Notes on the rice crisis

  1. The current rice crisis is a manifestation of the permanent crisis of Philippine agriculture and the economy in general. This permanent crisis is characterized mainly by backward production and intense concentration of the means of agricultural production, most especially land, in the hands of compradors and landlords.

  1. Such backwardness and lack of genuine agrarian reform have been aggravated by the neoliberal restructuring of agriculture, which has been most intense since the 1990s. They include the WTO-AOA (Agreement on Agriculture), rice trade liberalization, privatization of the NFA (National Food Authority), land use and crop conversion that prioritized production of high value crops for export instead of food including rice for domestic consumption, among others.

  1. The direct impact of these neoliberal reforms is the substantial erosion of the country’s self-sufficiency and self-reliance in food production. Farm area for palay contracted by 86,606 hectares between 1991 and 2002 as a result of land use conversion, based on the 2002 Census of Agriculture (CA) of the NSO (National Statistics Office). Corn, which like palay is also a staple crop, saw its farm area contract by 298,064 hectares during the same period.

  1. Overall, the country has become a net food importer after decades of surplus food production. From a yearly surplus of $667.5 million in food trade from 1980 to 1994, the Philippines recorded an annual average of $724.6 million in food trade deficit from 1995 to 2006.

  1. Thus, the current rice crisis can be summed up as the country’s incapacity, because of years of neoliberal agricultural restructuring, to meet domestic requirements through local production amid a situation of tightening global supply of rice. At present, the global supply is pegged at 323.3 million metric tons (MT) while demand is already 323.2 million MT.

  1. In the past years, the share of rice imports to the gross domestic supply of rice has been significantly increasing. BAS (Bureau of Agricultural Statistics) data show that from 1990 to 2000, imports comprised an average of 5.9% of the country’s annual gross supply of rice. The figure has jumped to 9.7% for the period 2001-2006. In 2005 and 2006, the import ratio was 13%.

  1. For 2008, Bayan maintains that imports could account for as much as 20% of the country’s rice consumption. This is much higher than the government claim of an 8%-share of rice imports to national rice requirements. Media reports in March quote the Department of Agriculture (DA) as saying that rice imports this year could reach as high as 2.4 million MT. This volume is equivalent to almost 20% of the country’s average annual rice consumption of around 11.9 million MT.

  1. With such a high level of dependence on rice imports, the country is definitely facing a serious insecurity in rice supply given the tight situation in the global supply-demand balance for rice. Worse, Vietnam, which in 2006 supplied more than 85% of our rice imports, is itself facing grave concerns on its own supply security.

  1. Vietnam needs to secure its own rice supply as it faces rapid contraction in its farmlands due to land use conversion, losing 125,000 hectares of rice fields in 2007 alone. It projects rice exportation to fall by one million MT per year and considers totally stopping exportation to protect its own food security.

  1. The Philippines is already feeling the impact of these developments in Vietnam. Out of the 1.5 million MT in rice imports that the country asked from Vietnam for 2008, Vietnam committed only one million MT. With a volatile situation in the global rice market – and other factors that contribute to this volatility such as extreme weather changes, US recession, energy/oil insecurity, etc – there is no assurance that Vietnam and the country’s other sources like Thailand can deliver. Note also that China, which used to export rice to the Philippines, is now a net rice importer.

  1. Because of tightening global supply, combined with uncertainties in the US economy that encourage massive speculation in commodities including rice, the price of rice has been soaring. Rice from Thailand and Vietnam, for instance, is already at the range of $600-700 per ton from only $320-340 per ton in 2007. As a consequence, local retail prices have been increasing rapidly. As of the second week of March, the retail price of fancy rice is pegged at P33.17 per kilo from an average of P30.76 per kilo in 2007; premium rice, from P26.93 to P28.91; special rice, from P24.72 to 26.91; and ordinary rice, from P22.39 to P24.58. Under the Arroyo government, the price of rice has increased by an average of around P7 a kilo.

  1. The NFA has been ineffective in stabilizing rice prices, which is one of its mandates, as it has been substantially weakened by commercialization and privatization efforts of past and present governments. While the government intends to keep NFA rice at P18.25 per kilo, NFA’s limited participation in the local rice market (only 5% according to IBON), which continues to be dominated by a cartel, do not make a dent on overall increases in rice retail prices.

  1. Tight supply and high prices will hurt the poor most. The rich have extra money to buy a big volume of rice, even at unusually high prices, that could meet their families’ need for a couple of months. For most families, however, they buy rice to meet a day’s need, or in many cases, a meal’s need. (Aside from those who could not afford a meal at all.)

