Businessmen are strongly urging the government to ensure that the ongoing comprehensive tariff review and reform by the Tariff Commission (TC) should result in reduced corruption in the agriculture sector and accessibility of products at cheaper prices to ensure food security in the country.

The Management Association of the Philippines (MAP) on Tuesday, Aug. 15, issued a statement signed by its president Benedicta Du-Baladad, in light of the ongoing move by the TC to review and reform the tariff structure of the Philippines. The review seeks to adjust all products/tariff lines falling under Chapters 1-97 of Section 1611 of the Customs Modernization and Tariff Act for tariff schedule of most-favored nation (MFN) 2024 to 2028. MFN refers largely to imports from countries where the Philippines has no free trade agreement.

Foremost in the position paper is for government to “move towards achieving a tariff structure that supports food security for Filipinos, especially accessibility and affordability of competitively priced food, via low tariffs on food products.”

The business group also said that the review should be able to strengthen sustainable agri-food value chains, especially domestic agricultural value-adding enterprises including processing, storage and logistics, through a rational tariff structure where tariff rates on inputs do not exceed those on finished products.

In addition, MAP said the tariff review should be neutral across industries and avoids distortions and unwarranted protection arising from tariff peaks, currently seen primarily in agricultural products.

Removal of existing peaks and achieving low uniform rates in a tariff structure that provides equal incentives across domestic industries will encourage more and wider agricultural processing and value-adding, help control inflation, and enhance the country’s food security, the group stated.

Notably, MAP said the review should result in reduced incentives and opportunities for corruption and smuggling.

This can be done by unifying Minimum Access Volume (MAV) and non-MAV tariff rates, and keeping tariffs relatively low and uniform across all goods (with a maximum 10-15 percent) to keep food prices affordable, especially to the poor, MAP said.

In calling for lower tariffs in agri products, MAP noted that the Philippine tariffs on agricultural and food commodities are higher than those applied to goods in general.

It cited TC reports, which showed that the simple average of tariffs applied on agricultural products is 12 percent while the average for all products is eight percent.

Trade-weighted averages also show the same pattern, with nine percent for agriculture, nearly double that for all goods at five percent.

MAP blamed the high agricultural tariffs to the policy that generally excluded these products from tariff adjustments over the past decades, with agricultural products deemed "sensitive" levied the highest statutory rates of up to 65 percent. In 2015, two-thirds or 66 percent of Philippine agricultural output by value was shielded from foreign competition by MFN tariffs of 40 percent or more.

The 2018 Philippines Trade Policy Review, jointly undertaken by the Philippine government and the World Trade Organization, showed that majority of commodities have MFN tariffs ranging from zero to 20 percent. However, about six percent of lines have tariffs significantly above 20 percent, reaching up to 65 percent.

The Trade Policy Review also observed that the tariff peaks translate into reduced incentive for domestic value adding. For example, high tariffs on corn at 40 percent dampen incentives to manufacture livestock and aquaculture feeds within the country, which are vital in the meat and fishery industries that provide the protein needs of Filipinos.

“This exceptional level of protection has dampened the impetus for government and agricultural producers to achieve higher levels of productivity, hence lower costs and prices, to be comparable to and competitive with that of our neighbors. The long-term and lasting solution to attain food security for Filipinos is to implement game-changing reforms for productivity improvement, such as farm consolidation, better water management, and effective extension systems. Maintaining high import tariffs will only remove the urgency to pursue these,” the statement added.

Most of the agriculture commodities with very high tariffs are food products (sugar, meat, fish, rice) or inputs to local manufacturing and value addition (corn, meat, fish, sugar, etc.). “These commodities are prominent and crucial in family food consumption, food security, and general inflation,” said Du-Baladad.

“This exceptional level of protection has dampened the impetus for government and agricultural producers to achieve higher levels of productivity, hence lower costs and prices, to be comparable to and competitive with that of our neighbors. The long-term and lasting solution to attain food security for Filipinos is to implement game-changing reforms for productivity improvement, such as farm consolidation, better water management, and effective extension systems. Maintaining high import tariffs will only remove the urgency to pursue these,” she also said.

“Filipino families have historically been burdened with higher food prices than consumers in other countries across ASEAN and beyond, ” she added.

Worse, MAP said that lower-income families are forced to purchase food products of low nutritional value, leading to a worsening vicious cycle of poverty, hunger and poor nutrition, lowered human capacity, hence persistent and further deepening poverty, the group said.

The group further explained that trade enhances food security. It improves access to food, lowers food costs, mitigates supply shocks, reduces inflationary pressures, and ultimately strengthens economic and social prosperity. High tariffs have long been shown to be counter-productive, and lead to reduced investment, low or stagnant wages, and higher rates of malnutrition.

“But the positive economic gains to greater trade must be accompanied by effective implementation of focused adjustment and assistance measures carefully aimed at adversely affected sectors, especially small farmers. Government must refocus its support and assistance to farmers from high levels of trade protection to effective improvement of productivity and competitiveness,” the group added.