Welfare Impacts of Rice Tariffication

The Rice Liberalization Act (RA 11203), signed last February 2019, reverses decades-long policy of placing quantitative restrictions on rice importation administered by the National Food Authority. The Act goes further by dismantling interventionist policy in the rice industry by divesting the Authority of its regulatory powers. The policy has been controversial, with some farmers and even lawmakers calling for a review and reversal of the law. This study takes a long term perspective by conducting ex-ante impact assessment based on a computable general equilibrium model with welfare effects disaggregated by income decile. Under liberalization, rice imports are far larger than under the interventionist policy. Farmgate and retail prices are significantly lower under liberalization. It finds, among others, that farmers are worse off under liberalization, while consumers are better off. On the side of farmers, the policy causes a fall in palay output, as well as area harvested, relative to that under an interventionist policy. Aggregating the peso value of benefits and costs, the study also finds that society as a whole is better off under liberalization. Benefits from liberalization are spread widely across the population, while the costs are concentrated among net rice producers.