No to zero tariff on chicken, pork and corn
We must firmly reject the proposal of zero tariff for the critical products of chicken, pork and corn. This recommendation was first presented in a meeting with President Marcos to minimize inflation because of the Middle East crisis.
Last April 12, 18 agricultural-related organizations sent a letter to the President. They stated: “We seek your intervention in the proposed tariff reduction on imported pork, chicken and corn. The agriculture and fisheries sector is the most valuable sector, with serious consequences and impact on national food security, elevated hunger and rural livelihood.”
Chicken and corn
The present 40-percent tariff on corn was decided on with due diligence. An appropriate tariff is one that equates the price of an imported product with a locally produced one.
This achieves a level playing field. Tariffs that are too high would mean excessive local industry protection, resulting in unfairly high prices for consumers. Tariffs that are too low would mean that imported products would sell at a price below local production cost. The results are job losses and more poverty.
In a position paper submitted by Eliseo Jose Inciong, chair of the Urban Broiler Raisers Association and executive vice president of the Alyansa Agrikultura (AA), he documented the poultry picture.
As of last February, the landed cost of a whole chicken was $1.12 per kilogram (kg) . With the current 40-percent tariff and a P60:$1 exchange rate, this translates to P94 per kg. At that time, the local farmgate price averaged P103 per kg. The import was cheaper than the local product.
If the 40-percent tariff is reduced to zero, the import price will decrease to P67 per kg. This is much lower than the current P103 per kg farm gate price. Considering that production cost is P95 per kg, losses will be incurred, jobs lost and our food security threatened.
In the case of corn, a position paper was submitted by Leonardo Montemayor of the Federation of Free Farmers (FFF) and Argel Cabatbat of the Magsasaka Party List. It makes the same strong case against a zero tariff.
It stated: “Setting import tariffs on corn to zero would reduce the landed cost of corn by an average of P1.70 per kilo. Some two million corn farmers cultivating 2.3 million hectares stand to incur almost P12 billion in losses if farm gate prices drop by P1.70 per kilo as a result of the tariff cut.”
Disconnect
In considering tariff changes, we must recognize that there is a large disconnect between the imported and the farmgate prices on one hand and the retail price on the other hand. The farmgate price has to compete with the import price. But the retail price is often much higher than the farmgate and imported prices.
This is because the middleman margins are extremely large. This is due to market distortions, such as cartels, hoarding, collusion and multiple layers. Price is not determined by cost alone, but by supply and demand forces.
For example, the February chicken import price was P94, while the farmgate price was P103. But the retail price was P220.
In very many instances, armchair economists predicted that a significant tariff decrease would automatically result in an equally significant retail price decrease. This has been proven wrong. Producers suffered greatly, while consumers received little benefit because of the minimal retail price decreases.
An important case was when the 35-percent rice tariff was implemented. The Department of Agriculture rejected the submitted appeals of both the AA and the FFF for safeguards through additional tariffs.
The result was a minimal 2-percent decrease in normal retail prices, but a 23-percent decrease in rice farmer incomes. Because of supply and demand factors, a decrease in chicken, pork and corn tariffs will not result in the proportionate decline in retail prices. And this will be done at the expense of millions of our farmers and fisherfolk.
Due diligence
Government must decide on tariff changes based on due diligence. There have been questions raised by certain organizations on whether recent tariff decisions have been done without the necessary appropriate rigor.
A zero tariff on chicken, pork and corn should not be adopted hastily. Due diligence through means, such as a tariff hearing and in-depth, accurate data analysis must immediately be done. Our people, especially farmers and fisherfolk, deserve no less during this perilous Middle East crisis.
The author is Agriwatch chair, former secretary of presidential flagship programs and projects, and former undersecretary of the Department of Agriculture and the Department of Trade and Industry. Contact is agriwatch_phil@yahoo.com
