Archive for the ‘Tradetalks’ Category

After a long silence in the WTO headquarters, the draft text of the modalities for Non-agricultural Market Access (NAMA) and Agreement on Agriculture (AoA) are out. Here are the two in .pdf file format:

Draft Modalities for Agriculture
Draft NAMA Modalities

UPDATE: FairTrade Senior Researcher Errol Ramos has an initial observations and reactions to the draft NAMA modalities.

Based on his summary, the salient features of the new NAMA draft are:

For bound tariffs, the Swiss formula is adopted with 2 coefficients (1 for developed and one for developing). Specifically: (1) Between 8-9 for developed; and (2) Between 19-23 for developing.

For unbound tariffs, a 20 percent mark-up will be adopted.

The flexibilities under the para 8 of the NAMA Framework are:

(1) For bound tariffs, 10 percent of the NAMA lines will have lesser cuts. (2) For unbound tariffs, 5 percent of the NAMA lines will be kept unbound.

The new NAMA draft also speaks of having no consensus or little development at all on the:

1. Definition of what full reciprocity is,
2. Sectoral initiatives
3. Other issues like non-tariff barriers, conversion to ad valorem equivalents
4. NAMA environmental goods.
5. Balance of ambition between NAMA and AoA.

His reactions to the draft NAMA text, after the jump:

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Wigberto Tañada, Lead Convenor

We welcome this initiative of the WTO and the Friedrich Ebert Stiftung (FES) to hold here in Manila this two-day multi-stakeholder dialogue-consultation workshop for the Asia-Pacific region on the WTO trade talks.

As all of us gathered here are aware of, the trade talks under the Doha Development Round (DDR) are on their 7th year. Director General of WTO, Mr. Pascal Lamy, a former Socialist leader of France, has virtually tried everything in the books to break the impasse in the DDR talks – dramatically suspending the talks last year, quietly reviving them early this year, holding official individual meetings with the stubborn members, shepherding a critical few in Davos, and in his own words, swinging back and forth from blustering to bantering. And yes, hopping from one capital to another, in search of the elusive global consensus.

And so last February, Mr. Lamy was here. He met with the business community and a few representatives of the civil society movement. As one of the privileged civil society speakers, I told Mr. Lamy that a large number of people in the Philippines have been wary of the DDR talks. For after 12 years of existence, the WTO has not delivered the promises of more and better jobs for the workers, more and better incomes for the farmers and more and better businesses for our entrepreneurial class. After 12 years of WTO, the Philippines’ poor have become poorer and more numerous, with hunger now affecting one out of every seven Filipinos.

The poor performance of the Philippines under the WTO is apparently replicated in the uneven pattern of development in other developing countries of Asia and elsewhere. This is especially true in agriculture where global imbalances have remained huge and global trade has increasingly tilted against the small farmers of Asia. Thus, the growing number of farmers committing suicides, from Korea to India and Pakistan.

But what must have surprised Mr. Lamy in the Manila forum last February were the blunt statements made by the members of the Philippine business community. They told him frankly and unequivocally – that the global trading system under the WTO is tilted against the poor developing countries, that the giant agricultural subsidies of the North are fueling hunger in the South, that the lower tariffs of the rich developed countries can not make up for the higher protection extended by patent monopolies on technologies, and that the one-size-fits-all liberalization formula is no development formula at all. The WTO and the trade liberalization ideology it has come to represent have no social constituency in the Philippines and many parts of the world.

This is why the DDR talks, focused as they are on more market access opening in agriculture, industry and service sectors, are deadlocked. Advocates of fair and just trade want a correction, not an exacerbation, of global trade imbalances. They demand the universal observance of the principle of special and differential treatment (S&DT), for not all countries are created equal. And not all have the capacities to follow a uniform formula of liberalization. Equal rules for unequal partners often lead to more inequalities and sufferings among the weak and vulnerable.

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By Felipe F. Salvosa, II
Published on the April 27, 2007 issue of BusinessWorld

The Philippines is among three countries with the greatest skepticism on globalization and international trade, a global opinion poll found, with only about half of Filipinos having positive attitudes as against a wider majority in other countries.

The survey of nearly 23,000 respondents in 18 countries, commissioned by an American think-tank, found that a majority of people support economic globalization and freer trade. Respondents, however, said liberalization should come with stricter environmental and labor laws.

