Favor farmers for our future
To secure the future of our children and grandchildren, we must favor the farmers. In the case of deciding tariff levels for domestic pork producers, we must keep this uppermost in mind.
Our farmers provide us with the food we eat, as they earn income for themselves. Without this opportunity for work, they will join the ranks of the unemployed. Poverty will increase, civic unrest will rise and disaster will ensue. We must be grateful to importers, who supply us with what we lack. We must fully support them at the appropriate level, but not so excessively as to cause suffering for farmers.
This was a key issue discussed during the Oct. 12 hearing of the Tariff Commission on pork tariffs. The Pork Producers of the Philippines (Propork) argued the current 25-percent Outside Quota and 15-percent Minimum Access Volume pork tariffs (25 percent/15 percent) were causing severe suffering among our pork farmers. The price of imported pork, as a result of these tariffs, had favored the producers to decrease their farm-gate prices from April to June down to P172 per kilogram.
In August, the Department of Agriculture (DA) announced that this price had decreased to P150 per kg, which is 25 percent below the P195-per-kg production cost. Even worse, Propork vice chair Rolando Tambago said that as of the first week of October, this had further decreased to an alarming P120 per kg in several areas. Eric Harina, Propork president and vice president of Alyansa Agrikultura (AA), which made a presentation, argued that the pork tariffs should be increased immediately for the pork industry to survive. They were already in a crisis.
Price gap
AA argued that the price-gap method should be used as a starting point to decide tariff levels. It determines the gap between the imported and domestic price. This gap is the starting tariff point where the imported equals the domestic price. Discussions considering other factors such as supply shortages and inflationary factors will modify this starting point. This method is used effectively in several countries such as Vietnam, Indonesia, China and India.
AA started its presentation by asking if either the Tariff Commission or the DA had calculated this pork price gap. Both responded they had not. AA then presented its calculation of this price gap, shown in the accompanying chart.
The adjusted column in the table was added after comments were made at the hearing that the attributed costs for the imported category should be increased. Consequently, with Propork saying these adjustments should still be verified and subjected to further discussion, very liberal assumptions were made regarding the import price.
The $2-per-kg landed cost was increased to $2.25 per kg. The margins per kilo of P15 for the importer and P5 for the reseller were doubled to P30 per kg and P10 per kg, respectively. These liberal adjustments significantly decrease the price gap (and consequently, the starting tariff) from 92 percent to 51 percent.
The ChatGPT estimate of 40 percent (as of Oct. 9) is lower than the Propork numbers of the original 92 percent and the adjusted 51 percent. AA stated this was because ChatGPT qualified that their number had not considered the transformation of the farm-gate live weight price to the imported price, which is necessary for proper analysis. This will result in a larger gap. Nevertheless, all three numbers are much higher than the current 15-percent/35-percent rate, which is creating havoc today.
DA action
At the hearing, the DA’s proposal was to increase the current 15-percent/20-percent rate to 15 percent/35 percent in 2027, then to 30 percent/40 percent in 2028 (which were the original tariffs). AA wrote to Agriculture Secretary Francisco Tiu Laurel, Jr., arguing that this was too little and did not need to be implemented in two phases. The price gap is significantly above the DA’s proposed tariffs, and the phased proposal will unfairly prolong the farmers’ suffering.
Instead, the DA should immediately take motu proprio action on the appropriate provisional and other safeguards allowed by law. The need is very urgent. In addition, updating the pork tariff rates should later be done using the price gap method to determine the correct levels. The very next day, Tiu Laurel indicated that the approach had merit and would be considered. He wrote that there was a need “to check the gap.”
This is an excellent time to show that we favor farmers. Much of our future depends on their survival as well as their eventual progress or demise.
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 through [email protected].