  1. The urgency of drastic reforms, both in the short and long terms, is highlighted by the fact that the various reasons behind the tightening global supply of rice – climate change, energy insecurity, US recession and the crisis of monopoly capitalism in general – are far too complex to be resolved very soon. On the other hand, indicators show that they will continue to worsen in the coming years, and thus put even greater pressure on the country’s food security. Changing weather patterns, for instance, will significantly reduce production and yield in the generally backward agricultural systems of the world’s rice producing countries, including the Philippines. The mad rush to biofuels to meet growing energy needs, in particular in the First World, will continue to undermine food production, especially in the colonial and neocolonial countries.

  1. To ensure food security, the country needs to be self-reliant and self-sufficient in its food production, especially of staples such as rice.

  1. Medium to long-term reforms must include the implementation of genuine agrarian reform (land distribution, substantial and reliable state support/subsidy, etc) to encourage farmers to be more productive; reversal of agriculture liberalization (stop WTO-AOA, rice tariffication, etc); strengthen the mandate of the NFA in ensuring sufficient and accessible supply at affordable prices of food crops including rice and reverse its privatization and commercialization; dismantle the rice cartel; and stop land use and crop conversion and expand domestic food/rice production to levels of self-sufficiency (including a reliable buffer supply), among others. These policy reforms must start now.

  1. Immediate interventions (GMA must stop downplaying the crisis and recognize the urgent need for significant State intervention): Centralized procurement of imported rice of the NFA (cancel import licenses of private traders), increased presence of NFA distribution/retail outlets particularly in areas where poor families are concentrated (urban and rural); emergency fund that will directly go to rice farmers to subsidize production cost; price control (under RA 7581 or the Price Act, government can impose a price ceiling during times of calamity, disaster, or emergency).

Jpepa faces tough constitutional issues as Senate vote nears

Part 1 of a two-part series

The Japan-Philippines Economic Partnership Agreement (Jpepa) is on top of the agenda of the Philippine Senate when it resumes from its Holy Week break on April 28. Senator Miriam Santiago, chair of the Senate committee on foreign relations, said she will release a full report endorsing “conditional concurrence” with the treaty.

Originally, the upper chamber was supposed to ratify the Jpepa before the Lenten break. But the Senate schedule on the treaty has been derailed by the alleged $329-million broadband corruption scandal. Since February, senators have been preoccupied with the inquiry on the anomalous broadband contract that caused renewed calls for Pres. Gloria Arroyo’s resignation or ouster.

Nonetheless, Filipino trade officials have been quietly but aggressively promoting the Jpepa through the media. The Japanese embassy has also become more insistent in its lobbying efforts for Jpepa’s ratification. But as the Senate vote on the treaty draws near, many fundamental issues remain unresolved. In fact, the proposed conditional concurrence of Santiago underscores the failure of the Jpepa to pass crucial constitutional issues.

If ratified, the Jpepa sets a dangerous precedent wherein treaties could be approved in spite of clear constitutional flaws. Worse, Jpepa ratification ignores the legitimate concerns brought up by fishers, workers, nurses, environmentalists, nationalists, and other cause-oriented groups. Beyond the constitutionality of the Jpepa, the bigger issues involve the treaty’s lasting impact on the livelihood of marginalized groups and the country’s economic sovereignty.

National treatment

Retired Supreme Court (SC) justice Florentino Feliciano raised several constitutional questions in one of the Senate’s hearings on the Jpepa last year. He pointed out that the Jpepa’s provisions granting national treatment to Japanese investors and prohibiting performance requirements violate the 1987 Constitution.

National treatment, which is contained in Article 89, means that Japanese investors and their investments will be treated like their Filipino counterparts. But this provision contradicts the ownership limits set by the Constitution. “It is common knowledge that entry into certain sectors of economic activity in our country is constitutionally restricted to Filipinos or to juridical persons at least 60% owned by Filipinos”, Feliciano said.

Government negotiators actually had the chance to hurdle such legal challenge. Article 94 of the treaty gives the Philippines an option to list all constitutional and legal provisions that do not conform to Article 89. But while the negotiators did exercise this option, they failed to provide a full account of such provisions. “The most dramatic example of omission”, observed Feliciano “is relating to the operation of public utilities”.

Article XII Section 11 of the Constitution requires a minimum of 60% Filipino ownership in public utilities. “If the Jpepa comes into effect, Japanese investors would be entitled to own more than 40% of a public utility. This would be a direct contravention of our Constitution”, Feliciano maintained.

There are other similar constitutional restrictions that were not listed by the negotiators in Article 94. They include limits relating to the practice of certain professions; ownership and administration of educational institutions; mass media; and advertising.

Performance requirements and future measures

Article 93, meanwhile, limits the authority of government to impose certain requirements on Japanese investments in the country. Government could not oblige Japanese investors to transfer technology, use a particular amount of local inputs in their production, and to hire Filipinos in certain positions, among others.