“Majorities around the world believe economic globalization and international trade benefit national economies, companies, and consumers. But many think trade harms the environment and threatens jobs and want to mitigate these effects with environmental and labor standards,” the report released by the Chicago Council on Global Affairs and said.

The section on the Philippines said “Filipinos tend to think globalization is good for their country, though they are among the most skeptical of the publics polled.”

“The Philippine public also divides over whether their government should comply with World Trade Organization rulings,” the report said.

The Social Weather Stations (SWS), among the polling firms commissioned for the global survey, found that although only half of Filipinos think globalization is good, positive attitudes outnumbered negative ones by a margin of 49% to 32%. A fifth of respondents in the SWS survey declined to answer.

Majority of the Filipino respondents, or 55%, think “minimum standards for working conditions” should be part of trade agreements, while 30% believe they should not be required. They were almost equally divided on whether as a general rule, the Philippines should comply with adverse decisions made by the World Trade Organization (WTO): 48% believed the country should and 49% believed otherwise.

The SWS interviewed 1,200 respondents nationwide in the September 24 to November 29, 2006 poll, which had a 2.9% margin of error.

Aside from the Philippines, the “greatest skepticism” about globalization was in Mexico (41% good, 22% bad), and Russia (41% good, 24% bad). In the United States, the report said, 60% thought globalization is mostly good while 35% called it mostly bad.

Rene Ofreneo, executive director of the Fair Trade Alliance, noted that the Philippines, Mexico, and Russia share negative experiences in economic liberalization, resulting in wide public dissatisfaction over policies toward globalization.

The Philippines was the fastest in the region in bringing down tariffs, leading to the decline of many domestic industries which could not withstand competition.

“We are an aggressive liberalizer but look at where we are now,” Mr. Ofreneo said. “Filipinos see it as hopeless.”

Mexico’s corn farmers are also suffering as a result of the North American Free Trade Agreement with the US and Canada, he said, while the maquiladoras (free trade zones) provided only a temporary respite and were eventually beaten by China.

Russia, meanwhile, has been reeling from “shock therapy” imposed by multilateral financial institutions which had recommended a sudden shift to a liberalized economy after the collapse of communist rule, where state monopolies were transferred to oligarchs.

Trade lawyer Jeremy I. Gatdula, for his part, argued that Filipinos enjoy cheaper goods and luxuries such as mobile phones, computers, travel, and education because of globalization.

“It’s interesting that Filipinos register such skepticism when almost everything about a Filipino’s way of life came about due to globalization,” he told BusinessWorld.

Political leaders, he said, are also to blame for the skepticism by using globalization as a scapegoat rather than reforming policies that favor well-entrenched domestic business interests.

The global survey showed that dissent to globalization was strongest in France, with 42% believing that trade liberalization and economic integration had been “mostly bad.”

The highest levels of support for globalization were found in export-oriented economies such as China (87%), South Korea (86%) and Israel (82%).

The findings could “strengthen the political will” for liberalization in arenas like the WTO, said Christopher Whitney, executive director at the Chicago Council on Global Affairs.

There were more misgivings, however, about the environment with 66% of French respondents and 49% of both American and South Korean ones believing that trade harms the natural world.

Strong majorities in China and India agreed that trade agreements should include environmental protections.

Again, France led the way in expressing fears for trade’s impact on job security, followed by the United States.

The survey interviewed nearly 23,000 respondents in total, drawn from Argentina, Armenia, Australia, China, France, India, Indonesia, Iran, Israel, Mexico, Peru, the Philippines, Poland, Russia, South Korea, Thailand, Ukraine and the United States, plus the Palestinian territories. — with a report from AFP

By Max V. de Leon
Published on the April 20, 2007 issue of the BusinessMirror

NOTING there is “glaring conflict of interest” between traders and manufacturers, the Federation of Philippine Industry is seeking the separation again, as in the old setup, of the Department of Trade and Industry into a Department of Industry and a Department of Trade to ensure that both sectors get equal treatment and protection from government.

Federation president Jesus Arranza said this separation is needed at this time because of heightened globalization, adding that they are now drafting a legislative proposal for this purpose. “We are now finishing our study on this and we will furnish the Congress with a copy.”

