Importers are batting for the extension of Executive Order 171 to counter the continuing adverse impact of the Russia-Ukraine war on consumer prices, but local producers strongly opposed the petition stressing the reduced import tariff did not benefit consumers and it is time to protect local agriculture, as what other economies are doing, to ensure food security in the country.
EO No. 171 extends the validity of EO 134 and 135, which lowered the most favored nation (MFN) tariff rates for the importation of pork and rice up to end December this year. The EO also reduces MFN tariff rates for corn to 5 percent in-quota and 15 percent out-quota, citing that corn accounts for more than 50 percent of the total production cost of large-scale broiler and swine farms. To help maintain or lower electricity prices, EO No. 171 also temporarily eliminates the 7 percent MFN import tariff rate on coal as it is an important raw material in the generation of electricity.
At the virtual public hearing conducted by the Tariff Commission, petitioner Foundation for Economic Freedom (FEF), a private think tank that filed the petition on behalf of the importers, has urged for the extension of EO 171 at least until the end of 2023. Based on FEF presentation, if the EO is not extended, the price of pork is expected to rise to P400 a kilo from the current P340.
From the producers’ side, Raul Montemayor, national Manager of the Federation of Free Farmers Cooperatives, Inc. (FFFCI) and member of the National Policy Board of the Federation of Free Farmers (FFF), a national farmers union which is the mother organization of the FFFCI, stressed that reduction in tariffs on non-ASEAN rice imports did not, and will not, significantly diversify sources of rice.
FEF cited diversification of rice import sources as one reason to extend the EO 171 to include other non-ASEAN sources, which are currently slapped with 50 percent tariff as against ASEAN countries at 35 percent.
But Montemayor said that Pakistan and India, the most likely sources of imported rice, cannot supply rice to the Philippines. Montemayor said that India bars rice exports, while the flooding in Pakistan has reduced plantings and limit its rice exports in coming periods.
Besides, he said, Pakistan is still competitive at 50 percent tariff level because it is largely exporting specialty rice that are offered in high end hotels and restaurants. By opening reduced import to tariffs to non-ASEAN will only benefit mostly consumers of premium rice grades or importers and traders.
There is also no correlation between reduction in non-ASEAN rice tariffs and rice retail prices, he said showing stable prices of rice in 2021 and 2021 to debunk claims that it is one source of inflation. “It unfair to place burden of inflation control on the backs of farmers,” he pointed out.
Citing data from the Bureau of Customs, he said foregone tariffs from the reduced rice tariff hit P111.102 million in June-Dec 2021 and P389.548 million in the Jan-Sept. this year or a total of P500.651 million.
In addition, he said, tariff reduction together with continued and worsening undervaluation of imports has resulted in huge tariff undercollection and lost funding for farmers. He placed total foregone revenues due to import undervaluation at P5.211 billion for the Jan-Sept. 2022 period alone.
Meantime, FEF admitted that although the lowering of tariff rates on pork did not lessen the retail prices of pork from the 2021 value, EO 171 significantly slowed down the rate of increase of the retail price of pork in 2022 vis-à-vis he no tariff rate reduction scenario.
On the projection by FEF that prices of pork ko rise to P400 a kilo from the current P340 if EO 171 is not extended, Samahang Industriya ng Agrikultura (SINAG) President Rosendo countered as he gave assurance that local producers will not raise prices of pork to P400 a kilo, but rather maintain the current P340 a kilo price.
The FEF further said that given the lower actual retail prices of pork due to EO 171, the total consumer benefits or savings are approximately P108 billion from April to December 2022.
In addition, FEF data collated from various sources showed that total consumer benefits or savings due to the lower retail prices of pork, chicken and eggs because of reduced prices of yellow corn are estimated to be approximately P4.2 billion from April 2022 to Dec. 2022.
Vitarich Corp., one of the Philippines' leading integrators and feeds manufacturers, expressed support for the FEF position citing the need for stable supply of yellow for feeds production.
The Tariff Commission has required all interested parties to submit their position no later than Nov. 16, 2022.
TC Chairman Marilou P. Mendoza assured the parties that TC will come up with evidence and data-based decision.