The Impact of Rice Tariffication Law

on Filipino Rice Farmers

A RESEARCH PAPER

Presented to the Faculty of Sociology Department

Xavier University – Ateneo de Cagayan

In partial fulfilllment of the requirements for SocEcon 10

AY 2019 – 2020

Alyssa Marie W. Aballe

Moneia Brae E. Casas

Angelic Mae P. Jumadla

Christian B. Neri

Kryslie S. Reonal

BS Management Accounting – II

Ms. Colleen Caryl Leslie Torres

Sociology Professor

October 4, 2019
ABSTRACT
ACKNOWLEDGEMENT
 TABLE OF CONTENTS

Chapter Page
1 THE PROBLEM AND ITS SETTING
Introduction
Statement of the Problem
Objectives of the Study
Significance of the Study
Scope and Delimitations
Definition of Terms

2 REVIEW OF RELATED LITERATURE AND STUDIES

Overview of the Philippine Economy
Overview of Philippine Agriculture
State of Agriculture in the Philippines
Problems, Issues, and Constraints in Philippine Agriculture
Overview of the Philippine Rice Industry
The Philippines and the World Trade Organization
Agricultural Tariffication Law (RA 8178)
Rice Tariffication Law (RA 11203)
Objectives of the Law
Key Provisions of the Law
The Relationship between Rice Tariffication and Inflation

3 RESEARCH METHODOLOGY
Research Design
Data Collection Procedure
Data Analysis Procedure
 4 PRESENTATION, ANALYSIS, AND INTERPRETATION OF DATA
Problem 1
Problem 2

5 SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS

Summary
Findings
Conclusions
Recommendations

BIBLIOGRAPHY
APPENDICES
 CHAPTER 1

The Problem and its Setting

The Rice Tariffication Law, also known as the Rice Liberalization Act or Republic Act
No. 11203, titled “An Act liberalizing the importation, exportation, and trading of rice, lifting
for the purpose the quantitative import restriction on rice, and for other purposes” was
signed into law by President Rodrigo Roa Duterte on February 14, 2019. This amends the
Agricultural Tariffication Act of 1996 that imposed tariff on agricultural imports except for
rice. This law served as the Philippine government’s compliance to its obligation to the World
Trade Organization (WTO). The primary purpose of the law is to lift the quantitative
restriction (QR) on rice imports and replace it with a general tariff. The law aims to protect
local farmers from the entry of more imported rice into the country through the imposition
of 35% tariff on rice coming from member-countries of the Association of Southeast Asian
Nations (ASEAN) and 40% tariff on rice coming from non-ASEAN countries.

Upon the enactment of this law, problems have emerged. The effects of liberalizing
rice imports in the country’s largest agricultural industry led to the decrease of the farmgate
price of palay or unhusked rice by 17% this quarter, while rice consumers’ savings have not
been as large as expected. Based on the data from the Philippine Statistics Authority, retail
prices only fell by 4%. Millers have stopped milling, and feed millers are short of darak(rice
bran) because of that. It is expected that the members of the local rice value chain received
a significantly lower net value in the industry.

According to the Philippine Chamber of Agriculture and Food, the prevailing farmgate
price of palay (unhusked rice) which decreased by around P5 per kilogram, led Filipino
farmers to be deprived by as much as P95 billion in income. This is based on the country’s
local palay production of 19 million metric tons annually. It has also been stated that the
fuller importation of rice from other countries resulted to the plunging prices of local rice,
benefiting the rice-eating populace but affecting negatively the livelihood of many Filipino
farmers.
 The Impact of Rice Tarrification Law on Filipino Farmers is the root of this study.
The researchers would like to look further on specific effects of the law on the income and
livelihood of the farmers, and to identify ways on how to extend support to the Filipino Rice
Farmers.

Statement of the Problem

The study intends to recognize the problems, issues and constraints in the Philippine
Agriculture and identify ways on how Filipinos can sustainably succor to the rice farmers.

This study aims to answer the following questions:

1. How does the Rice Tariffication Law affect Filipino rice farmers’ livelihood
sustainability?
2. How does the Rice Tariffication Law affect Filipino rice farmers’ security of
livelihood?
3. What is the significance and the impact of the Rice Tariffication Law to the current
state of Agriculture in the Philippines?
4. What are the problems, issues and constraints in the Philippine Agriculture?
5. What can Filipinos do to support the rice farmers?

Objectives of the Study

The study aims to accomplish the following objectives:

1. To provide a thorough discussion of the effect of the Rice Tariffication Law on Filipino
rice farmers in terms of security of livelihood and sustainability of income;
2. To examine the impact of the Rice Tariffication Law to the current state of Agriculture
in the Philippines.
3. To recognize the problems, issues, and constraints in the Philippine Agriculture.
4. To identify ways on how Filipinos can extend support to the rice farmers.
Significance of the Study

The study focuses only on the effect of the Rice Tariffication Law on one stakeholder
– the Filipino rice farmers. The researchers chose to focus on the Filipino rice farmers since
they are the primary subject of the law. The study which thoroughly discusses the effect of
the Rice Tariffication Law on Filipino rice farmers can be a learning paradigm to the Filipino
people by apprising them as to the current state of the Philippine Agriculture and how they
help the Filipino farmers on their own ways. This study can benefit the following:

XU Students. Through this study, students may gain awareness of the current state
of the Philippine Agriculture and give recognition that the Filipino farmers deserve. With this
information, students may be appealed to support agricultural activities of the university
that support the livelihood sustainability of the Filipino rice farmers.

