SOLONS BACK MAV HIKE BUT NIX PORK TARIFF CUT
AKEY House panel and two senators on Monday weighed in against a pending proposal sent to the President to slash tariffs on imported pork, saying it will have little impact on putting a brake on inflation while gravely damaging the domestic hog production sector.
They also have a consensus that the right move, if inflation were a concern, is to allow more pork importation, but keep the tariff rates as they are.
Citing its oversight powers over tariff-related matters, the House Committee on Ways and Means on Monday recommended to the Committee on Tariff and Related Matters (CTRM), through the Department of Agriculture (DA), the reversal of its proposal lowering tariffs on pork.
During a hearing, House Ways and Means Chairman Joey Sarte Salceda told the DA the committee is against a reduction of tariffs on pork. “Reverse the policy—that’s the consensus of this committee. We are recommending to you to keep the tariff and increase MAV [minimum access volume] because if you reduce the tariff you will just pad up the profit of meat processors,” Salceda told Agriculture Secretary William Dar.
“We’ve run the numbers, and our findings are that, at the levels the DA is trying to propose for importation, the tariff reduction will only impact average consumer pork prices by 50 centavos. This is not worth the pain it will cause farmers, and it is certainly not worth the trouble of more inspections,” Salceda said.
In a separate development, Senators Imee Marcos and Cynthia Villar, taking up the cudgels for the local hog industry, asked Malacañang to junk plans to cut tariff on imported pork.
The proposal was reiterated by economic managers as inflation accelerated in February to 4.7 percent, with the pork shortfall cited as a key factor. The managers said slashing tariffs—on top of increasing the volume allowed for importation—would allow the entry of cheap pork imports and stabilize prices, but the lawmakers disagree.
Senators Marcos and Villar, who chair the Economic affairs and Agriculture committees, respectively, conveyed in a letter their appeal for Duterte to reject the move to bring down tariffs on pork importers.
Marcos said she and Villar cautioned Malacañang that slashing tariffs would not help check inflation so much but instead put out of business the local hog industry, now already reeling from the onslaught of African swine fever (ASF).
The DA had petitioned to lower the tariffs for in-quota pork imports from 30 percent to 5 percent for the first six months; and to raise it afterward to 10 percent for the succeeding six months.
The DA also sought to lower the out-quota tariff for pork to 15 percent for the first six months and increase it to 20 percent for the next six months. Out-quota pork imports are slapped with a 40-percent tariff.
According to Marcos, they saw no need to further cut the tariff given the very low price of imported pork which, she said, would mean “the importers would earn so much more while government earns nothing.”
Marcos reminded policy-makers that the government needs the additional revenue now in order to have adequate funds for buying vaccines, “to fight the Covid-19 contagion.”
Villar earlier cited estimates that at least P16 billion in revenue would be lost if goverment lowers the tariff on pork and at the same time allows a 7-fold increase in importation of meat from the 54,000 metric ton limit.
Apart from that, she projected the market would be flooded with cheap imported meat that is seen to kill the local industry. This, even as hog raisers from Visayas and Mindanao conveyed assurances they can supply enough pork to fill the shortfall, particularly in Metro Manila.
MAV increase proposed
IN February, to stabilize pork prices, the DA recommended to President Duterte the increase in the minimum access volume (MAV) of pork to 404,210 metric tons (MT). The government had raised its proposed volume of imported pork this year to address the expected local demand for the food item. The current MAV is only at 54,000 MT.
According to Salceda, an unnecessary tariff reduction could hurt the domestic swine industry, of which 71 percent is backyard production.
“In a crisis like this, hurting a major source of revenues for household farms is unconscionable. We are drafting an official manifestation of the committee’s position to the DA. I would also like to remind the DA that this committee has oversight powers over tariff-related matters. That’s our original power, and the President only gets to exercise the power of flexible tariffs during Congressional recess,” Salceda added.