Feliciano cited Article XII Section 13 of the Constitution as inconsistent with Jpepa’s Article 93. This provision mandates the State to “promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures to make them competitive”.

A “more serious” constitutional law aspect of the Jpepa that the negotiators ignored, according to Feliciano, relates to the so-called “future non-conforming measures”. Article 94 of the treaty also gives the Philippines an option to list economic activities that the country may want to exclude from Article 89 in the future. However, what the negotiators listed are not reservations for future measures but existing non-conforming measures.

This could undermine Article XII Section 10 of the Constitution. The said provision mandates Congress to reserve to firms at least 60% owned by Filipinos certain areas of investments. Such investment may not be restricted today but “when the national interest dictates” could be restricted in the future.

On trade liberalization, Feliciano raised his concern on possible conflicts between the executive and legislative branches of government. Article 18 of the Jpepa requires the Philippines to eliminate tariffs on imported Japanese goods. “The power to set and modify tariff rates is fundamentally legislative in nature”, Feliciano said. “Although the Constitution (Article VI Section 28) allows Congress to delegate such authority to the President, it is still subject to limitations and restrictions”, maintained Feliciano.

Conditional concurrence

Other legal stalwarts who were not invited in the Senate hearings echo the observations of Feliciano. But while Feliciano proposes to amend the Jpepa to correct its constitutional flaws, they believe that such an option is not possible. Former SC chief justice Artemio Panganiban said that the treaty can no longer be renegotiated because the Japanese Diet already ratified it in December 2006.

“The best option is ‘conditional’ or ‘qualified’ ratification wherein the Senate ratifies the treaty but expresses reservation that the Constitution is superior over the Jpepa”, Panganiban said.

Santiago apparently took her cue from Feliciano’s analysis of the constitutional aspect of the Jpepa and Panganiban’s opinion on how the treaty can survive constitutional challenge. “It (Jpepa) will be declared unconstitutional by the Supreme Court. That is my humble opinion as a scholar of constitutional law”, Santiago admitted.

Note, however, that before pitching for conditional concurrence, Santiago first floated the idea of “exchange of diplomatic notes”. She called it a “side agreement” between Japan and the Philippines which will state that the Constitution shall prevail over the unconstitutional provisions of the treaty. Santiago initiated informal talks about the side deal with the Japanese embassy in Manila last December.

But three months later, Santiago has yet to produce the supposed side deal. Normally, a copy of such agreement is distributed to senators as in the case of the toxic waste issue. In May last year, the foreign affairs departments of Japan and the Philippines had an exchange of diplomatic notes wherein Japan promised not to export toxic wastes in the country under the Jpepa.

Did Santiago fail to convince the Japanese government to sign a side deal that states it will respect the Philippine Constitution in relation to the Jpepa? In her latest statement on the Jpepa, Santiago did not mention the side agreement.

“The Jpepa committee report will comprise at least four documents: the standard format with the signatures of nearly 23 senators who are members of the two committees; the draft Senate resolution setting out the conditions for concurrence; the report on constitutional and legal issues; and the report on trade and industry issues”, Santiago said when she announced the April 28 schedule on the Jpepa.

Will Japan accept it?

Because there is no bilateral side deal where Japan commits to abide by the Philippine Constitution, Santiago is now pushing for a unilateral conditional concurrence. But will Japan accept it? Santiago herself is uncertain. “I hope Japan will accept the conditions, without resubmitting the Jpepa to the Japanese Diet”, said Santiago.

The constitutional issues cited by Feliciano against the Jpepa’s provisions on national treatment and prohibition of performance requirements are non-negotiable for Japan. It defeats Japan’s primary purpose of using the treaty to further maximize its exploitation of the Philippines’ resources and markets. Considering that the country already has a highly liberalized trade sector, the true value of the Jpepa for the Japanese is the commitment of the Philippines to liberalize more investment areas.

But what is more dangerous is the gambit that Santiago is trying to play. Ratifying the Jpepa at its present unconstitutional form creates the risk that the Philippines will be subjected to legal disputes in international courts and face liability for damages. Under the Vienna Convention on the Law of Treaties, for instance, the Philippines could not invoke unconstitutionality as legal defense for non-performance of its Jpepa obligations.

Why not avoid these future complications and say “no deal!” now because the Jpepa patently violates the Constitution?

Most importantly, these restrictions were imposed by the framers of the Constitution because they protect the national patrimony and sovereignty. Thus, the debate should go beyond constitutionality but on how the Jpepa may undermine the country’s efforts in achieving industrialization and in strengthening its self-determination.

(To be concluded)

Part 2 of the series discusses the deeper issues of Philippine patrimony and sovereignty in relation to the Jpepa.