Community. The result of this study may serve as a written guide backed with
reliable research as to how the community can support the livelihood of the Filipino rice
farmers.

Filipino rice farmers. With the help of this study, Filipino rice farmers will know
their actual state in the agricultural sector and how this inequality has been the primary
reason for their livelihood’s unsustainable development. Filipino rice farmers would be
knowledgeable of the incentives, quicker access to loans and grants that the government is
extending to them for the security of their livelihood.

Future Researchers. Future researchers, professionals, or anyone interested in the

subject can use the results of this study as reference material that may be a basis or source
of substantial information in the future.

Scope and Delimitations

The study of how The Rice Tarrification Law affects our Filipino Farmers looks into
the different impacts of the law on the livelihood and income of the farmers, the problems
and issues with this law, and the current state of Agriculture in the country. The study is
limited to the Filipino Rice Farmers. The subjects of this study are the Filipino Rice Farmers
in the country whose livelihood and income are affected by the Rice Tarrification Law.

Definition of Terms

Rice. A swamp grass which is widely cultivated as a source of food, especially in Asia. It is
the staple food of Filipinos.

Palay. Rice that has not been husked.

Quantitative Restriction (QR). Refer to explicit limits, or quotas, on the physical amounts
of particular commodities that can be imported or exported during a specified time period.

World Trade Organization (WTO). The only global international organization dealing with
the rules of trade between nations.
 CHAPTER 2

Review of Related Studies and Literature

Overview of the Philippine Economy

The Philippines is one of the most enterprising economies in the East Asia and the
Pacific region. With the enlarging urbanization, a growing middle-income class, and a large
and young population, the Philippines’ economic dynamism is rooted in strong consumer
demand assisted by vibrant labor market and robust remittances. According to World bank,
Philippine economic growth moderated to 6.2 percent in 2018 from 6.7 percent in 2017,
dragged down by lower growth in global trade and domestic high inflation. In 2019,
however, growth is projected to reach 6.4 percent as inflation winds down and spending due
to the upcoming midterm elections is likely to boost private consumption growth. Export
growth, however, is likely to remain weak, as global growth and trade activities are projected
to moderate in the medium term.

According to World bank, the Philippine economy has made progress in delivering
inclusive growth, evidenced by the declining poverty rates and a falling Gini coefficient.
Poverty decreased from 26.6 percent in 2006 to 21.6 percent in 2015 while Gini coefficient
declined from 42.9 to 40.1 over the same period. Unemployment has reached historic low
rates but underemployment remains high, near its 18-20 percent decade-long average. The
Philippines' public deficit was moderate at 1.1% of GDP in 2018; it is expected to rise slightly
to 1.5 and 1.4% in 2019 and 2020, according to Heritage Foundation. Public debt also
remained at 39.8% of GDP in 2018 and is expected to decline to 39.2% in 2019 and 38.6% in
2020. The inflation rate did enlarge from 2.9% to 4.9% in 2018 but is projected to decline by
the IMF to 4% in 2019 and 3.3% in 2020. Domestic consumption is demanded to remain the
main driver of the economy, accounting for 70% of GDP.

The Philippines' economy is purely based on food processing; production of cement,

iron, and steel; and telecommunications, among others. The agricultural sector engages
25.31% of the labour force but contributes 9.66% of GDP. The Philippines is the second
largest producer of coconuts, according to Philstar. However, the agricultural sector
distresses from low productivity, weak economies of scale and inadequate infrastructure.
Institutional reforms are required in business freedom, investment freedom, and rule of law,
according to the Heritage Foundation. Despite the views of President Rodrigo Duterte and
the initial risks of policy instability and decline of investment during his mandate, the
continuation of liberal economic reforms initiated confidence as the investment hit record
levels for the last two decades.

Duterte's administration wants to lessen the poverty rate to 17% and anticipates the
economy to reach upper-middle income status by 2022. Sectors driving growth of the
economy also include business process outsourcing, financial services, trade, construction,
private consumption and more recently, manufacturing. The Philippines is alluring growing
investments from local and multinational players and, therefore, has started its transition
from a consumption-led to an investment-led economy. Giving strong support to the
economy’s growth performance is its young and educated workforce, with the average age
of the entire population estimated at around 24 years old. The measurements to give
awareness on the advantages of the Philippines in many sectors therefore are essential to
achieve shared economic prosperity.

Overview of Philippine Agriculture

Agriculture has been a dominant sector in the economy of the Philippines. According
to PSA, the common agricultural activities that are found in the country are crop production,
forestry, fisheries, livestock, and poultry. According to De Guzman (2018), the agricultural
sector employs only 25.96 percent of the Filipino workers as of November 2017, and in the
recent statistic report from the Philippine Statistics Authority, Agriculture, Hunting, Forestry
and Fishing (AHFF) has contributed 7.1 percent of the total GDP of the country, which has an
increase of only 0.6 percent, compared to the industry and services sector which has a 3.7
and 7.1 percent respectively in the second quarter of the current year.