Since other countries have such separate agencies for the two sectors, they have also “sought the help of the different embassies to come up with the data and comparison.”

Philippine Chamber of Commerce and Industry chairman Donald Dee, however, does not buy the idea of splitting the DTI, saying it should be the department that should balance the interests of the traders and the manufacturers. “They are just being protectionists. They believe that they cannot survive if we continue opening up. But that is not how the world works now. We have the World Trade Organization and we are signing free trade agreements.”

Instead of clamoring for protection, domestic industries should strive to be more competitive and not seek government interventions to keep the local manufacturers afloat through tariff protection, Dee added.

The two departments were fused into one in the 1970s by then-President Ferdinand Marcos. The conflict became apparent when President Corazon Aquino issued Executive Order 413 to bring down the tariffs across-the-board, he added. Obviously, manufacturers want tariff protection while traders want lower tariffs.

Arranza said even the PCCI could not come up with a united stand then on the issue because some members of the group were traders and the others were manufacturers.

Because of that, Arranza said some members of PCCI bolted out of the group to challenge the Aquino EO at the Supreme Court. Today, he said the problem persists, just like in the issuance of the safeguard duties on the imported raw material for detergents.

“As Trade Secretary, you cannot escape getting accused of being biased for one group and of neglecting the other sector with the current setup. So we want two departments, one to protect the domestic industries and the other to facilitate trade and commerce.”

Rene Ofreneo, co-convenor of the Fair Trade Alliance, agreed with Arranza so that the country can properly focus industrialization strategy. “We need an all-out mobilization and support for our industry. Right now, we are the only country in the region that has a shrinking industrial sector.”

Arranza said with two departments, the conflicting interests will be presented and debated better and there will be a thorough reading of the situation. But if the administration does not want another layer of bureaucracy, Arranza said it should look at creating separate divisions for trade and for industry under the department, with the secretary “as the referee.”

By Angelo S. Samonte
Published on the February 24, 2007 issue of the Manila Times

Fair Trade Alliance, a broad coalition of NGOs from the agriculture and industrial manufacturing sector, said it does not believe that the breakthrough announced by WTO Director General Pascal Lamy is achievable within months.

Wigberto Tañada, the lead convener of FTA, said Lamy did not mention any timetable when the United States would slash subsidies for its agriculture sector.

Tañada said: “We don’t believe in his pronouncements because those are too vague. We want specific concessions from the developed countries, particularly from the US, by cutting huge farm support. He didn’t explain how big the cuts would be. Would it be on staggered basis? When will be the final elimination?”

In a separate statement, FTA reiterates its position in the ongoing Nonagricultural Market Access (NAMA) negotiations, particularly in determining the coefficient for the adoption of the Swiss formula for the tariff cuts.

“We propose a target of 50 percentage points, or minimum of 35, because having gone over various simulations prepared by the Tariff Commission and Board of Investments, we believe that targeting a coefficient of 50 will maximize the current policy space of NAMA tariff lines whose average bound rates is pegged at 23 percent,” it said.

“We also propose the adoption of a mark-up of 50 or a minimum of 35, to provide flexibilities for the treatment of unbound tariff lines, considered to be sensitive and instrumental to economic development.

The FTA also supports the inclusion of sensitive products in the exclusion list, saying that the proposed minimum of 10 percent of total tariff lines will be good for the Philippines: “The FTA firmly stands for the preservation of the current policy space and work towards the development of a roadmap for industrial policy harmonization and upgrading that will make our industries more globally competitive.”

Reacting to Lamy’s visit to the Philippines, the Tambuyog Development Center, an NGO for fishery sector development said the WTO must reconsider the positions of developing countries by focusing negotiations to export distorting support instead of market access.

Tambuyog said talks should also include subsidies being given to industries in more developed countries rather than tackling market access issues that only favor industrialized countries.

Besides these issues, Tambuyog said the global trade body must recognize the need for protection of less developed countries, particularly their sensitive sectors through the use of special products (SP) and special safeguard mechanism (SSM).

would be detrimental for our industries that remain weak that’s why we should seek more protection,” Tañada said.

