Months prior to the passing of the controversial Rice Tariffication Law on February 15, 2019, analysts warned of the

drastic toll the law would take on farmers—one of the marginalized groups in an ironically agricultural country. Their
warnings proved true as seven months on, farmers across the country are struggling to make ends meet with the
farmgate price for palay hitting record lows.

The struggle of the Filipino farmer is one that has lasted for decades, if not centuries. Yet the consequences of the Rice
Tariffication Law have exacerbated their situation to new extremes. Empathetic to their struggle, Filipinos have been
quick to point fingers at the senators (or mainly, senator, singular) who authored the bill, but the Rice Tariffication Law is
more complicated than the black and white picture social media portrays. Here’s why:

What is the Rice Tariffication Law?

Before we deconstruct the law, we need to understand it. Consider the Rice Tariffication Law (Republic Act 11203) the
unli-rice import order.

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It allows for the removal of import quotas, taking off the cap on rice imports and allowing foreign rice to flood the local
market—but only if importers can pay the price. Also dubbed the Rice Liberalization Law, it places a 35 percent tariff on
imported rice coming from ASEAN countries and a 40 percent tariff on non-ASEAN countries.

President Rodrigo Duterte signed the bill into law in response to the insane price hikes of rice that took place in 2018
when rice hit as much as P70 per kilo. The law is intended to lower the price of rice by increasing supply, but no one
accounted for it to plunge to as low as P7 per kilo.

What did the Philippines promise?

The bill was authored by Senator Cynthia Villar, who bears the brunt of the backlash from farmers and netizens alike.
However, Villar says that the law was created to fulfill the country’s obligation to the World Trade Organization (WTO),
of which the Philippines has been a member since 1995.

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By becoming a member of the WTO, the Philippines agreed to lift all trade barriers, like quotas, in place of tariffs—with
rice as the only exception. The Philippines’ 1995 agreement with the WTO states that the Philippines would be allowed
to control the importation of rice through quotas to protect Filipino farmers, on the condition that the Philippines would
work on developing its farmers for global competitiveness for the duration of the agreement. The agreement expired in
2005, but was extended until 2012 and again until 2017.

“We (lawmakers) did not decide on the importation of rice. We signed an agreement in 1995 with WTO, they will allow
us to control the importation of rice for 22 years to prepare our farmers to become competitive to the imported rice,
and this expired in 2017,” Villar said.

After numerous extensions, the government finally decided to fulfill its obligation to the WTO by filing the Rice
Tariffication Bill, thus lifting the import limits on rice.

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Some would argue that the Rice Tariffication Law was inevitable—that the Philippines had to eventually fulfill its part of
the bargain. But critics argue that the Philippines could have simply filed for another extension or exemption.
“There was nothing to stop us from asking for another waiver or extension after July 2017,” argued Raul
Montemayor, national manager of the Federation of Free Farmers. “Of course, this would have required us to give
additional concessions to some WTO member-countries, some of which may have not been acceptable. But the
government just decided not to negotiate anymore for another extension and just remove the QRs. So, it was not true
that the WTO forced us to tariffy rice. It was our own decision.”

So who is to blame?

Villar, who won the most votes in the 2019 midterm elections, was arguably among one of the most popular senators at
the start of her term. However, the Rice Tariffication Law has attracted a growing number of critics as many netizens
have called her out for certain comments she made during a senate hearing, claiming that P21 per kilo of rice (which
would earn a farmer roughly P5,500 per month) was “too much” to ask for.

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But who is really to blame? Is it the WTO? The Philippine lawmakers who signed the agreement in 1995? The senator
who authored the law?

It’s easy to blame one person for the surmounting struggles that farmers have been facing for years, but in reality, it’s
systematic negligence that is at fault. The agreement was signed 24 years ago, which is enough time to fulfill the
Philippines’ promise to improve the local rice industry. Yet, over the course of 24 years, five administrations, and 14
agriculture secretaries, the rice industry was still not prepared when the expiration date hit. As a result, a law was
hastily signed to make up for 24 years of lost time. And now it’s the farmers that have to deal with the brunt of the
consequences.

Lack of preparation is certainly to blame, caused by negligence that farmers are all too familiar with. But lack of foresight
cannot be used as an excuse for the situation that farmers are now in. Lawmakers should have been aware of the impact
this would have on the ground—analysts warned this would happen and the farmers who are now on the brink of selling
their land are proving them right.

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What can be done?

As mandated by the Rice Tariffication Law, the P10 billion per year Rice Competitiveness Enhancement Fund (RCEF) is
meant to use the taxes from the tariffs to fund mass irrigation, rice storage, and research initiative programs for the
benefit of farmers. But the fund, which is the law’s main safety net for farmers, is already facing controversy as the
senate is questioning where P4 billion allocated to help farmers went.

However, one analyst claims that the problem lies in the tariff level being at only 35 percent, suggesting that it can be
increased if the volume of imports becomes too high.

On the consumer side, citizens can purchase rice directly from rice farmers in their local communities at reasonable
prices (such as P20 per kilo), and urge their schools, companies, and communities to follow suit. You can also download
the app Session Groceries, which will soon guide you to a Filipino rice farmer who you can purchase from directly.

