‘It’s time these rates are reviewed.
Let’s not stop with cement and wheat.’
Gloria Arroyo has slashed the
tariffs on cement and wheat to zero. It was the right thing to do despite the
predictable claims of affected companies that the cuts would send them to
bankruptcy and throw their workers to the streets. The puzzle is why the
reduction was good only for six months. It should have been made permanent
although this might require amendments to the tariff code.
Take the case of wheat, whether for food or animal feeds.
Nobody farms wheat in this tropical country. There is no one that needs
protection from foreign wheat growers. The government may lose some revenues
with zero tariff, but this is offset by cheaper bread, pasta and other wheat
end-products. Cheaper feeds likewise will lead to cheaper chicken, pork and
other meat products.
In the case of cement, it’s true that there is a flourishing
local industry. But its members can stand foreign competition. Most of them are
now owned by global cement concerns anyway. And if local producers cannot
compete with imports despite their advantage in location, they might as well
fold up. Consumers should not be penalized for their inefficiency.
What is cement if not cooked limestone? Anybody who ships
cement into the country is paying a stiff penalty in terms of transport cost. We
remember that some years ago, somebody was buying cement from faraway Turkey and
making money from it. But this was because local cement makers, who were
effectively cartelized behind a wall of protectionist tariff, were gouging
buyers.
Let’s take a look at the cement industry structure and
distribution. Each company is dominant in its territory. Cartel behavior is one
reason, but the more fundamental one is the cost of transport. A Mindanao-based
cement maker is in no position to match, not to mention undercut, the pricing of
one based in Rizal. And vice versa.
The benefits from the wave of trade liberalization launched
during the Ramos administration should be beyond dispute. It is the fashion
nowadays to bewail the flood of cheap products – legally imported or otherwise –
from China. But without the cheap imports what could the poor consumer buy with
his shrinking peso?
Domestic producers have also benefited from the tariff cuts.
Their imported raw materials are much cheaper now, enabling them to keep their
prices within reach of the ordinary consumer.
