August 4th, 2022
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) is proposing reducing tariffs on fertilizers, machineries, and farm equipment to zero and increasing tariffs on imported agricultural products that have not exceeded their bound rate yet by 5% for the next eighteen months, in order to address productivity and competitiveness issues in the domestic sector.
“In a meeting today, I proposed reducing tariffs on equipment, fertilizers, and farm machineries to zero, and to increase the tariffs on imported agricultural products such as meat, chicken, and vegetables by 5% outside our free trade partners, as long as they have not exceeded their bound rates.”
“According to the International Trade Association, the Philippine average applied tariff rate for those under the Most Favored Nation (MFN) regime is 9.8% for agricultural products. The average bound rate, or the highest tariff rate we can apply, for agricultural products under MFN is 35%. So, there is plenty of room for adjustment.”
“The differentials in prices between imported and domestic agri products are also large enough to be able to absorb the higher tariffs on imports. The landed cost of imported pork, for example, should be P265 per kilo, and domestic pork is sold at around P355 per kilo.”
Salceda says that zero tariffs on inputs and slightly higher tariffs on agricultural output will allow Philippine farmers to “benefit from trade in inputs, while also getting higher direct support from tariff revenues.”
“The problem of the domestic sector is really input costs. Fertilizers are especially problematic, as fertilizers are 85% higher than last year’s prices. We impose 1-3% tariffs on fertilizers.”
“Executive Order No. 133 already exempts agricultural enterprises from tariffs on their imported machineries and equipment, but small farmholders do not have the capacity to import products directly, and instead buy from domestic dealers who have to pay import duties and pass them on”
“This is also in parallel with my bill to allocate tariffs on agricultural products to the domestic sector, or House Bill No. 2471.”
Salceda was referencing his Universal Tariffs for Domestic Competitiveness Act, which, if enacted, would allocate Tariff revenues of all imports of raw agricultural products to funding for support for domestic sector counterpart.
“So, we should tackle them side by side. Sen. Imee already asked me about the bill.”
“The revenues from agri products should go to the nearest substitutable equivalent of the import, in other words, the sector that is hurting. For imported pork, it’s domestic swine producers. For industries without an exact domestic equivalent, such as, say, palm oil, we can provide assistance to the coconut sector.”
“This is in line with President Marcos’s objective of expanding domestic sector productivity to bolster our food security. He’s right. Especially given climate issues, ff the world stops selling to us, and we don’t have a strong domestic agri sector, we’re done for.”