The impact of the liberalization of agricultural trade on the peasantry of the Northern Luzon Cordillera

By Lulu A. Gimenez and Fernando Bagyan, APIT TAKO (Alliance of Peasants in the Cordillera Homeland)

The Northern Luzon Cordillera is the largest mass of mountains in the Philippine archipelago.

The Cordillera Administrative Region, comprised of the provinces of Abra, Apayao, Benguet, Ifugao, Kalinga, and the Mountain Province, have an aggregate land area of more than 1.8 million hectares. Terrain, however, limits the availability of arable land in the area.

The Cordillera is the most rugged group of mountain ranges in the Philippines. Elevations here vary from 10 meters at the bottom of river valleys to 2,900 meters on the mountaintops. The mountain ranges are heavily ridged. Their river valleys are narrow. Only along the foothills is there any flatland of significant extent.

Nearly 61% of the region is sloped in excess of 50%. This makes the soil highly erosive and the topsoil layer fairly thin.

Yet agriculture has been practiced here since before the 12th century, when people indigenous to the area carved their first terraces out of the steep mountainsides of western Ifugao and planted them to rice.

Today, some 80% of the Cordillera’s population, both indigenous and migrant, engage in agricultural production as their main source of livelihood.

Agriculture and the Peasantry in the Cordillera Region

The Cordillera Administrative Region accounts for less than 1.8% of the Philippines’ total population. Yet it produces two to four percent of the country’s supply of rice, camote (sweet potato), and coffee, and 65% to 80% of the country’s supply of temperate-clime vegetables – chiefly potato, cabbage, beans, and carrots. It also accounts for more than two percent of swine and cattle production in the country, and for nearly four percent of the country’s carabao population.

Table 1. CORDILLERA PRODUCTION AS PERCENTAGE OF PHILIPPINE PRODUCTION, 2000
Source of Data: Bureau of Agricultural Statistics (MT = metric tons)

In general, two types of agricultural production are practiced by the Cordillera’s peasantry: production for self-subsistence and production for commerce. All peasant communities engage in crop production for commerce to some degree. But not all communities still engage in crop production for self-subsistence.

Some 45,000 peasant households derive their wherewithal solely from the commercial production of temperate-clime crops – mostly vegetables plus a few fruits and flowers. These include the majority of peasant households in the most highly elevated municipalities of the Cordillera: practically all of those in the municipalities of La Trinidad, Tuba, Tublay, Atok, Kibungan, Bakun, Mankayan, and Buguias in the province of Benguet; most of those in the municipalities of Sabangan and Bauko in the Mountain Province and Tinoc in the province of Ifugao; about half of those in the municipality of Tadian, Mountain Province, and several of those in Kiangan, Ifugao.

In addition to these are close to 2,000 peasant households that derive their wherewithal solely from the commercial production of vegetables, flowers, fruits, rootcrops, and tiger grass (or broomgrass) in the municipality of Sablan in Benguet.

About 66,000 households produce half their rice and some of their corn for self-subsistence, and the other half of their rice and the bulk of their corn for commerce. These include almost all peasant households in the 29 municipalities that lie along the Cordillera’s foothills in western Abra, eastern Apayao, northeastern Kalinga, eastern Ifugao, and eastern Mountain Province.

Peasant households in the rest of the Cordillera produce rice, camote, taro, yam, cassava, corn, plantain, and tropical vegetables and legumes for self-subsistence, while also producing temperate-clime vegetables or legumes, bananas, mangoes, or citrus fruit, and coffee for commerce. These peasant households number about 98,000 in all.

Cordillera peasants are confronted with many issues, foremost among which is a perennial threat to their control of land resources posed by dam builders, large mining companies, and other firms engaged in natural resource exploitation. Most peasant households own the land they cultivate, but their ownership is rarely backed by legal documentation. Rather it rests on claims of ancestral rights and prerogatives that are founded on custom and backed by oral tradition. It has been nominally recognized by the state by way of an Indigenous Peoples’ Rights Act. In practice, however, lack of legal documentation for ancestral ownership is used by the state to deprive Cordillera peasants of their landholdings so that these can be taken over by corporations engaged in large-scale extractive industries deemed vital to the development of the Philippines’ backward economy.

