DOMINGUEZ DEFENDS PORK IMPORTS AS NECESSARY TO PREVENT PRICE SPIRALS

Finance Secretary Carlos Dominguez III told senators Tuesday that President Duterte’s directive allowing more pork imports at lower tariffs for a temporary period is an immediate and practicable response to protect Filipino consumers from price spirals that could further drive up inflation and undermine the country’s economic recovery from the COVID-19 pandemic.

Dominguez said the spike in meat prices this year has unduly jacked up food inflation, thus exacerbating the problems of unemployment, hunger, and reduced or lost incomes for many Filipinos that have led “people to line up at community pantries at dawn.”

A former agriculture secretary, Dominguez said that although the presidential directive to ease the pork supply shortage appears to be a painful solution as it would lead to a revenue loss of P13.68 billion for the government, this would slash pork prices to a level estimated to save Filipino consumers a whopping P67.38 billion.

“The gains of consumers reeling from the economic shock of the pandemic dwarf the foregone revenues by P53.7 billion, which is clearly a tradeoff beneficial to the entire country,” Dominguez said during the resumption of the Senate’s Committee of the Whole (COW) inquiry into the current pork supply shortfall in the country resulting from the prolonged outbreak of the African Swine Fever (ASF).

“The worse we could do in a situation like the one we are facing today is to let supply issues force food prices up even more. If food prices rise, the inflation rate also increases. If the inflation rate rises, interest rate increases will follow. This unhealthy chain of events will make economic recovery even more difficult for all,” Dominguez told senators.

Long-term solutions are necessary to deal in the long run with the current situation triggered mainly by the ASF outbreak, and these are already being initiated by the Department of Agriculture (DA), said Dominguez, hence the issuance of Executive Order (EO) 128 to provide an instant, albeit temporary, answer to the current supply and price problems.

EO 128 temporarily cuts the tariff rate on pork imports within the minimum access volume (MAV) quota to 5 percent, from the current rate of 30 percent, for the first three months upon the effectivity of the presidential directive. The reduced rate will go up to 10 percent for the next nine months thereafter.

It also increases the MAV quota for pork from 54,210 metric tons (MT) to 404,210 MT. The current import quota was set way back in 1998 as part of the implementation of the Agricultural Tariffication Act, which was more than 20 years ago when the Philippines’ consuming population was only 71 million.

“Again, more than the economics of it, EO 128 is a response to protect our people from shortages and price spikes during this difficult time. We need to do it now for the sake of our countrymen,” Dominguez said.

Dominguez told senators that the increase in the MAV quota for pork factors in the estimated supply deficit for 2021 at up to 477,000 MT based on estimates by the National Economic and Development Authority (NEDA).

Thus, the temporary increase in pork imports will not “kill” the local hog industry as feared by some quarters, given that imports would potentially account for only up to 22.8 percent of total consumption, Dominguez said.

Dominguez also made it clear that the decision to adjust pork import tariffs was not done haphazardly, but underwent extensive deliberations and consultations among the public and concerned agencies, with all the tradeoffs considered in the cost-benefit analysis.

The spike in pork prices could be immediately be resolved by bringing in more supply, Dominguez noted.

“It is not a question of smuggling or anything. It is because of shortage, and bringing in more supply would stabilize and bring down the price of pork, and therefore, the inflation rate,” he said.

Dominguez noted that allowing supply issues to drive food prices up will lead to an “unhealthy chain of events,” that could inflict long-term damage on the economy and the people, starting with the sharp rise in inflation, which would then lead to an increase in interest rates, and difficult economic recovery for the country.

“Everyone will suffer from high interest rates - from those struggling to pay the amortization dues on their home loans, to those making monthly payments on their cars or motorcycles. High inflation erodes people’s confidence and their desire to save,” Dominguez said.

Comparing the economy to a house, Dominguez explained to senators that the government spent decades reinforcing it through fiscal and monetary policies that serve as its solid foundations made even stronger by the tax reforms and other game-changing measures passed by Congress.

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