The main agricultural activity is crop cultivation. This includes lowland irrigated
farming, rainfed farming, and upland farming. Crop cultivation has 47.42 percent of the total
agricultural output in the Philippines. Palay and corn production has decreased by 5.82 and
8.73 percent respectively, yet the increase in production of onion, garlic, mango, tobacco,
rubber, eggplant, abaca, and pineapple were significant. The crops production was amounted
to 215.5 billion Pesos, which is 11.09 percent lower. According to the Food and Agriculture
Organization of the United Nations (2002), women’s participation in planting/transplanting,
manual weeding, care of crops, and harvesting are significant, with 35 to 49 percent of the
farming households hiring women workers in pulling and bundling of seedlings, and also in
planting and harvesting. Livestock raised in the Philippines are commonly broiler chickens,
carabao, cattle, ducks, goats, and swine. This has 17.41 percent of the total agricultural
output that increased by 3.22 percent, with a production that valued at 77.7 billion pesos.
Fisheries have been an important agricultural activity in the Philippine agriculture.
According to the Food and Agriculture Organization of the United Nations (2002), it provided
direct and indirect employment to 5 percent of the national labor force. It has contributed
17.41 percent in the total agricultural production in 2019 and grew by 1.90 percent, which
was valued 74.7 billion pesos.

Although we are considered an agricultural country, according to Lubang (2019), the

Filipinos in this sector are among the poorest that are living below the poverty line. In the
statistics that are found in PSA, agricultural workers receive the lowest daily wage compared
to workers from the industry and service sectors. Despite the contribution of agriculture to
the economy, it has not been an effective engine of social growth and human development.
The association of poverty to agricultural sector drove many children of agricultural workers
to finding more employment opportunities in the urban areas of the country. According to
PSA, this association also contributed to the declining number of workers in this sector, area
on agricultural production, and the percentage of contribution of agriculture in the
Philippine economy throughout the years.

The Current State of Agriculture in the Philippines

Agriculture is a significant aspect in the Philippine economy. The economic

opportunities include providing employment albeit its 30% contribution to the country’s
labor force and attaining the Millenium Development Goals (MDGs). The sector accounted
for 13%-14% of the country’s total gross domestic product (GDP), gradually declining as the
year progresses. However, in ceteris paribus, the sector’s gross value added (GVA) has been
growing. The declining contribution of agriculture to the country’s GDP is brought by the
structural transformation as sectors, industry and service, grew relatively much faster.
According to DOST-PCARRD (2018), in the year 2017, the value of the country’s GDP
amounted to 15.806 trillion (in PhP) and the agricultural GDP amounted to 1.526 trillion (in
PhP), thereby, yielding a 10% contribution to the country’s GDP.

The critical role of agricultural sector in the country’s general economic progress is
well-known. First, it provides raw materials and food for the rest of the economy. Second, it
provides market for products of the non-agricultural economy. And last, as the sector grows
and modernizes in the face of limited supplies of agricultural land, it releases surplus labor
to the industry and service sectors. Agriculture is the dominant source of livelihood and
employment amongst the 70% of the country’s poor that are coming from the rural areas.
Thus, importance of agriculture to the Philippine economy cannot be overemphasized.

Based from the current data gathered by the Philippine Statistics Authority (PSA),
agricultural outputs grew by 0.67% in the first quarter of 2019. An increase in production
were noted and monitored for livestock, poultry, and fisheries during the period. Crops had
a decrease in output. At current prices, the gross value of agricultural production accounted
to 429.7 billion (in PhP). Crops which accounted for 52.71% of the total agricultural output
decreased by 1.01%, livestock posted an increment of 1.25%, poultry incremented by 5.41%,
and fisheries inched up by 5.41% during the quarter.

Prospects for the sector appear to be fair. The country’s medium term development
plan, which accords priority focus to agricultural progress, is already in full-swing. The full
implementation of the plan is expected to address the challenges and constraints confronted
by the sector. Different strategies are currently underway, adequately supported by a clear
investment program to ensure achievement of these targets. The continued Philippine
economy expansion and per capita improvement are thoroughly projected to further
increase food demand. Sustained food increases in food demand may increase farm income
and induce farmers to seek productivity in improving technologies and practices. Majority
of these technologies are available albeit its limitation on the adoption part. The
infrastructure program of the government may also draw labor from the agricultural sector.
Problems, Issues, and Constraints in Philippine Agriculture

Philippine agriculture is merely characterized by its limited diversification and low

productivity. The traditional crops in the country such as rice, corn, and coconut accounted
for more than 50% already of total area harvested and it was only recently, that high value
crops are given focus. The previous administration ventured into placing the sector into high
growth trajectory, wherein, its medium term development plan (2013) aimed at an annual
growth rate of around 5% for crops, 2% for livestock, 5% for poultry, and 3% for fisheries.
These specific targets have largely been achieved in livestock and poultry, but hardly been
approximated in crops and fisheries. This scenario became even worse in the year 2016
when crops and fisheries exhibited a decline of 3.5% and 4.5% respectively. The poor
agricultural performance of crops was due to typhoons and El Nino affecting rice and corn
production, coconut-scale insect infestation, and limited adoption of high-yielding varieties,
whereas, fisheries was affected by extreme weather conditions and closed fishing
implementations.

