A complete tariff system is needed for success

To be effective in protecting farmers, the government should implement a system that is complete. This was the position given by organizations engaged in the pork industry during the Department of Agriculture (DA) press conference on Nov. 9. These include the Agriculture Sector Alliance of the Philippines, Pork Producers Federation of the Philippines and Philippine Pork Council Alliance Inc.

They welcomed the announcement that there would be no pork importation for 60 days. But they wanted a more complete system: “We recognize that this measure is a welcome step towards addressing the serious injury inflicted on the local hog industry by the continued influx of cheap imported pork.”

However, to complete this system, they added: “The government must immediately restore the original tariff rates of 30 percent for in-quota and 40 percent for out-quota pork imports.”

They argued correctly that the import suspension alone, without the tariff increases from the current 15 percent for in-quota and 25 percent for out-quota imports (or ”15 percent/25 percent”), would provide only temporary relief. Once the suspension is over, local pork producers will face the same market pressures of cheap imports from the current tariffs that have brought the industry to the brink of collapse.

Injury

According to the DA, the local pork industry faces potential losses of up to P100 billion in 2026. This is because the 15-percent/20-percent current pork tariffs have resulted in a damaging surge in pork imports.

Producers stated their losses amount to P250 million a day. At a production cost of P170 to P185 per kilogram, the average farm-gate price in August was P150 per kg. By October, this had decreased further to P110 to P120 per kg in several areas, causing huge losses.

In an Oct. 12 Tariff Commission hearing, the Alyansa Agrikultura used the globally accepted price gap methodology to help determine correct tariff levels. This approach suggests that a product’s imported price should equal the domestic price.

The price gap should be the starting point in determining tariffs. This price gap for pork ranged from 54 percent to 91 percent. This is significantly higher than the current gap 15-percent/25-percent tariff. No wonder there was an enormous, damaging import surge.

The International Training Center for Pig Husbandry projected a 2026 ending stock inventory good for 143 days of consumption. This is a huge oversupply of 3.7 months over the required one-month stock inventory. It should be noted that the DA had initially opposed the reduction of the 30-percent/40-percent tariff to 15 percent/20 percent. However, the other economic managers prevailed in this decision.

The law

Section 8 of Republic Act No. 8800, or the Safeguard Measures Act, reads: “In critical circumstances where a delay would cause damage which would be difficult to repair, and pursuant to a preliminary determination that increased imports are a substantial cause of, or threat to substantially cause, serious injury to the domestic industry, the Secretary shall immediately issue a written instruction to the Commissioner of Customs authorizing the importation of a provisional safeguard measure.”

For agriculture, this measure can mean a tariff increase or a quantitative restriction. What was announced on Nov. 9 was a 60-day stop to pork importation. But when this suspension is over, this system must be complete. This means an increased tariff should be in place.

In the case of our previous rice importation suspension, the system was not complete. When the suspension was lifted, the 15-percent tariff (decreased from 35 percent) remained. Predictably, rice imports once again surged at a level even higher than before. The DA’s initial position of a return to the previous tariff increase was again overruled by other state economic managers. We do not want the disastrous rice experience to now be replicated for pork.

Agriculture alliance

During the press conference, the multisectoral Agri Fisheries Alliance (composed of Alyansa Agrikultura for farmers and fisherfolk; Philippine Chamber of Agriculture and Food Inc. for agribusiness; and Coalition for Agriculture Modernization in the Philippines for science and academe) insisted that there was no need for the economic managers’ approval for a DA decision to increase pork tariffs for up to 200 days following the Safeguard Measures Act.

The DA must now be fully supported as they use the next 60-day import suspension period to increase the pork tariffs. These should be in place whenever the suspension is lifted. Only with a complete system, backed by the DA’s strong political will, can our agriculture survive and grow.

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. Feedback at [email protected].