The state provides little support to agriculture. As a policy, the state encourages agriculture only on land of less than 18% slope. The state expresses this encouragement, though, only in terms of subsidies for farmer procurement of whatever seeds and agrochemicals have been developed and are being disseminated by multinational agriculture research institutes or transnational agro-input producing firms. This it does in the name of agricultural modernization.

The state has not instituted any crop insurance or agricultural credit system. The only credit available for agriculture is extended by banks that demand the surrender of property instruments as collateral. Lacking legal documentation of their claims to property, most peasants are disqualified from availing of bank credit. Farmers’ cooperatives exist, but few accumulate enough money to extend substantial loans to their members. Most peasants thus turn to moneylenders and agro-input supply merchants for loans. The interest rates are usurious, at 10% to 20% per month, which translates to 120% to 240% per annum, or 100% per cropping, which translates to 200% to 300% per annum.

The Impact of the Liberalization of Agricultural Trade

Even before the Philippines participated in the formation of the World Trade Organization, it had started to liberalize its importation of agricultural products. This was demanded by the administrators of the International Monetary Fund, as part of the IMF’s Structural Adjusment Program for the country. Import-liberalization, however, accelerated with Philippine membership in the WTO. In 1995, all import quotas were tariffied, and afterwards, tariffs were steadily reduced.

As soon as tariffication went into effect, importation of rice and beef rose suddenly – from less than 1% of the country’s consumption in 1994 to 8% and 25.7%, respectively, by 1996. As tariffs declined, importation rose further. By 2001, it had become massive and affected all product lines.

The Philippines has been producing at least 13.5 million metric tons of whole rice grain per year.

This translates into 8.8 to 9.4 million metric tons of milled rice, which is more than the country’s average annual consumption of 8.0 million tons. Yet from 2000 to 2002, an average of 881,070 metric tons of rice was imported yearly, along with over two million heads of livestock, 138,030 metric tons of meat, and nearly 60,439 metric tons of dried legumes and fresh vegetables that were identical with local produce.

Table 2. IMPORTATION OF AGRICULTURAL GOODS IDENTICAL WITH LOCAL PRODUCE, 2000 TO 2002
Source of Data: Bureau of Agricultural Statistics

The imports were generally priced more cheaply than the local produce. This had the effect of dragging prices down. By the last quarter of 2001, the farmgate price of unmilled rice had declined by as much as 25%. The wholesale market prices of dried temperate-clime legumes had dropped by 50%. The wholesale market prices of fresh temperate-clime vegetables had fallen most sharply, by as much as 90%.

By the start of December 2001, Manila traders had stopped buying vegetables from the Cordillera region. The Mountain Trail, a highway which runs across the region’s Vegetable Belt in Benguet and the Mountain Province, was lined with mounds of rotting vegetables. The garbage dump at the Vegetable Trading Post near the City of Baguio reeked like a sauerkraut cannery.

“We had no Christmas that year,” recalls one vegetable farmer. Christmas the following year was even more bleak.

From midyear 2002 to the opening of 2003, the prices for temperate-clime vegetables were so low, most peasant households could not even earn enough to pay their loans with agro-input suppliers. Small merchants who used to sell them rice, meat, fish, canned goods, sugar, and salt started living on savings. One of them quipped, “You think only you, farmers, are victimized by these vegetable imports? I used to net a thousand pesos a day from selling you rice and dried fish. Now I’d be lucky to net a hundred.”

Only when the SARS crisis peaked, and vegetable importation from China, Hong Kong, and Taiwan fell, did the prices for temperate-clime vegetables rise. By this time, however, many vegetable farmers had been forced out of production.

