Agriculture:

Rice is considered the Philippines’ most sensitive agricultural product. In 2002, the Philippine
Government opened its rice market when it allowed the private sector, mainly traders, to import
rice. Prior to this, the National Food Authority (NFA) was the sole importer of rice. Rice imports
are assessed a 40 percent in-quota tariff and a 50 percent tariff for volumes beyond the quota.
Import licenses are regulated by the NFA. In 2004, the government completed negotiations with
other WTO members for the extension of its quantitative restrictions (QR) on rice, and in
December 2006, its request for extension was approved.

In July 2014, the WTO granted the Philippines request to extend quantitative restrictions on rice
imports through July 2017. In exchange, the in-quota limit was raised to 805,200 MT (from
350,000 MT) and the in-quota tariff reduced from 40 percent to 35 percent (the out-of-quota tariff
remained at 50 percent), through July 1, 2017. On November 5, 2015, Philippine President Aquino
III signed Executive Order No. 190 (EO 190) which put in effect the 805,200 MT MAV and the
corresponding MFN tariff changes.1

There are many misconceptions by Filipinos about the country’s rice industry. The most notable
is that our Southeast Asian neighbors sent students to the International Rice Research Institute
(IRRI) and the University of the Philippines in Los Baños, and these neighbors are now exporting
rice to us. Most Filipinos could not understand why the Philippines imports rice, and not export.
Here are some explanations.

First, IRRI trained scientists in all major rice-producing countries, not just the Philippines. The
IRRI has trained and worked with Vietnam, the Bangladesh Rice Research Institute, the Malaysian
Agriculture Research Institute, the Thai Department of Agriculture and the Indonesia Agency for
Agriculture Research as early as the 1970s.

In fact, the Philippine Rice Research Institute, created only in 1985, was late in coming. National
rice research institutes are important in developing varieties suited to different conditions. Just
because IRRI is located in the Philippines does not mean the Philippines has been favored by IRRI.
IRRI has released more than a thousand modern rice varieties in 78 countries since its founding in
1960.

Second, the Philippines has been a net rice importer for the last 50 years. According to the Food
and Agricultural Organization, from 1961 to 2011, the Philippines was an importer for 40 years,
and a significant exporter for only four years (1979-1981 and 1987). In 2012 to 2015, it also
imported rice. This is in part due to smaller rice areas and lower yields even in irrigated areas
because of water scarcity in the dry season.

Third, the Philippines has less comparative advantage in rice production compared to countries
drained by the world’s large rivers: India, Myanmar, Thailand and Vietnam. All are rice exporters
in the process. Add to that the 20 typhoons that hit the country every year. Rice production cost in
the Philippines is higher than in Thailand, Vietnam and India.

1 https://www.export.gov/article?id=Philippines-Trade-Barriers
Fourth, exporting rice is a major losing proposition. Today, the Philippines can export ordinary
rice at the highest price of P18 per kilo as compared to the current wholesale price of over P28 per
kilo. The export price translates to at best P9 per kilo at farmgate, way below the market price of
around P15 per kilo.

Food security must be anchored in income. Sadly, the Philippines has the highest poverty incidence
as compared to Indonesia, Malaysia, Thailand and Vietnam. Tens of millions have little purchasing
power.

While rice is the country’s major staple, there is need to diversify to other crops in order to boost
farm incomes for food security. The question that needs to be asked is whether we have invested
enough in other crops that could make a great difference in poverty reduction. These are coconut,
coffee, cacao, fruits, rubber, oil palm and aquaculture.

Proposal:

Due to the lack of resource and the difficulty of the circumstances with regard to the production
of rice, the tariffs imposed on the importation of rice makes the situation of the Philippines
untenable. Local rice production cannot sustain the growing poverty rate. Rice is the country’s
major source of sustenance. With the heavy duty imposed on its importation, the situation of the
country will only stand to worsen. Therefore, we propose the following:

1. For the years 2016-2019, the in-quote limit be raised from 805,200 MT to 900,000 MT,
and the in-quote tariff be reduced from 35% to 30%, while the out-quote tariff be reduced
from 50% to 40%;
2. For the years 2020-2024, the in-quote limit be raised to 950,000 MT, and the in-quote tariff
be reduced to 20%, while the out-quote tariff be reduced to 30%;
3. For the years 2025-2029, the in-quote limit be raised to 1,000,000 MT, and the in-quote
tariff be reduced to 10%, while the out-quote tariff be reduced to 20%;
4. For the years 2030-2034, the in-quote limit be raised to 1,200,000 MT, and the in-quote
tariff be reduced to 0%, while the out-quote tariff be reduced to 10%;
5. For the year 2035 onwards, the in-quote limit be completely removed, and that the
importation become completely tariff free.

To include such stipulation in the Free Trade Agreement between the Philippines and the United
States will allow both markets to flourish as the Philippines will patronize US exportation of rice
while allowing itself for a more sustainable pricing of rice imports.