As mentioned, limited diversification and low productivity are two of the biggest
agricultural challenges that constrained the agricultural performance of the country.
Traditional crops such as rice, corn, and coconut have a larger combined area as compared
to high value crops with market expansion potentials. This brings limitation to the capacity
of the country to harness the potentialities of the growing local and international markets.
Low agricultural productivity is another challenge being faced by the sector. There are
specific challenges that constrained the productivity of the sector. This includes limited
access to credit and agricultural insurance, low farm mechanization & inadequate
postharvest facilities, inadequate irrigation systems, scant support for research &
development (R&D), weak extension service, incomplete agrarian reform program
implementation, and ageing farmers. Small farm size (due to land conversion to meet the
housing and recreational needs of the population) is a challenge towards farm
mechanization as it is against the economic principle of “economies of scale”. In land
preparation and harvesting operations, mechanizing small parcels of land might be
inefficient. Inadequacy of technology transfer mechanisms is also evident in the sector.
Moreover, prices of acquiring and maintaining durable farm machines continue to stay at
levels expensive to majority of farmers. One of the reasons is the high tariff rate levied by
government on imported agricultural machineries. Imported machineries are still levied at
10% value added tax. The only means for farmers to access machineries are credit facilities.

Adoption of import policies and lack of import restrictions on agricultural machinery

yields to proliferation of imported equipment in the Philippines. According to Cruz (1990),
import duties on agricultural machinery in the Philippines ranged approximately from 10%
to 30% for completely built-up (CBU) engines, 10% for completely knocked down engines
(CKD) and 50% for raw materials. The decrement of tariff was reported to bring changes in
output prices and increment in production. The agriculture sector continues to be a net
gainer in agricultural output as a result of the tariff reform.

Limited connectivity between production areas and markets, and poor compliance
with product standards which can result to low competitiveness, are also one of the
challenges faced by the sector. Climate change can also pose a serious threat to agricultural
productivity. Increased flooding incidence, soil degradation, water shortages, and increased
pests constantly threaten agricultural outputs. Farmers find it a challenge as these factors
constantly hamper the quality of their produce and yields.

Technology and innovation are necessaries to strengthen the agricultural

productivity of the country and later, agricultural transformation. The inadequacy of
investing in these has been a significant constraint to agricultural growth. Investment in
agricultural R&D as percentage of agricultural GDP has typically hovered approximately at
0.3% annually, which is way lower on the 1% recommendation of the World Bank. Increases
in R&D investment were evident during the past few years, although, the total investment
would still be very low to even approximate the recommended rate.

Overview of the Philippine Rice Industry

Rice is the Philippine’s most important staple crop. The country is the world’s 8th
largest rice producer and its major rice-producing parts of the country are Central Luzon
(18.7%), western Visayas (11.3%), Cagayan Valley (11%), Ilocos region (9.8%),
SOCCSKSARGEN (7.5%), and Bicol region (6.8%); In addition, almost 70% of the total rice
area is irrigated and the remaining 30% is rain fed and upland (Ricepedia, 2012).

Much of the country’s irrigated rice is grown on the central plain of Luzon which is
the country’s rice bowl. However, despite the fact that rice is a staple food in the country, it
is associated with a highly political phenomena. Out of the six Southeast Asian rice grower
countries, Philippines ranks fourth in terms of production costs. The major cost items are
drying, transport, milling, storage, packaging, and working capital. High transport costs due
to ineffective road conditions decreases the transport cost efficiency, thereby increasing
transportation costs. The limited supply of rice millers in the Philippines also increases the
milling cost and milling industries could vastly increase their price since farmers are left with
no choice but to let the company mill the rice due to an absence of competition. This high
production cost results to higher retail price. The most affected by this increase in retail price
is the poorest 20% of the Filipino people which spends about 21% of their total income in
purchasing the staple crop. A continuing increase in rice prices could result to unsustainable
development and an unbalanced economy since production power is high but consumers
have low purchasing power. However, despite the decrease in purchasing power, the
demand for rice remains high. The Food and Agriculture Organization reported around 106.5
million Filipinos in 2018 with each person consuming 110 kg of rice per year.

One of the key challenges that the country is facing is attaining rice self-sufficiency
and food security in order to sustainably feed the growing population. Rice yields in the
Philippines have grown in the last decade without a significant change in inputs such as
fertilizers and herbicides and crop establishment methods. This poses a threat to the
continuing sustainability on the farmers’ investment to their crop which in turn delays the
progress caused by declining land area, high cost of inputs, poor drainage and inadequate
facilities.

The Philippines and the World Trade Organization

The World Trade Organization (WTO) is an international organization established to

supervise and liberalize world trade. According to Anderson (1998), the WTO has six key
objectives: (1) to set and enforce rules for international trade, (2) to provide a forum for
negotiating and monitoring further trade liberalization, (3) to resolve trade disputes, (4) to
increase the transparency of decision-making processes, (5) to cooperate with other major
international economic institutions involved in global economic management, and (6) to
help developing countries benefit fully from the global trading system.

The Philippines’ membership in the World Trade Organization (WTO) aspired to have
an efficient price intervention and public expenditure policy framework for the Philippine
agriculture sector. There are four elements of this agricultural agreement focused at the
following: First, expand the market access by substituting non-tariff barriers with tariffs and
Imposing ceilings (or bindings) on all existing tariffs on agricultural products at rates not
more than 10% of the current tariff rates. Second, reduce the production and trade-
distorting domestic support for agriculture to a maximum of 10% of the gross value of
agricultural production. Third, the average quantity of subsidized exports must be reduced
as well as the value of export subsidies. Fourth and last, harmonize the sanitary and
phytosanitary measures in accordance with the international standards, guidelines, or
recommendations. According to Uvero (2019), under WTO, the protection of domestic
industries and markets must be made only through custom tariffs and not through other
commercial measures. This is to provide a clear and transparent protection in promoting
market access and competition.

