Promises & realities*

Unfair rules in global trade are killing our industrial and farm products

Rene E. Ofreneo, Ph.D., Executive Director

Promises:

In the l980s, the Philippines adopted the IMF-World Bank’s structural adjustment program (SAP) calling for more economic openness through the removal of import restrictions, reduction of tariff rates, liberalization of investment policy regimes, deregulation of various sectors of the economy, and the privatization of government corporations, services and assets. These would lead to the expansion of exports, increase in investment and employment, and a more sustainable outward-looking economy.

In l994, at the height of the Senate debates on Philippine membership in the WTO, a “GATT-Uruguay Round Inter-Agency Committee” formed by Malacañang projected the following gains:

  • Stronger agricultural exports
  • Half a million new jobs a year in agriculture
  • P60 B a year in gross value added in agriculture
  • Stronger industrial exports
  • Half a million new jobs in industry (with employment potentially growing to as high as 700,000-800,000 annually)
  • More competitive ‘modernized industries’
  • ‘no dying industries’ for industries would ‘mature’ and adopt to ‘new trading behavior’

The Senate, in its Committee Report No. 702 dealing with the WTO, said that the Philippines is a major winner under the WTO but would suffer the following consequences should there be no ratification:

  • Decline in industry, agriculture and services
  • Rise in consumer prices and  interest rate
  • Budgetary deficit
  • Employment deterioration
  • Trade deficit

Realities after 10 YEARS of WTO membership and 25 YEARS OF SAP:

  • GNP growth highest during the l950s to1970s, lowest during the l980s to present
  • Trade deficits did not disappear except in the post-Asian crisis years (1998-2000) and had averaged US$4 billion in recent years.
  • Exports rose dramatically but only due to electronic assemblies, which  account for close to 70 percent of the total (however, electronic exports have softened since 2000)
  • All other exports have remained flat.
  • Unemployment has remained at double digits and is the highest in East Asia.
  • Share of industry in employment has remained stagnant, accounting for 15.1 per cent in l980 and 15.8 in 2000; in contrast, Malaysia, South Korea, and Thailand recorded dramatic increases in industrial employment due to their expanding industrial sectors
  • Many “dying industries,” especially among the home-oriented ones such as textiles, rubber, tires, tiles, ceramics, plastics, steel, shoe, battery, cement, etc.
  • Share of manufacturing to total output shrank from 27.6 per cent in 1980 to 24.1 per cent; in contrast to that of Malaysia increased from 19.6 to 30.0 per cent for the said reference years, and of Thailand, which rose from 23.1 to 37.1 per cent.
  • Growth of agriculture has been anemic, averaging 1.5 per cent in the l980s and l990s; the projected P60 billion gross value added a year in agriculture was never realized.
  • Ratio of agricultural imports to exports went up from 96 per cent in 1990 to 168 per cent in 2000.
  • Many  cropping areas subsist from crisis to crisis, e.g., rice, corn, tobacco, coconut, vegetables, root crops, etc.; the only winners appear to be bananas, pineapples and mangoes (but the three account for less than 5 per cent of the total agricultural production)
  • Budget deficits have swollen, as the taxable industrial sector is not expanding
  • Economy surviving mainly because of the remittances of the 5 million OFWs and 3 million Filipino immigrants

Many unemployed and unemployable end up as part of the swelling informal sector, which now accounts for more than 50 per cent of the total work force.

—————————

* Special Report published in NewsBreak September Special Edition, “How fair is free trade?” 

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