Amend the Rice Tariffication Law now!

The Federation of Free Farmers (FFF) presents the following brief to explain the urgent need for major revisions in Republic Act No. 11203 or the Rice Tariffication Law (RTL).

1. RTL’s claimed benefits are overstated and deceptive:

a.  During RTL’s first three years (2019 to 2021), rice retail prices fell by an average of P6 per kilo, but only if compared to the exceptionally high prices during the rice crisis in late 2018.

b.  When analyzed against prices in 2017 (a more normal pre-RTL year), the above-cited average drop is only about half a peso for both regular milled rice (RMR) and well-milled rice (WMR).

c.   RTL hurt poor consumers in particular—they spent P12/kilo more for the same RMR they had previously bought from NFA at P27/kilo. About 87 percent of imported rice were premium grades sold to well-off consumers.

d.  For farmers, palay prices decreased by an average of P1.37/kilo vis-a-vis 2017 levels, causing cumulative losses of P66 billion and an income decrease of P4,657 per hectare per season.

e.  Most of the gains from cheaper rice imports were captured by market intermediaries.

f.   Undervaluation of rice imports was rampant, resulting in an estimated P12 billion in tariff undercollections to date.

g.  While palay output reached a historic high in 2021 of 19.96 million tons, this was only 3.5 percent more than production in 2017. Population growth actually outpaced the rise in domestic output, resulting in greater dependency on rice imports.

h.  Yields in 2021 were just 3.7 percent better than in 2017. The current average of 4.15 tons per hectare is still way below the minimum 5 tons (100 cavans) per hectare needed to be competitive against imports.

i.   There is no reliable and up-do-date information on whether the estimated P40 billion spent for rice farmers under the RTL’s Rice Competitiveness Enhancement Fund (RCEF) have really reduced farmers’ production costs and improved their competitiveness.

2.  Changes in the RTL should aim for:

a.  Proper management of imports and supply to ensure stock availability, while avoiding supply gluts that unduly depress palay prices.

b.  Ensuring that gains from lower import prices actually benefit consumers.

c.   Giving timely and effective relief to farmers negatively affected by the law.

3.  To properly manage imports and supply, the following can be undertaken:

a.  Timely and accurate monitoring of stock levels, import volumes, and prices.

b.  Reinstate the issuance of import permits and licensing of accredited importers as tools for tracking and managing imports.

c.   Manage the issuance of sanitary and phytosanitary import clearances (SPSICs) to avoid supply gluts, particularly at harvest time.

d.  Use the minimum access volume (MAV) mechanism to better manage imports from non-Asean sources by adjusting MAV quantities and tariffs as deemed necessary; rescind Executive Order 171, which cut non-MAV tariffs to 35 percent.

e.  Streamline the process for imposing safeguard duties, and amend RTL so that government can temporarily ban rice imports during import surges (allowed under R.A. No. 8800 and World Trade Organization rules).

f.   For food security purposes, allow NFA to import rice and distribute limited volumes, subject to strict controls and parameters so as not to disrupt the normal operation of markets.

g.  Alternatively, empower NFA to purchase a certain percentage of private sector imports for NFA’s buffer stocks (buying price to be equal to the import price declared by importers).

4.  To ensure that consumers truly benefit from cheaper imports, we can:

a.  Restore NFA’s powers to inspect warehouses and apprehend hoarders and price manipulators.

b.  Provide alternative sources of rice for consumers (including electronic trading systems, whereby farmers can sell directly to consumers using NFA and private warehouses as depository and logistic hubs).

c.   Authorize NFA to sell subsidized rice to targeted sectors.

5.  To extend more timely and effective assistance to affected farmers, we can:

a.  Reconfigure the RCEF and other tariff collections to support interventions that are location-specific and can be dynamically adjusted as farmers’ needs change over time.

b.  Maximize tariff collections by plugging loopholes that encourage undervaluation, misdeclaration and outright smuggling of rice imports.

c.   Aside from its buffer stocking functions, strengthen NFA’s capacity to prop up palay prices through strategic procurement (if necessary).

d.  Give incentives for local government units to provide marketing support to their farmer-constituents.

e.  In helping farmers acquire needed farm inputs and implements, allow them to select their preferred types and brands (“farmers’ choice”).

6.  Repeal or amendment of RTL

a.  Repeal of RTL and a unilateral reinstatement of quantitative restrictions (QRs) on rice will require renegotiation of our obligations under the WTO and entail payment by way of concessions to some negotiating parties/countries.

b.  Repeal may not be necessary, if amendments can ensure proper management of imports and supply situation, and adequate protection for rice farmers.

Raul Montemayor is the National Manager of the Federation of Free Farmers