WTO , Trade Liberalization , and Rural Poverty in the Philippines : Is Rice Special ? ∗

A with South Korea and Japan, the Philippines were granted an exemption from the removal of quotas on rice imports in 1995 under Annex 5 of the World Trade Organization (WTO) agreement. This exemption was to expire in mid 2005, but an extension is currently under negotiation. We examine the poverty impacts of both a Doha agreement and free world trade, combined with the elimination of domestic tariffs and rice import quotas, in the Philippines. Rice is the staple food for about 80% of Filipinos. Indeed, more than 60% of expenditure by poor rural households is on food, of which about half is on cereals (mainly rice and corn). Rice is also the single most important agricultural crop in the Philippines and, therefore, a major source of income for millions of predominantly poor, Filipino farmers. Although there have been increases in palay rice yields—through expanded use of modern varieties, irrigation techniques, and fertilizer and planting area—palay production has not kept pace with high population growth. Consequently, rice imports continue to increase. Another notable evolution is the growth of the market sector, with 46% of production sold on the market (rather than being self-consumed) in 1997, compared to 22% in 1970. The government is heavily involved in the rice sector because of its political significance in order to ensure affordable supplies to consumers and, less successfully, a reasonable return to rice farmers. As a result, farm prices have been low, margins squeezed and supply has been unable to keep up with