An open letter to GMA

Last July 17, FairTrade published, in the Philippine Daily Inquirer and the Philippine Star, an open letter to the President on trade liberalization and was signed by various FairTrade partners, networks and friends. Here’s the text:

Zero tariffs para sa dayuhang kalakal?
Trabaho at negosyo para sa ibang bayan?

Madame President:

In the past, you not only championed the nurturing and strengthening of our industrial base. You even took the unprecedented bold move of temporarily freezing tariffs. However, some of your technocrats maybe straying from your vision. We therefore bring this matter to your attention, so that the Philippines may not appear to be an aberration in Asia.

By lowering our tariffs ahead of other Asian countries and yet failing to provide our local producers a competitive enabling environment (cheaper energy and utilities, quality infrastructures, friendly business rules, credit access, etc.), some of our own government officials have managed to stop our industrial and agricultural sectors from growing in the last three decades! In this period, the Philippines was overtaken and left behind in the growth process by our Asian neighbors. Even Vietnam is about to overtake us

And yet amazingly, some of our economic technocrats are bent on pushing the country to the extreme edge of the disastrous program of unilateral and one-sided economic liberalization. They want our industrial tariffs, at an average of five (5) per cent and already the lowest in Asia with the notable exception of Singapore (whose industry enjoys heavy government assistance) and Japan (which maintains a labyrinthian system of non-tariff protection), to even go down to zero! This despite the fact that our government is facing a severe fiscal shortfall – with the Bureau of Customs unable to meet its targets because of our low tariff rates and widespread smuggling, and our Bureau of Internal Revenue unable to collect more taxes from a shrinking domestic industrial sector. This illogical move to go zero tariff shall reduce the government’s revenue and weaken further our domestic industrial and agricultural producers!

For example, the domestic cement industry is now able to survive the existing five per cent tariff, which is unfairly low compared to the 50 per cent tariff imposed by Malaysia, 40 per cent by Vietnam, and 10 per cent by Thailand (which maintains zero-cement import policy).

If our zero-minded tariff officials would have their way, the Philippine cement industry is likely to collapse. To justify the zero move, they have been raising specious arguments. First, they claim there is no competition. But at five per cent tariff, any importer can easily bring in imports. There are already seven domestic producers, some of whom are engaged in limited importations. Second, they claim that domestic cement prices are unfairly high. And yet, benchmarked with those prevailing in Asia, Philippine cement prices are at the middle-level range, lower than India’s but higher than those in Indonesia and Vietnam, which have a much lower energy costs, the main determinant of cement production cost. In addition, cement price increases have been lower than inflation over the last ten years. Third, they say that the Philippine cement industry is now dominated by foreigners. But were these foreign investors not allowed to come in precisely to save the industry from total collapse, in the aftermath of the l997-98 Asian financial crisis? The development challenge is how to encourage these investors, who are currently getting rates of return even below the cost of capital, to continue modernizing and sustaining the domestic cement industry under a fair and balanced system of competition. But changing the rules of the game in midstream and exposing these investors to unfair trade rules directly contradict the government’s campaign for foreign investments.

Madame President, if an industry as capital-intensive as the cement industry can not survive this zero-tariff assault, how can the other domestic industries and agriculture withstand the pressure for the country to go zero-tariff?

Such blind unilateral liberalization measures constitute, in the words of Justice Florentino Feliciano (former WTO Dispute Settlement Presiding Judge), ‘unilateral disarmament’. The problem is that what these zero-tariff technocrats are disarming is a nation and its capacity to attain your vision of achieving developed industry status by 2020 or beyond. For without a solid and strong industrial base, no nation can aspire to become a First World country.

Mahal na Pangulo, hinihiling naming: irepaso at baguhin ang ating mga patakaran sa kalakalan. Bigyan ng pantay na pagkakataon ang sarili nating industriya at agrikultura na makasabay sa karera sa daigdig ng kompetisyon sa ilalim ng makatarungan at makatwirang mga patakaran sa taripa at kalakalan!

Fair Trade Alliance (FairTrade)
Citizens’ Alliance for Consumer Power (CACP)
Philippine Rural Reconstruction Network (PRRM)
PEACE Foundation / UNORKA
Alliance for Rural Concerns (ARC)
Philippine Sugar Millers Association (PSMA)
National Federation of Hog Farmers, Inc. (NFHFI)
WomanHealth Philippines
Samahan ng Magsasapatos sa Pilipinas (SMP)
Initiatives for Dialogue and Empowerment through Alternative Legal Service (IDEALS)

Automotive Industry Workers Alliance (AIWA)
Association of Genuine Labor Organization (AGLO)
National Labor Union (NLU)
National Confederation of Labor (NCL)
National Federation of Labor (NFL)
Alliance of Construction and Informal Workers of the Philippines (ACIW)
National Union of Bank Employees (NUBE)
Union Network International – Philippine Liaison Council
Youth Advocates for Economic Progress (YAEP)

Zero cement tariffs will lay-off workers
Panel backs zero tariff for cement

  1. The domestic economy continues to suffer due to the voluminous importation of goods. We have been reduced to the dumping ground of Asia. Substandard as some goods may be, it still finds its way into our markets. While local businesses try to improve its products, importation cost of raw materials continue to rise. The stronger peso can be helpful in a way but it does not assure our businesses protection.

    The recent recalls of China-made products and the risks to health their products has is a clear sign that anything cheap is not always the way to go. The government should develop safety nets and strict importation controls to protect our businesses. Lopsided trade agreements should be ceased. A liberalized market does not ensure growth. It leads to loss of jobs and foreign business monopolies. The locals are pushed to the edge and further reduce their opportunity to create business.

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  • Founded in 2001, the Fair Trade Alliance (FairTrade) of the Philippines is a broad multisectoral coalition of formal and informal labor, industry, agriculture, NGOs and youth pushing for trade and economic reforms.
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