“The Philippine economy has only recently began catching up with the rapid
economic progress of East Asian countries, after more than a decade of poor economic
performance that witnessed declining per capita income in real terms. Growth rate of gross
domestic product averaged only 1% per year in the 1980's. While the economy briefly
recovered in the late 1980's under the new Aquino government, economic growth was again
stalled by political problems and growth rate of gross domestic product slowed to 0.6% per
year between 1991- 1993. The current economic recovery since 1994 is now often viewed
to be more sustainable and founded on stronger macroeconomic fundamentals” (Intal et al.,
1996).

When it joined the World Trade Organization (WTO) in 1995, the Philippines has
committed to remove all non-tariff barriers in agriculture. Upon opening up the country’s
agricultural market to other WTO member‐countries, the Philippines established a
tariffication system in 1996 through Republic Act (RA) 8178, also known as the Agricultural
Tariffication Act. It is the domestic law that implemented WTO provisions on agriculture for
the Philippines.

Through RA 8178, all quantitative restrictions on agricultural products were

converted into tariffs – except rice. The Philippines was able to negotiate for this “special
treatment” under Annex 5 of the WTO Agreement on Agriculture (AoA). This granted the
country an initial 10-year exemption for the lifting of the quantitative restriction(QR) on rice
and the subsequent conversion of this QR into a tariff. A rice QR allows the Philippines to
prohibit rice imports from coming into the country beyond a MAV/in-quota.

The Agricultural Tariffication Law

Republic Act No. 8178 or "The Agricultural Tariffication Act" was enacted in 1996 to
prepare the agricultural sector of the Philippines to face global competition in the advent of
trade liberalization. The Agricultural Tariffication Act aims to protect the Flipino farmers and
producers of agricultural products, as well as increase the productivity levels of local farms.
Together with the enactment of this law is the creation of the Agricultural Competitiveness
Enhancement Fund (ACEF) which serves as a 9-year Special Fund. After December 21, 2007,
the balance will then be transferred to the General Fund. Stipulated under this law is the
provision that all agricultural products, except rice, will be subjected to in-quota rates (lower
duty) for minimum access volume commitments under the World Trade Organization and
out-quota rates (higher duty) for imports beyond the minimum access volume.

According to Ocampo (2018), this tariffication bill fulfills the Philippine government’s
commitment with the World Trade Organization Agreement on Agriculture (WTO-AOA)
which was signed in 1995, with the provision to impose tariff, instead of quantitative
restrictions, on agricultural imports. R.A. 8178 calls for the country to decrease the tariff
from 50% to 35% for the agricultural product imports.

To be able to protect local producers, RA 8178 directs the National Food Authority
(NFA) to establish rules and regulations governing rice importation. The volume to be
imported by the NFA shall be set based on the outstanding supply condition, together with
the recommendation of an interagency committee. NFA shall be involved in the distribution
through cooperatives and other marketing channels to ensure the supply of rice at stable
prices across the Philippines.

Under this law are the salient provisions that would utilize the potential of the
country’s agriculture sector to be globally competitive through the imposition of tariff to
imported agricultural products rather than use of quantitative import restrictions: First, the
law provides an equitable and transparent mechanism, which is the Minimum Access
Volume (MAV) Mechanism, to allocate the MAV of agricultural products. Second, the
Repealed Laws through RA 8178 resulted to all agricultural products allowed to be freely
imported into the country, except for rice. Third, the Amendment in the National Grains
Authority Act (P.D. 1485) permitted hold of quantitative restriction on rice. Rice was also not
tariffed. Fourth, the entire proceeds of Agricultural Competitiveness Enhancement Fund
(ACEF) shall be set aside and set aside by Congress to provide different forms of assistance
and support to the agricultural sector of the Philippines.

The Rice Tariffication Law

The Rice Tariffication Law, also known as the Rice Liberalization Act or Republic Act
No. 11203, titled “An Act liberalizing the importation, exportation, and trading of rice, lifting
for the purpose the quantitative import restriction on rice, and for other purposes” was
signed into law by President Rodrigo Roa Duterte on February 14, 2019. The law amends the
Agricultural Tariffication Act of 1996 that imposed tariff to agricultural imports except for
rice. RA 11203 aims to lift the quantitative (QR) restriction on rice imports and replace it
with a general tariff. Its precedent, the Agricultura Tariffication Act of 1996, served as the
Philippine government’s compliance to its obligation to the World Trade Organization, lifting
QRs and imposing tariff to agricultural products. It aims to protect local farmers from the
entry of more imported rice into the country through the imposition of 35% tariff on rice
coming from member-states of the ASEAN and 40% tariff on non-ASEAN countries. Proceeds
from these tariffs will be used to funds mass irrigation, warehousing, and rice research
(Tobias, 2019).
Objectives of the Tariffication Law

Objectives of the tariffication law include the following: (1) to fulfill the Philippines’
international commitment upon joining the World Trade Organization in 1995 by replacing
the QR on rice with another form of protection that is more transparent, revenue-generating,
and supportive of the sector – or a tariff; (2) to ensure the availability of rice in the domestic
market for the accessibility of greater majority of the population by allowing more
participants in the importation of rice; (3) to lower domestic rice prices to levels that would
be affordable to the greater majority of the population; (4) to make the domestic market
function effectively and efficiently with little to no government intervention; (5) to provide
farmers equivalent protection with the imposition of 35% or higher tariff rates on rice
imports and preferential assistance to rice farmers that are adversely affected by the
tariffication; and (6) to provide opportunity for farmers to earn more in the world, featured
in the law by lifting the restriction on rice exports to encourage farmers to produce better
quality traditional rice.