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The irony can’t be lost in our situation—a primarily agricultural country that struggles in sustaining its farmers. Perhaps
it would do well to remember this Polish proverb when it comes to the Rice Tariffication Law and all other measures that
impact farmers: “If the farmer is poor, then so is the whole country.”
Department of Agriculture (DA) Secretary William Dar on Friday said the problems being caused right
now by the Republic Act (RA) 11203, the Rice Tariffication Law, are just “birth pangs.”

“We have to contend with the initial birth pangs [of the law] and these are what we are managing,”
Dar told the House Appropriations Committee during his defense of the DA’s proposed P71.8-billion
budget for 2020.

“At the end of the day, this law will be very beneficial,” Dar further claimed.

The Rice Tariffication Law is being blamed for the huge drop in farm gate prices of local palay
(unmilled rice). This is because the law liberalized the importation of cheaper rice varieties to the
Philippines, which already has higher production costs compared to neighboring countries as far as the
crop is concerned.

But Dar refused to call this and other difficulties connected to RA 11203 as a negative impact of the
law, since it remains to be seen if they will persist. The tariffication measure was enacted only last
February.

Dar, who first served as DA chief over 20 years ago, said the real intent of the law is “to make rice
farmers productive, competitive, and with higher income.”

A key mechanism for this is the Rice Competitiveness Enhancement Fund (RCEF), a provision under
RA 11203 which gives local rice farmers a P10-billion annual assistance over the next six years.

The RCEF – which will result from government’s tariff collections on imported rice – covers various
areas of assistance, most notably modern seeds distribution and farm mechanization.

“The government has collected P9.2 billion in tariff so far…We can reach P10 billion and beyond, the
possibility of P15 billion is there,” the DA chief told Albay 1st District Rep. Edcel Lagman during the
latter’s interpellation of him.

However, Dar admitted that assistance from RCEF has yet to be rolled out to local farmers since
“kakarating pa lang nung pera (the money had just arrived).”

Dar also said the DA’s proposed budget of P71.8 billion for next year is a 12 percent increase from the
agency’s 2019 appropriation, but this was mostly due to the direct addition of RCEF to its budget.

The Bureau of Plant Industry (BPI) said during a House hearing earlier this week that some 1.2 million
metric tons of imported rice have already arrived in the country between February and August 23.

The farming of rice – the Philippines’s most important crop and staple food – employs some 2.5
million Filipinos.
We are firm in defending and asserting the rice tariffication reform despite the current transitional problems that it
faces in its implementation. The reform will benefit both Filipino rice farmers and Filipino consumers.

First, we present a historical background.

The Philippines, being a member of the World Trade Organization (WTO) since 1995, has to comply with its rules that
entail the elimination of trade barriers, nevertheless, the Philippines was granted an exemption from the removal of its
quotas on rice importation. This exemption was originally meant to expire in 2004, but was extended until 2014, and
further stretched till the passage of the Rice Tariffication Law in early 2019.

The long regime of quantitative restrictions, ostensibly to protect farmers, had severe costs. For one thing, the
protection meant that the Philippines had to compromise other sensitive economic sectors by opening them up to more
competition. For another thing, quantitative restrictions bred massive corruption, created an ineffective and
incompetent import monopoly, and imposed a disincentive on farmers, beset with inefficiencies, to shape up. The
government became lax and felt no pressing need to enhance our farmers’ productivity since it relied on the import
quota to shield farmers from competition.

Because of the failure of agricultural modernization due to poor institutions and weak policies, including the short-
sighted quantitative restrictions on rice, the country’s agricultural production has stagnated. In terms of efficiency and
productivity, the Philippines has lagged behind its ASEAN counterparts such as Vietnam and Thailand. Our farmers incur
higher costs of production and hence could not compete with the more efficient rice-producing farmers from Vietnam
or Thailand. The ultimate effect has been the deterioration of the well-being of our farmers.

Worse, those who suffered the economic burden of the quantitative restrictions were the whole Filipino population (for
we are all consumers including the farmers themselves who in the main are net consumers).

A consequence of the import quota was higher food prices. Higher rice prices heavily contributed to over-all inflation.
This was most pronounced in the inflation spike in 2018. The main culprit was the surge in rice prices, resulting from the
mismanagement of imports that resulted in a rice shortage. Rice makes up for about 10% of the consumer basket. For
the poorest Filipinos, rice accounts for about 23% of its total consumption spending.

But the unusual rise in inflation in 2018, which many critics mistakenly blamed on the effects of the comprehensive tax
reform package, became an opportunity to introduce a hard reform. The higher-than expected inflation was triggered
principally by the unwarranted spike in rice prices, resulting from the mismanagement of imports to meet supply. This
forced the hand of government to remove the quantitative restrictions and shift to the tariffication of rice imports.

