“Don’t Mislead The President;
Lower Rice Tariff Wrong Move!”
Dear Sec. Arsing,
While I did not have the opportunity to work with you when I was Secretary of Agriculture, several co-workers in the Department of Agriculture who knew you gave me the impression that you are a hardworking and sensible government worker.
Your recent move, however, to recommend to President Ferdinand R. Marcos Jr. the reduction of Rice Importation Tariff from 35% to 15% “to bring down rice prices in the market” made me doubt whether the “sensible” description that they made of you was accurate.
I cannot understand how you came up with the idea that reducing Tariff on Rice Importation would mean lower rice prices because this simply is not supported by historical data.
Take a look at this graph which I attached to this post which showed the volume of Pork Importation which increased from 256,020 metric tons in 2020 to 710,360 metric tons in 2022.
The meteoric rise in the volume of Pork Importation was mainly because of two reasons:
- The devastation of the Hog Industry by the African Swine Fever;
- The reduction of In-Quota Tariff to 15% and Out-Quota Tariff to 25% which the Senate approved based on the recommendations of the Economic Managers then headed by Finance Sec. Carlos G. Dominguez to tame rising pork prices in the market.
Did it work? No!
While importers benefited from the reduced tariff, Pork Prices in the market continued to rise because there was no mechanism to ensure that the Pork Importers would be obliged to cascade the benefits of a reduced tariff to consumers.
Today, the price of Pork in the market hovers between P420 to P450, up by about P150 per kilo since 2020.
This was the same monumental blunder that Dominguez and his Economic Team committed when they convinced President Rodrigo Duterte to sign the Rice Tariffication Law promising that it would reduce rice prices in the market by P7 per kilo.
At that time, the price of rice (prior to the “artificial rice shortage” which was part of the drama to justify the RTL) was only P38 per kilo.
Today, rice prices are in the range of P50 to P60 per kilo in spite of the fact that the volume of importation rose from 850,000 metric tons in 2017 to 3.6-million metric tons as of last year.
The formula and the projections failed because of one simple reason: GOVERNMENT DOES NOT CONTROL MARKET PRICES.
You know that Reducing Tariff will not result in lower prices because of market realities where supply and trading of pork, chicken, rice and other food items are controlled by traders.
Instead of benefiting government and consumers, your recommendation will be detrimental to our government and our agriculture sector because of the following:
- Reducing Rice Import Tariff from 35% will mean revenue losses amounting to an estimated P15-B every year. That is a lot of money which if properly utilized could improve agricultural productivity;;
- Reducing Tariff would encourage importers to bring in more rice which would be sold at the same price as today but which would dampen the planting intentions of Filipino rice farmers.
It will be a double whammy which would affect government revenues and farmers’ productivity.
The RTL blunder must not be repeated and you as the major Economic Adviser of the President must not make the same mistake committed by Dominguez who misled President Duterte.
Please review your numbers and projections and match these up with realities on the ground and I am sure you will agree with me that Lower Tariff and Increased Importation do not translate to reduced prices in the market.
Sincerely,
Manny Piñol