Key Provisions of the Rice Tariffication Act

First of the key provisions of the rice tariffication act is the tariffication itself, wherein
tariffs are set at 35% on all rice imports from ASEAN countries and 50% on all imports from
non-ASEAN countries. Second, lifting of quantitative restriction on imports and exports are
expected to increase imports and depress palay prices. Third, the President is given powers
upon the recommendation of NEDA and as advised the National Food Authority Council
(NFAC), in which the President “may increase, reduce, revise or adjust existing rates of
import duty up to the bound rate” of rice tariffs. In case of “imminent or forecasted shortage,”
the draft IRR provides that the President may allow the importation of rice at a lower applied
tariff “for a limited period and/or specified volume” to address the situation. The fourth key
provision of the law is the creation of the Rice Competitiveness Enhancement Fund (RCEF),
which will be funded by the tariff revenues of rice imports and will be used to directly
support rice farmers and fund innovative undertakings of the government to further
strengthen the rice industry. According to Tobias (2019), the fund aims to provide key
interventions to support farmers and enhance their competitiveness and profitability,
including farm machinery and equipment to improve farm operations, rice seed
development, propagation and promotion, expanded rice credit, and extension services. The
RCEF will be allocated to rice producing areas and earmarked as follows:

1. 50% will go to the Philippine Center for Postharvest Development and Modernization
(PhilMech) to provide farmers with rice farm machineries and equipment;
2. 30% will be released to the Philippine Rice Research Institute (PhilRice) to be used
for the development, propagation and promotion of inbred rice seeds to rice farmers
and the organization of rice farmers into seed growers’ associations engaged in seed
production and trade;
3. 10% will be made available in the form of credit facility with minimal interest rates
and with minimum collateral requirements to rice farmers and cooperatives to be
managed by the Land Bank of the Philippines and the Development Bank of the
Philippines; and 10% will be set aside to fund extension services by PhilMech,
Agricultural Training Institute (ATI), and the Technical Education and Skills
Development Authority (TESDA) for teaching skills on rice crop production, modern
rice farming techniques, seed production, farm mechanization, and knowledge/
technology transfer through farm schools nationwide.

The fifth key provision of the law is formulation of a Rice Industry Roadmap by the
Department of Agriculture, along with other relevant agencies. The Rice Industry Roadmap
shall spell out the critical interventions that need to be put in place in order to assist the
small rice farmers, especially those that will be most affected by the tariffication. Former
Secretary Emmanuel Piñol has also issued Special Order No. 358 which created a National
Rice Roadmap Team.

The law provides a sixth key provision, the National Single Window Program, which is a
proposed measure to setting up a single window system for rice by the Bureau of Customs
to address rice smuggling. The seventh key provision excludes and transfers the regulatory
function of the National Food Authority (NFA) to the Bureau of Plant Industry (BPI). NFA will
retain its power in maintaining a rice buffer stock to be used in emergency situations at to
sustain the government’s disaster relief programs with rice sourced solely from local
farmers. In accordance with RA 8800 or the Safeguard Measure Acts and its Implementing
Rules and Regulations (IRR), the eighth key provision is that the IRR shall provide for a
Special Rice Safeguard to help protect local farmers from sudden or extreme price
volatilities. Finally, the law provides that a Rice Farmer Financial Assistance Program, which
focuses on rice farmers, cooperatives, and associations adversely affected by rice
tariffication. This will also allocate tariff revenues in excess of P10 billion to the Rice Farmer
Financial Assistance Program to compensate rice farmers who will lose income as a result of
the measure. A portion of the excess tariff shall be allocated to titling rice lands, expanded
crop insurance, and crop diversification program.

The Relationship between Rice Tariffication and Inflation

The newly approved Rice Tariffication Law, approved by Congress on November

2018, removes the National Food Authority’s (NFA) power to import and distribute cheaper
rice. With Senator Cynthia Villar as the principal author, the measure was prepared jointly
by the Committees on Agriculture and Food, on Ways and Means, and on Finance. It is in
substitution of Senate Bill Nos. 1476, 1689, 1839, taking into consideration Proposed Senate
Resolution Nos. 143, 146 and House Bill No. 7735, with Senators Ralph Recto, Leila De Lima,
Joel Villanueva, Risa Hontiveros, Grace Poe, Sherwin Gatchalian and Cynthia Villar as
authors.

Pres. Rodrigo Duterte signed into law the Rice Tariffication Bill which was imposed
recently on March 5, 2019. The law was prompted because of the surging inflation of price
of rice during the last quarter of 2018 after the rice stocks of NFA ran out. Data from the
Philippine Statistics Authority (PSA) also asserts that rice was the topmost contributor to
inflation in September 2018, while food items in the consumption basket accounted for more
than half of the inflation rate in the same month. Consumers bought regular-milled rice at an
average price of Php 37.89/kg (US$ 0.72/kg) and well-milled rice at Php 41.93/kg (US$
0.80/kg). Prices of rice have continued to go up since then. Farmers enjoyed the highest
buying price for palay which was recorded at Php 22.00/kg. The rise in rice prices, both at
the farm-gate and retail levels, contributed significantly to inflation. As Filipinos continue to
struggle with inflation, the government found ways to temper rising inflation. One way of
doing so was the passage of the Rice Tariffication Bill.
 According to the National Economic and Development Authority (NEDA), rice
tariffication will directly benefit farmers and the poor through lower rice prices and
increased government assistance to the agricultural sector. The newly-signed law provides
for the establishment of the Rice Competitiveness Enhancement Fund (RCEF), which will
pipe in Php10 billion (US$ 190.84) annually to the rice sector for the next six years. The RCEF
is allocated for the procurement of farm machinery and equipment, rice development,
propagation and promotion, as well as expanded rice credit and extension services. NEDA
has also taken the lead in crafting the Implementing Rules and Guidelines (IRR) of the Rice
Tariffication Law along with the Department of Budget and Management, Department of
Agriculture, and other concerned government agencies to ensure the country’s smooth
transition to a new rice regime. The IRR takes into account the feedback and concerns
brought up by various stakeholders during the drafting of the bill and after it was signed into
law.
 CHAPTER 3

