THE IMPLEMENTATION OF

RICE TARIFFICATION LAW

Alas, Lyka
Macajig, Earlven Rose
BA POLSCI 3-C
Background of the Study
Rice is the staple food for approximately 80% of Filipinos, and it is a major
item in the consumer's consumption basket. It is the Philippines' most
important agricultural crop and a major source of income for millions of Filipino
farmers. The Philippine rice industry has always been competitive agricultural
government center policies. The policies' focal points revolve around
promoting food self-sufficiency sufficiency, resulting in a high income for rice
farmers while keeping prices reasonable for consumers  the buying public.As
rice is such an important part of all Asian economies, efficiency gains in rice
production will imply increased intensity in rice production and, in general, a
financial turn of events. Due to the high demand for rice in the Philippines,
they import rice from Vietnam, which has become the primary rice supplier to
the Philippines due to lower prices." Rice imports from Vietnam are expected
to be lower at 6.3 million MT. The country's rice demand for market year (MY)
2021-2022 is expected to increase slightly to 14.6 million metric tons (MMT)
due to higher domestic output and higher demand for the staple, according to
a Global Agricultural Information Network report. According to the Gain report,
higher production, combined with an increase in population and higher
consumption during an election year, would drive an increase in the country's
rice demand. In this case the Duterte administration passed a landmark policy
reform, Republic Act (RA) 11203, or the Rice Tariffication Law, in 2019. The
law abolished the NFA's regulatory and import functions and converted QRs
into ordinary customs duties, a process known as "tariffication.", the RTL
ended NFA's monopoly, removed quantitative restrictions on rice imports, and
replaced them with a 35 percent import tariff after more than four decades of
battles to reform the rice sector. As it aims to modernize the agricultural sector
in order to make it more competitive on a global scale. This law allows
imported rice to enter while imposing a tariff that varies depending on the
volume of imported goods. Tariffs collected on rice imports are directed to the
Rice Competitiveness Enhancement Fund under Republic Act (RA) No.
11203, also known as the Rice Tariffication Law (RTL) (RCEF). By providing
at least P10 billion per year to the RCEF until 2024, the RTL ensures that
farmers directly benefit from the liberalization of rice trading. This law
represents an opportunity to revolutionize the agriculture sector and help our
farmers become more competitive in the global economy and to lower retail
prices for consumers. The significance of this study stems from its
implimentation not only for rice and agriculture, but also for the entire
economy and the global rice market, with significant implications for the
country's general welfare, nutrition, and food security.
Statement of the problem

The goal of the study is to know if the Rice Tariffication Law which aims to reduce the price
of the country’s key staple and, in anticipation of its potential adverse impact on palay
farmers, mandates an annual Rice Fund as production support and other assistance to rice
farmers.
Does the implementation of RTF been effective on reducing the price in the country?

 What will happen to the price of rice?

Discussion /Arguments

The primary provisions of Republic Act No. 11203 or the RTL, Rice Tariffication law are as
follows: first, it substitutes quantitative restrictions (QR) on rice importation with a tariff. Prior
to this law, there was a maximum amount of rice that can be imported, and all importation
was controlled by the National Food Authority (NFA) (NFA). There is no longer a limit on the
amount of rice that may be imported. Imported rice, on the other hand, is subject to a 35%
tariff if exported by an Association of Southeast Asian Nations (ASEAN) country, a 40% tariff
if imported from non-ASEAN countries within the 350,000 mt MAV, and a 180% tariff if
imported from non-ASEAN countries above the 350,000 mt MAV. (PhilRice, 2019, "Rice
Tariffication Law," 5) Although they differ, quantitative limits, tariffs, and subsidies are all
forms of protectionist policies aimed at shielding local producers from the more competitive
global market.

Second, the tariff revenue will be used to establish the Rice Competitiveness Enhancement
Fund (RCEF). It is required that P10 billion be allocated for the improvement of the rice
industry over a six-year period. P5 Billion should be utilized to fund machinery and
equipment, P3 Billion for the technological improvement of seeds, P1 Billion for loan
assistance, P1 Billion for extension activities. (Yacub, 2019)

Although the law has impacts to other stakeholders, the two primary stakeholders that are
explored by the theory, and consequently this article, are the rice consumers and rice
producers or farmers.

Benefits that the customers can get:

 Cheaper Price

Filipinos spend more than twice as much for rice as our neighbors. In 2018, the Philippine
price of well-milled rice was P45 per kilo, whereas the Thai price was just P22 per kilo
(PhilRice, 2019, "Rice Tariffication Law", 7) Increased imports will lower prices since we will
have more access to more competitive choices. According to PhilRice, the Bangko Sentral
ng Pilipinas (BSP) and National Economic and Development Authority (NEDA) claim that
prices will fall by P2-7 per kilo. (PhilRice, 2019, "Rice Tariffication Law", 7) According to
some reports, the price could fall as low as P27 per kilo. (Rivas, 2019, "Rice prices remain
depressed")

 Effects on Inflation

This is also expected to slow down inflation. Rice prices have remained stable (with) a
negligible effect on inflation. We also offer a wide variety of rice to pick from. Rice accounts
for 9.6% of the Consumer Price Index (CPI), making it the most weighted individual
commodity in the CPI. (Bangko Sentral ng Pilipinas, 2019) The government anticipates that
the removal of QR will result in a 0.6% reduction in headline inflation this year. (2019, De
Vera)

 Reducing poverty

Lower rice prices will benefit people living in poverty the most. Rice accounts for around 20%
of the family budget in poor homes. (PhilRice, 2019, "Rice Tariffication Law", 9) Lowering
rice prices would allow for greater spending on other items.