“Even with the current pork tariffs of 40 percent, the imported price will be around P187 per kilo. Considering that pork has reached up to P400 per kilo in some markets, there is no logic for a tariff reduction. Even at a tariff rate of 100 percent, there would still be an incentive to import,” Salceda argued.
Dar earlier said the Tariff Commission is finalizing its report and recommendations to the CTRM on DA’S proposal to further slash pork tariff for one year.
Neda’s move
AS inf lation was reported last Friday to have accelerated to 4.7 percent in February, the National Economic and Development Authority (Neda) said the CTRM will submit its recommendation to temporarily lower pork tariffs.
In a statement, acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the CTRM proposes to immediately lower pork tariffs to 5 percent within the MAV and 15 percent outside the MAV for 3 months, with a slight increase to 10 percent within the MAV and 20 percent outside the MAV for 9 months.
The Neda said these rates are significantly lower than the current 30 percent within the MAV and 40 percent outside the MAV.
High tariffs favor smugglers?
WAYS and Means Senior Vice Chairman Sharon Garin has rejected cutting tariffs on pork products.
“Plus, more than half of the imports are for processors, so the processed meat manufacturers will get most of the benefit...meaning Purefoods, etc .... not the Filipinos buying pork in the wet market,” Garin added.
For his part, Dar said the government will design a mechanism for how the imported meat products will reach the wet market.
“There are discussions [on] up to what level of inflation can be significantly reduced if we go to those [tariff] levels. But at the end of the day [it’s about] inflation and maintaining affordable prices,” Dar said.
He said the DA and the whole Economic Development Team of the government are both monitoring the food supply situation.
‘Fix SPSIC system’
TO Salceda, however, the more sensible approach is to fix the government’s Sanitary and Phytosanitary Import Clearance (SPSIC) system.
There’s need to improve “our imports inspection and quarantine system, and to streamline imports processing,” Salceda said. “That’s why I am asking the DA and the Bureau of Customs to submit a flowchart of their processes, so we can study and make recommendations.”
Salceda also warned that a tariff reduction, when global prices are already much lower than domestic prices, merely “pads the profits of big businessmen.”
“My proposal is this: Let’s allow more importation at current tariff rates. Whatever is in excess of what we usually import, let’s use the tariff revenues as an RCEF for the swine industry. That could reach P14 billion more in tariff revenues if we import all of our shortfall,” Salceda proposed. RCEF stands for rice competitive enhancement fund.
“That addresses the heart of the matter, which is domestic pork supply,” he said.
RCEF for swine industry
SALCEDA is also pushing for a dedicated agricultural program from tariff revenues from pork.
“I’d prefer an RCEF for pork. The free hybrid seeds from rice worked to reduce our import dependence on rice. Let’s do the same for the pork value chain. Because the problem is domestic,” Salceda added.
“Let’s see how pork imports increase. Let’s deduct the tariff revenues from the baseline, and use it to develop the domestic industry. I am convinced it will work better than an outright lowering of tariffs,” he said.
Mix of policy moves
FOR her part, economist-lawmaker Stella Luz Quimbo of Marikina reiterated that the solution to food inflation is a mix of policy responses, including reducing tariffs.
“I am not ready to reject the [lower tariff] proposal. When tariffs are very high that could cost smuggling and we know smuggling will bring more problems like ASF. Also, very high tariff would lead high prices for consumers and right now that’s a big problem,” said Quimbo.
Quimbo asked the DA to submit the “technical basis” of the proposal lowering tariffs on pork products to the committee.
“We have to be science-based. What are the basis of this 5-percent tariff proposal? I need to know from the DA. Let’s look at what the economic considerations are,” she said.
Earlier, Quimbo said if the government rationalizes tariff rates at lower levels, “this is tantamount to hitting two birds with one stone.”
“Prices will fall and at the same time, importers will legitimately pay the tax,” she added.
Smuggling is rampant partly because “tariffs are high and enforcement is weak. Due to the high tariff at 40 percent, importers prefer to just smuggle. With rampant smuggling, imported meat will be too cheap and our local producers will not be able to compete, and government loses out on tariff revenues,” she said.