Cartel’s happy days are back

“Building up the RCEF that seeks to ultimately mechanize farming is among the objectives of the Rice Tariffication Law that liberalized the grains industry.
Cartel’s happy days are back

Big rice traders have won this round, obtaining a reduction in tariffs using the uptrend in inflation as leverage.

The National Economic and Development Authority board has approved a drastic cut in the tariff on the staple grain from 35 percent to 15 percent to address rising inflation, attributed to the spike in the cost of rice.

Prices rose for the third straight month in April, climbing 3.8 percent on the year.

Global grain quotations have spiked but it is the local traders causing this since the country remains the top importer of the grain and thus dictates international prices.

Collusion with exporters in Vietnam, where more than 70 percent of the country’s rice imports are sourced, has kept global prices high which benefits the traders.

The tariff reduction, in turn, creates a double whammy for local producers as they have to compete with imports, while government support for them through the Rice Competitiveness Enhancement Fund will be slashed by P22 billion this year.

Building up the RCEF that seeks to ultimately mechanize farming is among the objectives of the Rice Tariffication Law that liberalized the grains industry. The tariff reduction and an impending law that seeks to return the importation power to the National Food Authority may, however, offset all the gains from the RTL.

The recent move’s trade-off is giving consumers a reprieve as traders can always raise prices as the cartel regains control of both the domestic and global markets.

Importers of the grain benefit from the high grain prices since lowering the tariff makes the imports way cheaper than the local produce.

Agriculture-related groups indicated that the country has thus far imported two million metric tons of rice, equivalent to 53 percent of projected imports.

The groups questioned how the government was so gullible as to fall for the maneuvering of the cartel since there is no rice shortage and thus the price spikes can be addressed differently aside from by cutting the tariff.

“If the intention of tariff reduction is for buffer stocking, we only need 12 percent of the projected rice imports or around 450,000 metric tons of imported rice. So why the need to reduce rice tariffs?” according to a stakeholder.

Farmers’ groups said the foremost effect of the slashed tariff is on the RCEF, which would have strengthened the local industry.

Rice is expensive because of a chronic lack of government support to improve rice productivity, made worse by a dependence on imported inputs.

Reports from Thailand and Vietnam said the tariff reduction is a cause for celebration among exporters in both countries.

The Vietnam Trade Office advised exporters to focus on maintaining their top position in the Philippines.

With the lower tariff, Vietnam is looking at ramping up exports to include medium- and lower-quality rice “to cater to a broader range of Philippine consumers.”

Reduced tariff benefits primarily the premium rice varieties that are consumed by the more well-off in society.

The rationale behind the RCEF was to provide targeted aid to farmers drawn from the tariff on imports, while the NFA took care of procuring from local producers and selling rice at a subsidized price.

At best, the tariff reduction was a knee-jerk response to the inflation trend that is being caused by high rice prices induced by unscrupulous forces with the aim of convincing the government to slash duties.

In the previous administration, the price of rice was kept at a manageable level as the former President went straight to the source of the problem, which was the cartel, threatening its members with a government crackdown.

Policymakers should again consider police action against the syndicates in the rice industry rather than penalizing local producers through the huge tariff cut.

Daily Tribune