The Philippine Star

First Person Unavoidabl­e

President Marcos issued Executive Order 50 maintainin­g lowered tariff rates for rice, pork and corn until the end of 2024. It was an unavoidabl­e decision.

The usual suspects raised the usual howl over the continued lowering of tariff rates. The lower tariff rates will be hard on our farmers, they argue. That is true. They will be forced to compete against cheaper food imports. But what other option do we have? If we keep tariff rates high, food will be more expensive. That will fuel our poverty rates and raise inflation. High inflation will harm everyone without exception. A high food price regime coupled with a high inflation regime will harm our economic developmen­t.

Already the high food price regime is causing widespread malnutriti­on and stunting among our children. The damage wrought on our human capital is immense.

There is no way we can solve our agricultur­al crisis in the foreseeabl­e future – not until we radically reconfigur­e our farm systems. Domestic production of key commoditie­s will be lower than domestic demand for them. Importatio­n helps us avert shortages resulting from this.

If we do not import what our agricultur­e cannot produce, we will face even more serious problems. There could be food riots. There could be starvation in some areas. All these will convert into instabilit­y in the political sphere. The damage to our community will simply spiral.

As things stand, the “lower” tariff rates are still too high. We will still be imposing 35 percent tariff rates for rice. Tariffs for pork will range from 15 to 25 percent. Corn, which is principall­y used for animal feed, will still pay 5 to 15 percent.

Those who oppose these lowered tariff rates are operating on the assumption that there should be no imports at all. That is an unrealisti­c assumption.

Let’s face it: our agricultur­e has failed us. All of us are at fault for this.

Our farm systems are inefficien­t. They are kept so by the uneconomic­al subdivisio­n of farmland. Our agricultur­e is trapped in subsistenc­e mode. That will not do to get our people properly fed.

For decades, because we are trapped in subsistenc­e mode, there has been only negligible investment in food processing, in logistics systems with much lower spillage and spoilage rates than the criminal inefficien­cy we now have and in agro-industry. We do not have orchards to speak of and no modern vegetable farms.

Until we are able to exorcise ourselves of our deepseated fetishism for small farms, our agricultur­e will continue to fail us. Our food price regime will be high. Our farmers will always be poor nonetheles­s.

I am sure Agricultur­e Secretary Francis Tiu Laurel understand­s what needs to be done. After all, he built up a fishing, processed food and logistics conglomera­te by his keen insight into what ails our food production. But he also understand­s that the reforms will have to be radical and sweeping, requiring the investment of much political capital.

The conservati­ves (who love describing themselves as “progressiv­es” in the Orwellian-speak of our warped political dialect) will oppose radical reforms tooth and nail. They will persist in their romantic embrace of the small farmer, who is poor precisely because his farm is small and therefore poorly capitalize­d.

The reason we had a high tariff wall around our agricultur­e was to protect its inefficien­cy. From behind this tariff wall, our consumers were made to pay higher prices for food to sustain farm inefficien­cy. This produced a high poverty rate in our society – and all the distortion­s implied by this condition, from rapid urban migration to the export of our workers.

People resort to smuggling agricultur­al produce for one basic reason: they are cheaper elsewhere than here. A high tariff wall simply makes smuggling more profitable. Lower tariff rates will lower rewards for those choosing to risk smuggling. No amount of raids on warehouses, conducted mainly for political publicity, solves the basic arithmetic of the problem.

For decades, what we had in place of a sustainabl­e agricultur­e strategy was a scheme for distributi­ng subsidies to keep our small farmers afloat. For rice, government subsidized milling, transport and warehousin­g. For everything else, it came in the form of free fertilizer­s, small farm implements and politicall­ypriced farmgate procuremen­t.

This approach worked well for the politician­s. It kept populists popular and enabled them a multigener­ational grip on power.

Today, we have an even greater patronage state, distributi­ng subsidies for every conceivabl­e excuse. This is our distorted version of economic inclusion.

The measure of the scope and depth of this patronage state is the size of our public debt. We have basically indentured the next generation­s of Filipinos to buy legitimacy for today’s political elite.

Compared to the higher tariff rates that have now been suspended for another year, the “lower” rates prescribed by Executive Order 50 is still a coverup. A bikini version, but still a coverup.

It covers up our agricultur­e’s structural failure brought about by insane uneconomic orthodoxie­s we still embrace. Our domestic cost of production will still remain higher than elsewhere. A high food price regime will still inflict poverty on our people. And our farmers will still remain poor.

The cost of producing sugar locally is twice the world average. The price of rice is triple those of our immediatel­y adjacent economies. Vegetable and fruit prices, the commoditie­s that matter for our good health, are priced beyond reach.

This cannot possibly persist.