Tariffication is still a form of protection. The high tariff (35% of declared value) drives up the price of imports and the
revenue derived from the tariff is earmarked to benefit farmers. The Rice Tariffication Law’s also provides funding of P10
billion to provide seeds, mechanization, technical assistance, and credit. Any amount above P10 billion that can be
generated from the tariff can be used for cash transfers and other forms of financial assistance to the farmers.
In other words, the law still maintains a significant degree of trade protection, but it does not impose the supply
bottlenecks and institutional monopolies. Moreover, it has created a significant budget to enhance the productivity and
well-being of rice farmers.

What was supposed to be a limited period of quantitative restrictions had a short-term objective of giving time for local
rice producers to become more efficient and productive. But after a generation of an import-quota regime, the intended
goal of making our rice industry competitive and improving rice farmers’s income has not been realized.

Rice tariffication is thus a most significant reform. However, because the country’s reliance on the quantitative
restrictions lasted so long, the farmers face hard adjustments in the early implementation of the reform, the so-called
transition pains.

Imports have significantly increased. The country is projected to import about 2.4 million metric tons of rice in 2019. The
retail prices of rice have fallen greatly, relative to 2018 prices, and prices are anticipated to go down further. This is good
for the consumers, but rice farmers face an enormous challenge.

Two problems have arisen. First, retail prices have not fallen as much as farm-gate prices have. This suggests a role for
the Department of Trade and Industry and Philippine Competition Commission to investigate whether there is market
power at the wholesale/trader segment. Consumers have not yet realized the full gains of the reform.

Second, the price drop in farm-gate prices has now reached at- or below-cost levels for many rice farmers, and this
certainly threatens their livelihood. The Rice Competitiveness Enhancement Program (RCEP) provisions for seeds and
mechanization, among others, will benefit farmers by reducing their production costs, increasing their farm yields, and
ultimately raising incomes. However, these gains are expected to be realized in the medium term. But the short term is
very critical.

Here, we present a proposal to address the immediate problems.

The cash transfer, similar to the 4Ps, with the sole condition being that the beneficiary is a rice farmer, is absolutely
necessary. The transfer should give the farmers income relief while the Rice Competitiveness Enhancement Program is
still being rolled out. Cash transfers, together with the zero-interest loans that the Department of Agriculture (DA) has
introduced, have an immediate, tangible, and direct impact on the farmers.

We estimate that of the two million rice farmers, about 600,000 to 700,000 are vulnerable (are impoverished or at risk
of poverty). A cash transfer of P5,000 per farmer per year would cost about P3 billion to P3.5 billion, excluding
administrative costs. But we can go farther than that by providing cash transfers to all farmers owning rice land of two
hectares and below. They constitute 1.7 million farmers of the Philippine total of two million rice farmers. After all, all
small rice farmers need the support to adjusting to the new policy regime.

There is enough fiscal space for a cash transfer of P5,000 for a cropping season (the amount is based on a study done by
the Philippine Institute for Development Studies or PIDS) to be given to the 1.7 million rice farmers. This amount per
farmer perhaps is quite generous, especially given that there will be other interventions for rice farmers. Hence, the
amount can still be reduced reasonably. Be that as it may, the total amount for such unconditional transfer to cover 1.7
million farmers is P8.5 billion. This is a small price to pay for the reform.
The Department of Social Welfare and Development (DSWD) is in the best position to do the transfers. It has the
experience and lessons, the logistics and the infrastructure.

The next question is where to get the P8.5 billion. The revenue from tariffication is projected to reach P15 billion, thus
freeing P5 billion for cash transfers. Perhaps the remaining P3.5 billion (excluding the administrative costs) can be
obtained from the government’s unprogrammed funds?

Simultaneous with this, funds for seeds, credit, and mechanization should be disbursed soonest. Planting season has
begun.

Admittedly, the law’s current formulation is rigid. While financial assistance can be funded, it is conditioned on tariff
collections exceeding P10 billion. As it stands, collections are projected to reach P15 billion and Congress ought to
consider advancing these funds towards the rice farmers in need.

Another task is to update the existing registry and targeting systems such as the DA’s Registry System for Basic Sectors in
Agriculture or RSBSA and the DSWD’s Listahanan.

We also welcome the DA’s introduction of no-interest loans amounting to P15,000 for every farmer and payable in eight
years. It is a form of cash transfer. Farmers can repay these loans, given the long period of repayment and given a well-
designed system of monitoring and enforcement.

On top of this, the National Food Authority (NFA) should aggressively buy rice from local producers, especially in the
areas with depressed prices. Such buying can influence higher prices towards alleviating the impact on farmers of
low palay prices. The NFA, too, must be quick in disposing older stock, even at a cheap price to supplement their
aggressive buying. This will not only result in freeing space for NFA to buy more local rice, but will also benefit
consumers through lower prices of rice. Local government units and other government agencies must likewise be
involved in buying local rice for their constituents to contribute to the over-all effort.

Rice tariffication is ultimately to the benefit of the whole people, but we must act quickly to safeguard the welfare of
Filipino rice farmers.

NEDA Undersecretary for Policy and Planning Rosemarie Edillon had said inflationary pressures from other
agricultural food items must be managed as well, while at the same time anticipating developments in international
oil markets.
"Given the risks, we really need to be anticipative and proactive in implementing measures to ensure price stability

and cushion the impact of higher consumer prices on the poor," Edillon had said.