Research Methodology

The research methodology involves the gathering of data through interviews and
reports which could provide necessary information to further analyze and understand the
topic being studied. This chapter presents and describes the research design, data-gathering
instruments, and data analysis procedure.

Research Design

The descriptive method of research was used in this study, which did not only require
the collection of data but also entailed describing the data presented in the paper.

The Qualitative Research Consultants Association (n.d.) defines qualitative or

exploratory research as one that is designed to reveal a target audience’s range of behavior
and the perceptions that drive it with reference to specific topics or issues. Surveys may be
used for descriptive, explanatory, and exploratory research. It is used to find data for further
understanding and adequate interpretation (Calderon & Gonzales, 1993).

A descriptive survey design was used. A descriptive survey was selected because it
aims to gather data with accurate interpretation of its meaning and significance. This design
was chosen to meet the objectives of the study, which involves the insights of an economist
in Xavier University – Ateneo de Cagayan, as well as procuring official documents and reports
from several agencies.. In particular, the study attempts to describe the effects of Rice
Tariffication Law on Filipino rice farmers.

Data Collection Procedure

Data Analysis Procedure

 CHAPTER 4

Presentation, Analysis, and Interpretation of Data

This chapter presents the result of the interview and research conducted in the study
of the impact of the Rice Tariffication Law on Filipino rice farmers. The result of this study is
given below.

Problem 1

How does the Rice Tariffication Law affect Filipino rice farmers?

1.1 Security of livelihood

The last provision of the Rice Tariffication Law is to provide a Rice Farmer Financial
Assistance Program which not only focuses on rice farmers but also cooperatives and
associations adversely affected by the rice tarrification. This will also allocate tariff revenues
in excess of Php10 billion to the said program to compensate rice farmers who will lose
income as a result of the measure. A portion of the excess tariff shall be allocated to rice lands
titling, crop insurance expansion, and crop diversification programs. Providing rice farmers
equivalent protection with the imposition of 35% or higher tariff rates on rice imports and
preferential assistance that are adversely affected by the tariffication is one of the key
objectives of the law. The RCEF provision of the law, most particularly, which aims to provide
key interventions to support farmers and enhance their competitiveness and profitability or
their sustainability of income affects the farmer’s security of livelihood in such a way that it
shall open up a window for farmers to export and contribute to the world market. Further,
Sabal (2019) asserts that the security of the local farmers in their livelihood depends on the
efficiency and effectiveness of the government programs established in correcting the
inequality caused by the tariffication law. It is the primary duty of the government to oversee
and correct it. The government should account it by putting it in the right institutions.

1.2 Sustainability of income

One of the primary objectives of the Rice Tariffication Law is to provide opportunities
for farmers to earn more in the world, featured in the law by lifting the restriction on rice
imports to encourage farmers to produce better and quality traditional rice. However, having
to compete with cheap rice imports will make farmers more penniless (Tobias, 2019) as
there is no apparent protection and safety nets for the farmers. Another concern is that the
law will enable cartels of the rice trade and will throw poor sectors into a worsened state of
hunger. There is no guarantee that retail prices will be lower in the long run with
unhampered importation. Rice cartels indulge on hoarding imported rice to create supply
tightness and prevent prices from falling.

According to Sabal (2019), the law would completely affect the Filipino rice farmers
because majority of the country’s population is within the middle-income status. Filipino
consumers are mindful and conscious of their health and this consumer behavior is a factor.
Filipinos will choose the cheaper, healthier alternative that an imported rice variety may
offer, leaving locally produced rice as the last option. He also adds and that it is the role and
responsibility of the government to lead, monitor, and implement the rules and regulations
regarding rice importation since they are the ones collecting the tariffs. Both the security of
the farmers’ livelihood and sustainability of their income largely depends on the success of
the government’s programs.

Problem 2

What can Filipinos do to support the rice farmers?

The country’s medium-term development plan which accords focus on agricultural

progress is in full-swing. The government is implementing plans and programs to address
the challenges and constraints faced by our local rice farmers and the agricultural sector at
large. Different strategies are currently underway, adequately supported by a clear
investment program to ensure achievement of these targets. Under the key provision of the
rice tariffication law is the creation of the Rice Competitiveness Enhancement Fund (RCEF)
wherein tariff revenues will be utilized to directly support rice farmers. Farm machineries,
rice farming programs, farm mechanization are some of the allocations of the fund.