Reports from the Bureau of Agricultural Statistics in the Cordillera Administrative Region reveal that as of December 2002, the Cordillera’s production of major vegetable crops had declined drastically, by an average of 48.8%.

Table 3. DECLINE OF CORDILLERA PRODUCTION OF MAJOR VEGETABLE CROPS COMPETING WITH IMPORTS, 2001 AND 2002
Source of Data: Bureau of Agricultural Statistics - Cordillera Administrative Region

The relief provided by SARS did not even last. Vegetable importation started rising again, and the prices for domestic temperate-clime vegetables started falling again by July 2003.

Comparative Disadvantage

The secret behind the lower prices is not greater cost-efficiency in production within the source countries. In the US, for example, the farm costs of producing rice in 2001 totalled $323.68 per metric ton. In the Philippines in 2001, it totalled only P11,091.18 (at that time equivalent to $221.82) per metric ton.

Transport and handling costs should have raised the export price of US rice to at least $411.38. Instead, however, US rice landed on the ports of Manila at the price of US$284.86 (at that time equivalent to around P14,243) per metric ton. This was lower than the prevailing wholesale market price for rice of identical quality, P17,000 per metric ton.

The secret behind the lower prices has been heavy subsidization. It was government subsidy that accounted for the 30.8% discrepancy between the export price for US rice in 2001 and the cost of its production plus transport and handling.

Aside from the US, the major sources of agricultural imports have been China, Vietnam, Thailand, India, Australia, and the European Union – places where the state has also invested tremendously in the development of agricultural production capability as well as infrastructure.

Even before becoming a signatory to the GATT-WTO, which sets constraints on government support to agriculture, government spending accounted for only 6% to 10% of gross value added in Philippine agriculture. Of its annual budget, the Philippine government allotted at most 5% to domestic agricultural subsidy, none to agricultural export subsidy. Price support was limited to rice and corn, and worth only 5% of rice, 1% of corn production value. Although it needed to buy 24% of rice and corn production to become influential in the market, government was buying only 2.2% to 4.5%.

Now, government buys only as little as 0.14% of locally produced rice entering the market – even in premium-quality rice-producing areas like the Cordillera’s foothills in Tabuk, Rizal, and Pinukpuk within the province of Kalinga.

Government has been reducing its already meager subsidies. And it has begun to limit its agricultural spending to development support and services. It shoulders half the cost of the seeds of such higher-yielding crop breeds as it is encouraging farmers to try out for the first time. It provides irrigation services, although for fees that, taken together, more than suffice to pay for these services. It offers small loans to small farmers for the purchase of small machinery that will help them modernize their operations. Its personnel provide educational and technical services aimed at promoting modern farming practices. Beyond these, the government essentially leaves farmers to fend for themselves.

From 2000 to 2002, spending on agricultural support and services – including the salaries of service personnel – took up only 3.8% to 4.4% of annual government expenditures.

Peasant Protest

The liberalization of agricultural trade has served a heavy blow to Cordillera agriculture, already problematic to begin with. The Cordillera’s peasantry cannot but tread the path of protest.

Starting in September 2002, spontaneous mass-ups of vegetable producers and traders have ocurred in Benguet. In both Benguet and the Mountain Province, the formal protests that peasants have filed with the national government have been backed by local government leaders. In May 2003, traditionally pacific farmers’ associations joined militant organizations of peasants, workers, urban poor, students, and professionals in putting up a Cordillera formation of PUMALAG, the Pambansang Ugnayan ng Mamamayan Laban sa Liberalisasyon ng Agrikultura (National Network of Citizens Against Agricultural Liberalization). They filed a petition with the previous Congress, urging it to withdraw Philippine membership in the WTO and repeal the laws it has enacted in compliance with WTO agreements pertaining to agriculture. They will be re-filing the petition with the new Congress, which opens this month. # v.02 July 2004