MS 30th Anniversary XXX

June 30, 2017

I checked in at 1:25 p.m. for a flight that was to leave at 4:45 in the afternoon last Monday because I was afraid of the long lines in the immigration counters.  My travel companion was not a senior citizen, which meant he had to line up with OFW’s, millennials and all other Philippine passport holders who do not qualify as senior citizens.

But what a pleasant surprise! There were no long lines at the BID checkpoints.  Thinking it was just happenstance, I asked the female security guard, and she said with a smile that it was like that even in the morning.  The Immigration counters were properly manned. 

Quick action, and hopefully a permanent solution is in sight.

* * *

 June 30, 2017 is the cut-off date for the country to lift quantitative restrictions on the importation of rice.  To explain:  Since 1995 when we acceded to the GATT-WTO treaty on free trade, we were given 10 years within which to make our rice production more freely competitive in the world market.  Within such time, government could impose restrictions on the quantity of imports of the staple cereal.  Within the same period, we were supposed to make our rice farmers produce more yield per hectare, thus increasing national production, enough to feed our people.

In 2004, despite modest increases in per-hectare yield, from 3.2 tons or roughly 65 sacks to 70 sacks each containing 50 kilos, we were neither self-sufficient nor price-competitive.  Why so?

Because demand for food increased along with the uncontrolled growth of our population.  We consume, by the way, an average of 135 kilos of rice per person per year.  In comparison, the Japanese consumer eats only 68 kilos of rice per year. “Unli” rice because viands are too expensive.

And second, we did not produce enough at economically competitive cost as against our Asian neighbors.  Thus, it is easier to import from Vietnam, which produces three crops per year, as against our two crops on irrigated fields, and once a year in rain-fed land.  Or Thailand, or Myanmar, Cambodia, India and Pakistan.

Ten years passed, and we were not ready for our commitment to free trade.  So our government asked Geneva where the World Trade Organization is headquartered, and we got seven more years.  In return, we had to allow other countries to export meat and poultry, on top of a minimum access volume of 375,000 metric tons per year.  One half of that volume we could import only from the US, Thailand, China, Vietnam, India, Pakistan and Australia at varying quantities each year.  The other half we could import from any other country we could source from.  Country-specific versus omnibus origin.

By 2011, despite a much-trumpeted self-sufficiency goal come 2013, our rice yield was 3.85 tons per hectare.  Lower than Thailand, much lower than Vietnamese farmers yield per hectare.  Again, why so?

Because out of four million hectares of land dedicated to rice, only 1.43 million was irrigated.  Palay, from which our rice is milled, requires 5,000 liters of water to nurture one single kilogram.  One shocking discovery was that when Ferdinand Marcos left the country, 1.35 million hectares of palay fields were irrigated through efforts of President Elpidio Quirino down to Marcos.  All those years after Marcos, or from Cory Aquino to when Benigno S. Aquino III became president, the number of irrigated ricelands increased by a scant 80,000 hectares.  More than 2.5 million hectares were still rain-fed.  So when a severe El Niño strikes, as in 1997, we have to import so much.

Truth is, but for a few years in the late sixties and early seventies, we have always been importing rice as far back as 1897.

So in December 2011, we went back to the WTO and filed a waiver so as to ask for an extension of the QR.  Nine countries asked to negotiate for trade concessions in exchange for approving the extended period of five years. 

As head of the negotiating team, I found China the easiest country to deal with even if at the precise period I went to Beijing, we were eyeball-to-eyeball on Scarborough Shoal.  The Thais and the Americans were the toughest to negotiate with.  The net result was that we have had to increase the minimum access volume of rice imports from 375,000 to 825,000 tons each year until June 30, 2017. 

That meant private importers duly accredited by the National Food Authority could import that much from specific countries who agreed to the waiver, on top of allowing MAV for pork and poultry, and other food items as well.  Nothing comes without a quid-pro-quo in the WTO.  They then pay the Bureau of Customs a tariff equivalent to 40 percent of the cost of their imports once they show an import permit from the NFA.

But come 30 June this year, QRs will have to be lifted.  Anybody can import without going to the NFA, except for phyto-sanitary inspection on the edibility or food safety quality of their rice imports.  All they have to do is open their letters-of-credit with their banks, and pay customs duties, which is reducible 5 percent each year if imported from an Asean member-country.  At what tariff rate, our government has yet to define, but no more quantitative restrictions.  Protection can be done only through tariff imposition. 

The upside of this free trade agreement is that consumers ought to be able to buy their rice at lower prices, except when there is a world-wide shortage of the staple.  As has been established earlier, Indo-Chinese rice is much cheaper than local produce, freight and handling costs included.

The downside is the plight of our rice farmers.  NFA cannot buy enough from them because it is saddled with debt, and neither Congress nor the economic managers can give them enough.  The 4 billion annual subsidy allocated to NFA can buy only 235,000 metric tons of palay at 17 pesos per kilo.  And our rice farmers produce a total of 18 million tons of palay each year.

Also, the private traders buy palay at P18 to P20, depending on quality.  If NFA were to match this, then it needs more money, and it simply does not have. 

If we want to lower the cost of production so that the local rice farmers can compete with their Vietnamese counterparts, government will have to subsidize irrigation (President Duterte wants NIA to stop collecting irrigation service fees), hybrid and/or quality seeds, and fertilizers.  As well as crop insurance to shield farmers from typhoons and other calamities.  All these require taxpayer money.

So should we be afraid of June 30, 2017?  Yes and no.

It may be a catalyst for agricultural modernization and generating economies of scale in our agrarian reform minimalized land system.  And it should mean lower, or at least stable rice prices for the consumer.

But government must prepare.  And time is no longer its friend.

Especially with all the ruckus we are seeing in the relevant agencies.

Topics: Lito Banayo , June 30 , 2017 , importation of rice , National Food Authority , NFA
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