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Protective trade policies causing high food prices – MAP

Protective trade policies such as implementing high tariffs in the agriculture sector are causing unwanted collateral damage to consumers as it results in high prices of food, a business group said, as it called for uniform tariffs across domestic industries.

In a position paper on the Tariff Commission (TC) and the National Economic and Development Authority’s comprehensive review of the most favored nation tariff structure, the Management Association of the Philippines (MAP) urged for uniform tariffs across all industries.

“High tariffs have long been shown to be counter-productive and lead to reduced investment, low or stagnant wages and higher rates of malnutrition. Using protective trade policy to help farmers causes unwanted collateral damage to the much wider mass of consumers, especially the poor who suffer the long-term consequences of high-priced food,” the group said.

Citing the Bangko Sentral ng Pilipinas, the MAP noted that on the average, food and agricultural items have accounted for 38 percent of inflation since 2017. “The recent and disheartening episodes of inflation on specific food items such as pork, fish, sugar, garlic and onions, highlight the disproportionate impact of high tariffs that underlie high domestic food prices,” the group said. The MAP stressed that Filipino families have historically been burdened with higher food prices than consumers in other countries across ASEAN and beyond.

The group highlighted that Philippine tariffs on agricultural and food commodities are higher than those applied to goods in general, citing data from the TC showing that the average tariffs applied on agricultural products is 12 percent while the average for all products is eight percent.

The MAP said that the removal of existing peaks and achieving low uniform rates in a tariff structure that provides equal incentives across domestic industries will encourage more and wider agricultural processing and value-adding, help control inflation and enhance the country’s food security.

Citing the 2018 Trade Policy Review by the Philippines and the World Trade Organization, the MAP noted that the tariff peaks translate to reduced incentive for domestic value adding.

As an example, it cited the 40 percent tariffs on corn that dampened incentives to manufacture livestock and aquaculture feeds in the country.

While it is pushing for uniform tariffs, the group also pointed out the need for effective implementation of focused adjustment and assistance measures aimed at adversely affected sectors, especially small farmers.

Overall, the MAP urged the government to move towards a tariff structure that supports food security for Filipinos, especially accessibility and affordability of competitively priced food via low tariffs on food products and strengthen sustainable agri-food value chains, especially domestic agricultural value-adding through a rational tariff structure where tariff rates on inputs do not exceed those on finished products.

Source: Philstar

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