Patas na labanan, not ‘Foreigner First’*

Wigberto E. Tañada, Lead Convenor

In his April 13 column, Raul Pangalanan found fault with the Fair Trade Alliance’s support for reciprocity rights for the Philippine aviation industry in the sizzling ‘open skies’ debate. He further branded the old ‘Filipino First’ policy as a ‘failed experiment’ and those seeking to build a national economy nothing but a bunch of ‘statist’ orthodoxists. In effect, what Raul wants is to completely open up the economy just like what the cha-cha proponents are now perorating about, that the remaining Constitutional restrictions on foreign control of Philippine land, media, natural resources and public utilities are retarding national growth.

What is wrong in seeking reciprocity or equality rights in trade, especially when one is dealing with the big developed economies? Why give the foreign commercial interests more rights than they are willing to give to our own domestic producers? In the WTO, the seven-year old Doha Round of negotiations has not progressed precisely because most of the developing countries are not prepared to give in to the free ‘market access’ demand of the United States, European Union and other developed countries without the latter giving up on their own trade-distorting subsidies ($1 billion a day in agriculture), on their global control over the monopoly-inducing patent and IPR system and on their obstinate refusal to recognize the special-and-differential needs of developing countries.

And yet, here in the Philippines, we have been opening up unilaterally our economy since the l970s, way ahead of our own neighbors. Two years ago, our WTO Ambassador in Geneva, Manuel Teehankee, pointed out that due to unilateral trade liberalization, our industrial and agricultural tariffs are only one-third of those of Thailand and much, much less compared to those obtaining in China, India and Vietnam. These ‘protectionist’ countries happen to be the ones flooding our domestic market with industrial and agricultural goods that are displacing our own industries and jobs. Thailand does not even want to allow the entry of cigarettes manufactured in the Philippines under normal trading arrangement; they have imposed restrictions on cigarettes made in Batangas by Philip Morris.

The question we would like to pose to Raul and others espousing similar economic views: Where is the Philippines today after three-four decades of one-sided economic liberalization? Why are foreign investments flowing into the above protectionist countries, not in the deregulated Philippines? From an industrial leader in the l960s, why has the Philippines become Asia’s industrial laggard and virtually the only country in East Asia with a shrinking industrial sector?

No, the Fair Trade Alliance is not seeking a closure of the economy or a return to the high tariff walls erected by President Diosdado Macapagal in the early l960s. What we want are reasonable trade fences that give our own domestic industrial and agricultural producers equal opportunities to grow. We want calibrated liberalization and calibrated protection on a sector-by-sector basis that will allow both our home-oriented and export industries a fighting chance to develop and compete under fair and equitable rules. It is not a simple choice of opening up or clamping down, of deregulating or walling off, or going export oriented or producing for the home market. As what Japan and our successful East Asian neighbors have been doing, it is a question of creatively combining liberalization, protection, import substitution and export orientation in the overall context of building up domestic agro-industrial capacity and infusing dynamism in the economic system. Dani Rodrik of Harvard (Rethinking Growth Policies in the Developing World, October 2004) aptly summarized the experience of our East Asian neighbors as follows:

“The bad news, for policy reformers elsewhere, is that these high-growth countries have marched to their own drummers, and the fit between their policies and the conventional policy agenda is awkward at best. China and Vietnam are of course the chief exhibits here. Both countries have become more market-oriented, but have done so through unorthodox means. China reformed its incentives in a two-track manner (grafting a market system on top of a planned system, rather than abandoning the latter altogether), underplayed private property rights (relying instead on township-and-village enterprises owned by local governments), and opened up to the world in a partial way (complementing its highly protectionist trade regime with special economic zones). Vietnam, as a fellow socialist country, followed many of the same principles since the second half of the l980s. And India, despite the folk wisdom that relates its growth acceleration to the liberalization of 1991, actually began its take off a decade earlier, during the early l980s and under heavy protectionism.”

Moreover, in the case of China, its spectacular export growth – in the l990s – happened despite its high industrial tariff regime averaging 30 per cent and its stubbornness in resisting Western demands for China to liberalize its foreign exchange market (two-tiered system), land market (even Chinese can not buy lands up to now), domestic market (on top of high tariffs, difficult customs procedures) and investment regulations (where foreigners are often required to come in through joint ventures with clear technology transfer mechanisms).

On the other hand, the Philippine economic debacle of the last three-four decades is similar to the experience of Russia, which, as documented in the book of Joseph Stiglitz (Globalization and Its Discontents, 2003), pursued a slam-bang economic liberalization similar to the Philippines structural adjustment program of the l980s and l990s, as similarly prescribed by the IMF. In l994, our dissenting views in the Senate to hold in abeyance our membership in the WTO and for the government and the private sector to address first the manifold tasks of strengthening domestic industry and agriculture were dismissed by the proponents of early WTO ratification who projected one million jobs a year being created in both sectors beginning in l995. The exact opposite has happened.

So why are commentators like Raul confusing the economic picture by still blaming nationalism and ‘Filipino First’ for our economic debacle and our failure to develop a national economy when the policies in place in the last three-four decades are precisely those hewing closely to their ideas of unilateral, one-sided and accelerated liberalization and deregulation? When the Administration of Carlos P. Garcia raised the ‘Filipino First’, this was immediately opposed by foreign business interests and was officially buried in the early l960s under the IMF’s ‘decontrol’ program. It was stillborn.

Clearly, if the proponents of one-sided liberalization want a healthy economic debate, they should objectively look at the facts and not make sweeping generalizations. They should also find time to read up on the economic history of Japan, NICs, China, India, Malaysia, Thailand, Vietnam and, of course, our own Philippines.


* Commentary on Raul Pangalangan’s ‘Filipino First’ — but which Filipinos published on his Passion for Reason column of the April 13, 2007 issue of the Philippine Daily Inquirer. 


  1. 1 The ‘open skies’ issue in Clark: A question of fairness* « FairTradeWeb

    […] with the local aviation industry on the proposed wholesale opening of Clark to foreign carriers. By opposing an open skies policy in Clark, we have been taken to task for taking a stand that is all… We have been reproached and admonished for continuing to adhere to the ‘Filipino First’ policy, […]

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