GMA should listen to FTA

Columnist Julius Fortuna of Manila Times said PGMA should listen to FTA. In his ‘East and West’ column, Fortuna wrote:

The Fair Trade Alliance (FTA) held a conference on Tuesday at the Club Filipino to come up with certain recommendations to the President about the economy. Implement nationalist policies—is what this group is suggesting to GMA.

I notice that the suggestions of Mr. Tañada are really scaled down, compared to the economic positions of the nationalist movement of the 60s and 70s. But it seems that the earlier ideas have become so “radical” in the face of the government’s almost total adherence to globalization and unhindered free trade.

Tañada’s reform ideas include fair trade, tariff reforms, building of the nation’s productive capacity, how to resolve the debt crisis and promote industrialization. The ideas of FTA run counter to the instinct of government where every little or big crisis is resolved by opening the economy wider for foreigners.

I wonder if the President really believes in total adherence to globalization or if she has just been set up by her free-trade ideologue friends. Some observers say she might just opt one day to become like his father—who became an exponent of industrialization later in life. Let us see how she fares in the last three years of her term.

Kudos to Mr. Fortuna for featuring FairTrade on his column. It seems we just have to wait and see whether GMA’s policies  in the last three years of her term will be inclined in developing our local industries. After all, in one FairTrade dialogue with GMA, she religiously said that she is not married to ‘unbridled liberalization.’

WE, representatives of the different sectors of our society — business and industry, farming, trade unions, academe, civil society, informal labor, youth and students,

Having come together in the Conference on ‘Defining the National Development Agenda in Global Trade Talks’ held here at Club Filipino, Greenhills, San Juan, Metro Manila July 19-20, 2005, in search for bold solutions to the economic ills bedeviling the nation, foremost of which are the country’s eroding agro-industrial base, severe and chronic fiscal distress, flight of capital and entrepreneurial talents, massive unemployment and poverty, and widespread feeling of hopelessness among our people,

Hereby express our collective unity on the urgency and necessity of the following economic reforms to arrest the ignominious descent of the Philippines into Asia’s industrial laggard and to reverse decades of agro-industrial stagnation, fiscal deficits, capital scarcity, joblessness and despondency:

1.  Junk the Neo-Liberal Paradigm Now!

After three decades of faithful adherence to the neo-liberal development paradigm of unilateral trade and economic liberalization, the Philippines has become less industrialized, its agriculture a virtual wasteland and the treasury dependent on foreign borrowings.   It is time that this paradigm be junked and be replaced with a more pragmatic, more balanced and more pro-Filipino and Asia-like approach to trade and development issues, through a new development paradigm which seeks to

  • Develop both the export and domestic markets,
  • Rely on the contributions  of both foreign and domestic investment,
  • Preserve and strengthen local industry and jobs amidst global and regional integration,
  • Promote greater value addition and employment in existing capacities through more value-adding and networking activities that give greater depth and breadth to the agro-industrial structure,
  • Depend less on foreign borrowings and advice,
  • Strengthen national sovereignty and independence, and
  • Promote global and regional integration in a calibrated and nuanced way and is sensitive to the level of development of existing industries and the development needs of the country.

2. Stop smuggling now!  Recalibrate tariffs now!

In Asia and in the developing world, Philippine tariffs are among the lowest.   In the ASEAN, we are second only to Singapore; however, compared to Thailand,  ours is three times lower.  The situation is aggravated further by widespread smuggling, both outright and technical.

We demand:

  • The upward recalibration of our industrial and agricultural tariffs to the maximum rates we are entitled to under our binding commitments to the WTO, except for the raw materials and other inputs needed by local industry, and whenever our own tariff rationalization program so requires.
  • The immediate passage of the anti-smuggling bill, now passed in the House but pending in the Senate, seeking to increase penalties for smuggling and strengthen  rules against smuggling such as in the determination of the true value of imported goods,
  • The consolidation of the government-private sector initiatives in cracking down on smuggling and the releasing of the necessary funds to finance purchases by local producers of imported goods deemed lower than their true value, and
  • The closure of all duty-free shops located outside the international airports, the enforcement of the ban on the use of the special economic zones such as Clark and Subic for the importation of second-hand vehicles and other goods destined for the domestic market, and the strict monitoring of all facilities granted duty-free importation privileges such as the customs bonded warehousing units (CBWUs) to ensure that they are not disposing part of their imports on the domestic market.