A research from DLSU created simulations on potential policy acts and their consequences
on poverty and income disparity. (Cororaton and Yu, "Poverty and Distributional") The SIM 3
results, in which the quantitative restriction is replaced by the tariff equivalent, which is
48.9%, and lower income households receive the tariff revenue, show that the poverty
incidence will decrease by 1.587%, or 394,000 people. (Cororaton and Yu, "Poverty and
Distributional Analysis").

It is crucial to note, however, that these two simulations are a bit different from the legislation
since the baseline tariff rate for ASEAN nations is 35%, and tariff income do not go directly
to consumers but is used for enhancing rice yield.

According to the National Nutrition Survey, as quoted by PhilRice, 1 out of 3 Filipino children
under 5 years old are stunted. (PhilRice, 2019, "Rice Tariffication Law", 9) Increasing rice
access would mean that approximately 4.2 million children would have access to better
nutrition. (PhilRice, 2019, "Rice Tariffication Law", 9) This is helpful not only for the wellbeing
of children, but also for the growth of our country's human capital.

Benefits that the farmers can get:

 Increasing productivity

The Rice Competitiveness Fund (RCEF) aims to boost our rice industry's productivity.
According to Bordey, as stated by PhilRice, the DA's goal is to produce 6 tons per acre at a
cost of P8 per kilo. Currently, our farmers can produce 3.87 tons per hectare at a cost of P12
per kilo (PhilRice, 2019, "DA targets a"). (PhilRice, 2019, "DA targets a") When comparing
our crop yield, which measures farm output per unit of area, from 2012 to 2014 to some of
our ASEAN neighbors like Indonesia, Malaysia, Thailand, and Vietnam, we ranked third in
rice production, trailing only Vietnam and Indonesia, which rank first and second. (Dy, 2017)

Increasing mechanization and developing other agricultural innovations should improve our
efficiency in producing rice. Only two-wheel tractors and axial threshers are used in the
Philippines to mechanize land preparation and threshing. (Bordey, Moya, Beltran, & Dawe,
2016, 82) We also have a low rate of adoption of combine harvesters, which have been
shown to improve labor efficiency and reduce post-harvest losses by 2.2% when used.
Bordey, Moya, Beltran, and Dawe (2016).

 Increasing real income

Cheap rice benefits rice farmers as well, as they are consumers. (PhilRice, 2019, "Rice
Tariffation Law", 8) Over half of the 2.9 million rice farming households are classified as
small holders, which indicates they cultivate less than one hectare and are net rice
consumers. (PhilRice, 2019, "Rice Tariffication Law", 8) Rice farmers would also need to buy
rice during non-harvest seasons. Lowering rice prices may thereby enhance their actual
income (PhilRice, 2019, "Rice Tariffication Law", 8). (PhilRice, 2019, "Rice Tariff Law," p. 8)

Conclusion

Recommendation

A Review of Rice Tariffication in the Time of COVID-19: Rationale and Road to Rice
Self-Sufficiency in the Philippines

In view of the foregoing, the Philippine Senate and House of Representatives are called
upon to consider repealing Rice Tariffication Law (2019). Although the law is yet to be
repealed, the Philippine government should rechannel tariff payments collected from rice
imports to activities that will implement the other policy recommendations outlined in this
paper. In coordination with other government agencies that have vital connections with the
agriculture sector, the Department of Agriculture should spearhead the plan to strengthen
the domestic rice industry through direct financial aid aimed at modernizing it to improve
yield and overall productivity towards rice self-sufficiency. For its part, the Department of
Trade and Industry, National Economic and Development Authority, and other related
agencies should revitalize and reorient the country’s industrialization plan to encompass the
needs of rural industrialization. The Department of Energy should include rural solar
electrification in their future renewable energy plans to help lower the cost of agricultural
mechanization and rice harvesting and processing. Meanwhile, universities and the
Commission on Higher Education should seriously engage with farmers’ cooperatives
towards the goal of producing more agriculture-oriented research focused on increasing
yields, boosting productivity, and planting sustainably (see Dr. Sabio’s conceptualization of
Freedom University in Amado V. Hernandez’s novel Mga Ibong Mandaragit/Birds of Prey,
1982). The Cooperative Development Authority should provide seed capital meant to
organize farmers into farmers’ cooperatives, as cooperatives will ensure that the farmers are
able to benefit much from the gains of a revitalized domestic rice industry (on the potentials
of a vibrant cooperative movement; see Rolland, 2006; Flecha & Santa Cruz, 2016;
Lebowitz, 2014; San Juan, 2016). It must be emphasized that profits of cooperatives are
exempted from taxes in the Philippines; thus, encouraging and helping farmers to establish
their cooperatives will also help them financially. Surveys on the average price of farm inputs
(seeds, fertilizers, etc.) and studies on policies to further lower the price (or subsidize) inputs
should be accomplished. Studies on actual retail rice price in public markets are also
recommended to improve data collection used in comparing rice prices. Such data will be
necessary to check if official average prices do reflect local realities. A closer comparative
look at the land reform experiences of the Philippines vis-à-vis that of its neighboring
countries (especially rice-exporting or high-yield countries) should be done as a possible
way of explaining (and hopefully reversing) the Philippine rice industry’s lack of
competitiveness. Related to bolstering academe-agriculture sector practical research
linkages, a review of agriculture-related programs in Philippine universities and consequently
benchmarking with countries with strong agricultureoriented universities is also in order.

References
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over-2019-2021-period/ 

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