As ordinary Filipino citizens, it is significant to urge local government units to

purchase from local farmers. This will ensure a stable income for Filipino farmers and
receive a constant demand for their products with reasonable prices. The Filipinos can opt
to buy locally-produced rice instead of getting imported brands. This will motivate farmers
to produce more goods particularly rice. Local farmers go through a rigorous process in the
sale of their local produce. By establishing up a market for these local farmers, this will cut
the bureaucracy involved, thus, becoming easier for farmers to generate income. Filipinos
can also opt to reach out to companies to buy produce from local farmers. The Philippine
Rice Research Institute emphasized that local grocery stores, restaurants, canteens, and
among others, can partner with cooperatives or farmers’ groups in their locale and deal with
them as suppliers. This effort can sustain the livelihood of the farmers as there is a
continuous demand for their products. Sharing and amplification on the information about
local farmers is significant to expound awareness on the issues concerning the agricultural
sector and the local farmers.
 Chapter 5

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

This chapter presents the summary, conclusions and recommendations of the study
based on the data presented.

Summary

This study was conducted to determine the impact of the Rice Tariffication Law on
Filipino Rice Farmers based on the provisions of law and what specific ways can Filipinos do
to help the Filipino rice farmers. The study employed the descriptive method of research in
the process of gathering data.

Findings

The following are the prominent findings revealed in the researchers’ study:

1. The RCEF provision of the Rice Tariffication Law, which aims to provide key interventions
to support farmers and enhance their competitiveness and profitability or their
sustainability of income affects the farmer’s security of livelihood in a way that it shall open
up a window for farmers to export and contribute to the world market due to its features
that “provides key interventions to support farmers and enhance their competitiveness and
profitability” by providing farm machinery and equipment to improve farm operations, rice
seed development, propagation, and promotion, and expanded rice credit, and extension
services.

2. Sabal (2019) asserts that the security of the local farmers in their livelihood depends on
the efficiency and effectiveness of the government programs established in correcting the
inequality caused by the tariffication law. It is the primary duty of the government to oversee
and correct it. The government should account it by putting it in the right institutions.

3. One of the primary objectives of the Rice Tariffication Law is to provide opportunities for
farmers to earn more in the world, featured in the law by lifting the restriction on rice
imports to encourage farmers to produce better and quality traditional rice. However, having
to compete with cheap rice imports will make farmers more penniless (Tobias, 2019) as
there is no apparent protection and safety nets for the farmers.

4. The law may enable cartels of the rice trade and will throw poor sectors into a worsened
state of hunger. There is no guarantee that retail prices will be lower in the long run with
unhampered importation. Rice cartels indulge on hoarding imported rice to create supply
tightness and prevent prices from falling, thus securing giant profits.

5. With majority of the country’s population within the middle-income status, Filipino
consumers are becoming mindful and conscious of their health and this consumer behavior
is a factor. Most Filipinos will choose the cheaper, healthier alternative that an imported rice
variety may offer, leaving locally produced rice as the last option.

6. It is the role and responsibility of the government to lead, monitor, and implement the
rules and regulations regarding rice importation. Both the security of the farmers’ livelihood
and sustainability of their income largely depends on the success of the government’s
programs.

7. Ordinary Filipino citizens may urge local government units to purchase from local farmers.
This will ensure a stable income for Filipino farmers and receive a constant demand for their
products with reasonable prices. Consequently, they can also opt to buy locally-produced
rice instead of getting imported brands. This will motivate farmers to produce more goods
particularly rice.

8. The Philippine Rice Research Institute emphasized that local grocery stores, restaurants,
canteens, and among others, can partner with cooperatives or farmers’ groups in their locale
and deal with them as suppliers. This effort can sustain the livelihood of the farmers as there
is a continuous demand for their products.

9. Taking advantage of digital presence, Filipinos may also share and amplify information
about local farmers to expound awareness on the issues concerning the agricultural sector
and the local farmers.
Conclusions

The results of the study showed that the negative effects of the Rice Tariffication Law
outweighs its objectives. Another key player to the rice industry has also been introduced in
this study – the rice cartels of the Philippines. However, the results also showed that Filipinos
are able to assist fellow Filipino rice farmers in their endeavor to secure their livelihood and
sustain their income simply by buying their produce, as well as urging local governments to
support the farmers within their jurisdiction. The researchers therefore conclude that
although it is inevitable for Filipino rice farmers to be negatively affected by the deregulation
of rice, it is not a dead end for their livelihoods as fellow ordinary Filipinos can uplift their
plight.

Recommendations

Based on the findings and conclusions of the study, the following recommendations were
suggested:

To the XU Students. The researchers of this study highly encourage the students to
gain awareness of the current state of the Philippine Agriculture and give recognition that
the Filipino farmers deserve. Students are also encouraged to support agricultural activities
of the university that support the livelihood of the Filipino rice farmers.

To the Community. Local communities may urge their local governments to

purchase from local farmers. This will ensure a stable income for Filipino farmers and
receive a constant demand for their products with reasonable prices. The researches
encourage the Filipino community to buy locally-produced rice instead of getting imported
brands, as this will motivate farmers to produce more rice.

To the Filipino rice farmers. The researchers hope to inspire Filipino rice farmers
to seek justice in this inequality and to never stop fighting for their noble livelihood.

To the Future Researchers. The researchers of this study highly encourage the
future researchers to improve the study by focusing on another key player – the Philippine
rice cartels. Future researchers may also want to seek different opinons from different
professionals or agencies that are concerned with this agricultural issue. In addition, future
researchers may want to look into other agricultural issues in the country.