3. Resolve the fiscal and debt crisis in a fair and just manner – now!

The fiscal and debt problems are albatrosses hanging on the economy’s neck.   They put Philippine industry and agriculture at a great disadvantage, global competition-wise,  due to the ensuing efforts of the government to tax them more than what is needed, the inability of the government to provide needed and affordable infrastructures and support services,  and the tendency of banks to lend to the cash-strapped government rather than to the local businessmen, farmers and small entrepreneurs.

We demand:

  • An across-the-board import surcharge of up to 5-7 per cent which is preferred to the E-VAT or other new taxes, be imposed on all imports in the next 2-3 years until the fiscal situation is fully stabilized,
  • Debt service payments for onerous debts such as the Bataan nuclear power plant be renegotiated immediately for payment suspension,
  • Automatic debt servicing law be repealed,
  • Tobin tax be imposed on speculative foreign capital, and
  • New and bold  joint executive-legislative initiatives on how to reduce the debt stock and lower the debt service burden be undertaken in the light of the experience of Argentina, the recent G8 initiative for Africa and the history of the debt problem of the country.

4. Clarify/assert Philippine development priorities in trade talks now!

    It is abundantly clear that nations participate in trade agreements to advance their own national development agendas and priorities such as creating new markets for their products, protecting the technologies developed by their industries and so on and so forth.  The Philippines can no longer afford to remain naïve by embracing trade liberalization agreements without any clear development framework or measurement of what are ‘the goods’ and ‘the bads’ in each and every agreement and how the potential gains can be realized and the potential losses be minimized.

We demand:

  • An independent assessment of ten years of WTO membership and  12 years of AFTA – in terms of industry and job gains and losses — be first made before the country subscribes to any new agreements under the WTO and AFTA,
  • A stronger Philippine position against any weakening of the delivery of essential services and the liberalization of the land market through the General Agreement on Trade in Services (GATS),
  • Resistance to the inclusion of the fishery and footwear to onerous provisions in the Non-Agricultural Market Access (NAMA) and the rejection of any market access opening formula which ignores earlier Philippine liberalization efforts,
  • Support to the global campaign seeking a reduction in the $1billion a day agricultural subsidy by developed countries, the G30 campaign for recognition of special products (SPs), special safeguard mechanisms (SSMs), special and differential treatment (SDT) and the Philippine campaign for quantitative restrictions (QR) for rice,
  • Full transparency, consultation and coordination with affected stakeholders in the negotiations for any bilateral, regional and global trade talks with the creation of relevant task forces, and
  • The immediate passage of a law creating the Philippine Trade Representative Office, with a multi-sectoral composition, charged with the job of strategizing and coordinating all trade talks and ensuring full transparency and consultation with stakeholders are observed in any trade negotiation.

5.    Re-build the nation’s industrial base now!

No nation can aspire to be strong with a weak industrial base.   With the failure of the three-decade old neo-liberal project, the Philippines has to institute a number of reforms to rebuild and strengthen our industrial base.

We demand that:

  • Basic industries and investments expanding domestic productive capacity and value-adding activities be assisted in terms of technical capability, credit guarantees and transition tariff safeguards,
  • Tariff structures for industry sectors involving downstream, midstream and upstream players be harmonized in support of the development of the entire sectors,
  • Prices of power, infrastructures and the likes be benchmarked with other Asian producers and that national programs to lower the cost of these items be put in place, and
  • DTI, DOST and other concerned agencies work closely with the private sector in insuring that vulnerable industries get the necessary technical and other assistance to make the transition towards survival and growth through niching, modernization and the likes.

6.    Re-build the nation’s agricultural base now!

In today’s highly volatile and unpredictable world, the Philippines can not afford to have no food and raw material security of its own.   The government can also ignore – at its own peril – the food, income and welfare needs of our farmers and large rural population, whose lives have been adversely affected by government’s policy inconsistency (swinging pendulum-like from protection to deregulation and back) and lack of a clear pro-farmer sustainable development strategy for the sector in the last three decades.

