasible,” as lower rice tariffs would be better for consumers. 

However, the tariff cut should only be treated as a temporary solution.

“The long-term and more effective solution is to promote commercial agriculture through farmland consolidation. Increasing agricultural productivity requires the application of science, technology, capital and management and we can get them only by allowing bigger and better managed farms,” he said.

Kilusang Magbubukid ng Pilipinas (KMP) Chairman Rafael V. Mariano said in a statement that they continue to oppose the DoF’s tariff reduction proposal.

“A deluge of rice imports into the local market is also not a guarantee that retail prices will decrease,” he said.

Bantay Bigas Spokesperson Cathy L. Estavillo said that the tariff reduction will only benefit rice importers and big traders.

The US Department of Agriculture projects that the Philippines will import 3.8 million metric tons  during the marketing year 2023-2024.

Ms. Estavillo said if the country imports this projected amount with only 10% or a 0% tariff, this will cost the government “billions in foregone revenues.”

Meanwhile, Roy S. Kempis, a retired professor at the Pampanga State Agricultural University, said that the proposed tariff cut and recently imposed price cap on rice would benefit consumers at the expense of producers.

“Prices will be prevented from going up with the price cap; then the tariff reduction may further reduce prices to the consumers as more rice supplies go to the market driven by imports. Thus, they complement for the benefit of consumers; but not to producers,” he said in a Viber message.

He said these policies are not sustainable since the problem with rice prices is structural in nature.

President Ferdinand R. Marcos, Jr. earlier this month set the price ceiling at P41 per kilo for regular milled rice and P45 per kilo for well-milled rice.

Mr. Kempis recommended a “government-encouraged but market-driven farmgate rice price policy regime.” The price regime would allow farmers to have reasonable margins to sustain their production, he said.

“The above rice price policy will reduce expenditures on unnecessary rice programs that based on experience have provided government assistance that farmers do not need, or have been poorly designed and executed,” he added.

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