If you’re keeping tabs on the latest news, you may have noticed that there’s an impending rice shortage here in the Philippines. As reported by the National Food Authority (NFA), its buffer stock is running near to depletion which means that it may fail to serve Class D and Class E Filipinos’ needs. Agriculture Secretary Manny Piñol basically put all the blame on the private sector, arguing that businessmen are orchestrating this to put pressure on the government to allow rice imports.

From the outset, you might blame the government’s lack of investment in the agricultural sector and its neglect of farmers as to why this is happening. One could say that the government needs to do more to solve this. However, “big government” (borrowing a term from classical liberals) is the main root of the problem because of institutionalizing trade protectionist policies. The rice crisis is happening because the government is unduly interfering with the market.

It’s time to wake up to the reality that these protectionist policies have resulted to nothing but failures. Market-oriented reforms may be unpopular, but such policies are the path to go for long-term solutions.

In relation to rice, NFA sets an annual target for rice production in metric tons. Whatever is produced in excess of the target is the amount that is only allowed to be exported and the deficit is the only amount which is allowed to be imported.

This is wrong in two ways. Placing restrictions on exports severely hampers businesses’ ability to make more investments and increase their profits. Having more investments results to expansion of business operations which translates to more jobs. In addition to placing a cap on allowed rice imports such as quantitative restrictions, the government also places high tariffs on it (set at 35% according to Executive Order 23 of President Duterte).

Placing such stringent restrictions decreases the amount of supply available for everyone. Basic economics tells us that a product with low supply and high demand will have higher prices because it reflects its scarcity. To add, rice has an inelastic demand which means that despite higher prices, people won’t switch to a substitute good. Overall, such protectionist policies serve nobody’s benefit because it is anti-consumer and anti-business.

What about rice cartels? Contrary to Mr. Piñol’s argument, these cartels exist because of excessive regulations. Placing such strict regulations only invites more incentives to break the law. If we want rice cartels to be destroyed, then we must strengthen the formal market—and this can be done through trade liberalization.

President Duterte and Congress should grab the opportunity to institute market reforms so that it will benefit everyone.

Considering the inherently flawed design of the NFA, the way forward is to entirely abolish the agency, or at least, repeal its import and export restriction powers so that it will only focus on providing emergency stocks. Congress should ensure that House Bills 09178, 09165, and 02709 will be passed and will make their way to the President’s desk for signature as these three bills satisfy the latter.

Furthermore, we need to eliminate quantitative restrictions and gradually cut the tariff rate because such deregulatory actions will result to an increased supply will lead to lower prices in the long run. Senate Bill No. 1476 satisfies the former and like the mentioned House Bills, this must be certified as an urgent priority of the President.

The Department of Finance (DOF) recently conducted a study on what will happen if quantitative restrictions will be eliminated and a 35% tariff is on place on rice. They said that this will lead to a drop of Php 7/kg and 730,000 Filipinos can be potentially lifted from poverty. Just imagine how bigger the price drop will be if we cut the tariff rate?

Critics of these reforms point out that these are anti-farmer initiatives because increased competition will result them to losing their jobs. However, such scenario is no excuse not to implement these policies and it is possible to do these policies while looking out for our farmers. DOF said that the tariff revenues to be collected will be used to train them to diversify their skills. The President and Congress should also look to implement similar initiatives, for example, by promoting agri-entrepreneurship.

The evidence is definitely on the side of trade liberalization when it comes to delivering a big win for the common Filipino. The Duterte administration should make it a major priority to enact these reforms.