We demand:

  • No required reduction in agricultural tariffs unless other countries’ subsidies are significantly reduced.
  • Whenever appropriate, increasing tariffs towards the bound rates and in special cases, increasing bound rates and having bound rates if necessary.
  • Safety nets and support services to go with the tariff recalibration for each sector,
  • Farmers’ and other concerned private sector representatives should be involved in trade negotiations and the creation of the appropriate multisectoral task forces, specifically for bilateral and regional agreements,
  • The anti-farmer agricultural deregulation policy be formally junked,
  • A National Farm Bill, providing for a holistic or integrated approach to development, be enacted into law,
  • The land reform program be completed in a year or two and the promotion of sustainable agriculture and food self-sufficiency.
  • A halt on any land conversion involving productive farms or arable lands,
  • A stop to any two-million-hectare agribusiness plantation development scheme, but instead the promotion of small farmer development;
  • A full and transparent accounting of the use of the Marcos wealth meant as support for the agrarian reform program,
  • Promotion of sustainable agriculture and food self-sufficiency,
  • Strengthening of the Philippine phyto-sanitary rules and procedures to guard against infested and chemical-full agricultural imports (e..g, strict implementation of the MRL  or Maximum Residue level), and
  • Review of the parameters and implementation of the national land use policy, including the development of water and other natural resources.
  • Increased support for the very neglected agriculture sector, such as following the AFMA directions of giving P 32.5 billion annually to the rest of agriculture instead of the current P 15 billion given today, with transparency on the use of this budget given to the agriculture and fisheries councils

7.    Strategize the development of the service sector now!

With the collapse of industry and agriculture as growth leaders, the service sector has emerged as the country’s biggest employer.  Its formal sector side, mainly in the wholesaling and retailing businesses, is growing because of the large population and the remittances of the OFWs.  Its informal sector side, composed of numerous micro and solo enterprises in urban and rural poor areas, is expanding like anything because of the poverty and unemployment situation in the country.   Lately, so much hype is made out of the call center/BPO industry, although this industry still has less than 100,000 jobs generated so far.

We demand:

  • Care be exercised in negotiating for GATS and other service-related agreements in other forums (e.g., ASEAN and bilaterals) because liberalization in the service sector often means merely changes in ownership of existing businesses, not new investments and new job creations, and can lead to dangerous monopoly positions favoring the big buyers,
  • Any talks involving strategic industries such as aviation, education and so on should be transparent and should involve all the key stakeholders,
  • Scaling the value chain in the call center/BPO industry so that more jobs and values can be created and that this industry does not become a mere transition industry,
  • Informal sector enterprises should be given all the assistance they need, e.g., business skills development, credit facility, etc.  to upgrade themselves and become competitive in the market, and
  • Informal sector entrepreneurs and their workers be covered by social security.

8.    Promote tangkilikan and support for Filipino products now!

It is a truism only the Filipinos can help themselves.  And yet this simple ineluctable fact tends to escape those who believe that growth can only happen through foreign assistance and investment.   Malaysia Inc. is growing because Malaysians support their own industry and their own producers, with the Malaysian government showing the leadership all the way.  In this era of globalization, we can do no less.

We demand:

  • The national flag law be enforced in all agencies and that products of displaced workers such as garments and shoe producers be given primary attention (an appropriate EO should be released NOW),
  • Government and the Fair Trade Alliance work out a system of national labeling for fair trade products,
  • Strengthening of the big enterprise-small enterprise  business linkaging program,
  • Teaching in all schools at all levels of tangkilikan philosophy and program promoting buy-Philippine-made products,
  • LGUs support tangkilikan among barangay-based enterprises, and
  • Documentation of good tangkilikan practices.

9.    Mobilize the nation

There is no other way for the Philippines to generate jobs and investments except through domestic or Filipino resource mobilization given the difficulty of the Philippines in attracting foreign capital because of its image problem.  In fact, foreign capital will only flow in a substantial way, if the Filipinos themselves are seen as leading the way.

We demand:

  • The launching of a national campaign to revive entrepreneurship at all levels of society, both in the urban and rural areas,
  • The re-launching of the OFI Bond and other OFW savings mobilization schemes,
  • Reward, through fiscal incentives and other measures, for those who re-invest their earnings and go into value-adding linkages,
  • The transformation of LGUs into investment mobilization centers, and
  • Development of a nationwide business networking program.

The whole point is – Only the Filipinos can help the Filipinos.

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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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