Archive for the ‘WTO 05 Ministerial Conference’ Category

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

Hong Kong, billed as the ‘world’s freest’, is now a fortress – and wounded — city.

Thousands of HK police and para-military are on patrol in the labyrinthian streets of Wanchai and other fashionable districts of the city, on the look-out for global anti-WTO protestors, whose militance and resolve seem to be growing day by day.  Evening of December 17, the protestors, led by the defiant Korean and Filipino farmers, fisherfolk and trade unionists, breached the three-layered iron barricades of  the sprawling  HK Convention Center, where DG Pascal Lamy and ranking trade ministers from the developed countries are gathered and have been pushing for a one-sided and onerous draft Ministerial agreement. Tear gas, pepper spray, glass shields and numerical police advantage are being used to disperse the protestors who are trying to hold their ground to stop the Ministerial and express their collective anger against the WTO, which has become the most concrete expression of   inequity under globalization.

There is reason to be angry, if the latest draft Ministerial text masterminded by Pascal Lamy squeezes through the 6th WTO Ministerial Conference.

The draft text has managed to ignore the proposals made by the developing countries and civil society groups to make the present round of trade talks, billed as the Doha Development Round (DDR), truly development-oriented and the global trading system equitable.   Launched in 2001, DDR is supposed to address the special-and-differential (SND) needs of developing countries and correct the distortions in global trade in agriculture caused by the $1-billion-a-day subsidies provided by the developed countries.

And yet, what is being offered for the developing countries in HK are the usual rhetorical provisions on development and tokens for the least-developed (LDCs) from Africa, Caribbean and other regions such as duty-free entry for some agricultural goods (which has always been in place in Europe) and a $5-billion ‘aid for trade’ program (which has no budgetary allocations yet in the US and EU). Close to 200 SND proposals have been made by the developing countries since 2001, and yet only 5 SND ‘tokens’ for LDCs made it to HK.
The main items on the HK negotiation table are the demands of the developed countries for the developing nations to open up — in the name of ‘market access’ — their agriculture, industry and services sectors through a whole new set of liberalization formulas.

In agriculture, the developed countries are giving the impression that there are reforms when the text acknowledges the need to reduce their overall ‘aggregate measures of support’ (AMS) and eliminate export subsidies.  And yet, there are no concrete end dates or timetables being offered, which means the experience of the last 11 years of the WTO might even be repeated (when the total US and EU agricultural subsidies increased instead of declining as promised in l995)!  The draft Ministerial text positively recognizes the importance of special products (SPs) and special safeguard mechanisms (SSMs), two issues which the Philippines, Indonesia and 43 (from 31) other countries are passionately advocating.  And yet, there are no concrete actionable measures outlined for SPs and SSMs; meaning, they are subject to further future negotiations.

The only concrete reform measure in the new Agreement on Agriculture (AoA) is the pledge of developed countries to phase out the cotton subsidy, which has been killing the economies of the poorest countries in Africa such as Chad and Burkina Faso.  The other concrete measure is a non-reform one, the adoption of three ‘bands of tariff reduction’, with the developing countries given the band with the highest rates of tariff reduction and the developed ones, the lowest.   In short, the developing countries are mandated to open up their agricultural markets, while the Northern countries are given the flexibility to protect their domestic and export markets by keeping their subsidy system intact.

In industry and services, the anti-development agenda of DG Pascal Lamy and other WTO influential leaders become even clearer.

In industry, the proposals of the Philippines and other developing countries under the non-agriculture market access (NAMA) are to let ‘unbound’ items such as fishery and footwear to remain ‘unbound’ and give member countries flexibility to keep its sensitive industries uncovered by the WTO binding mechanism.  These have been ignored.  And so is the proposal to have two tariff-reducing coefficients, one for the developed and another for the developing nations.

Also, the text is silent on the tariff peaks, some as high as 300-800 per cent, extended by the developed countries on their sensitive industries.  Thus, even if the tariff averages of these countries are low, a uniform tariff-reducing coefficient will keep these favored industries protected.  This is a flexibility that the Philippines does not enjoy, having unilaterally and foolhardily reduced its tariffs wholesale in the l980s and l990s, way ahead of other developing countries. The text is also silent on the ‘crediting’ of this unilateral liberalization.

Overall, therefore, under  the proposed NAMA, the  Philippines loses all flexibilities such as the right to protect the fishery and other vulnerable sectors and support the development of strategic sectors such as an integrated petrochemical sector. The country will simply become an open market for all imports produced by other countries, at the expense of local industry, workers and fisherfolk, as what is already happening.

In services, there are loud protests by African and other developing country delegates that their proposals were deliberately omitted in the text.   The Philippines and a number of Asian countries took a progressive position by upholding the provision of the General Agreement on Trade in Services (GATS) on request-offer negotiation modality, which is flexible and recognizes the different levels of development of member countries.   And yet, what appear in the text instead are references only to  the plurilateral (among a group of  countries) and sectoral (industry by industry) negotiation approaches, which shall be subject to the MFN principle (what applies to one applies to all)!   This is virtually a reiteration of the original EU’s ‘benchmarking’ or ‘complementary’ approaches, which is aimed at forcing the ‘slow’ liberalizers to keep up with the ‘fast’ liberalizers such as Singapore.  The irony is that ‘Social Europe’ has very strict rules and allows government intervention in  services because of its strong social democratic tradition, and yet it wants the service sector of the developing world to open up its banking, telecommunication, water, energy, education, public utility and other services without any restrictions!

So what is the position of the Philippine trade negotiation team in the face of this US-EU-Australia-Canada-Japan trade offensive?

It is not clear.

In one of the plenary sessions, DTI Secretary Peter Favila took a fairly progressive position, one that closely adheres to the stand of the Philippine civil society movement favoring safeguards and subsidy phase-outs in agriculture, tariff and binding flexibilities in industry and policy space in services.   But in a briefing for the NGOs December 17, the government negotiators seem to be hesitant and equivocating.

The developed countries, of course, have hidden weapons to soften the resistance of the developing nations – offers of loans, declaration of market access for certain products, investment pledges and ‘policy coherence’ with the IMF-World Bank tandem.   The developing nations are further divided by threats of isolation from bilateral and regional ‘free trade agreements’ that are being forged with the ‘willing’. To top it all, the US and EU are now making a big noise about their ‘aid for trade’, to help developing countries adjust to liberalization and the new WTO liberalization formulas.

But protestors in the streets of Hong Kong, civil society advocates within HK’s Convention Center and trade negotiators from the developing world who remain steadfast in their principles know better.  They refuse to be drowned out by the threats and blusters by the trade negotiators from the developed countries. The unbalanced outcomes of 11 years of WTO are enough to educate the most jaded neo-liberal economists.

The bigger noise, therefore, is coming from those demanding for just and fair rules to govern a just and fair global trading order.  They happen to be on the right side of history. — Written with inputs from the Philippine trade advocacy civil society groups represented in HK.

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* Commentary published in BusinessWorld on December 20, 2005.

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

Wanchai, Hong Kong – The rich and luxurious side of Hong Kong – from the Causeway Bay (famous for its jewelry stores) to the Wanchai district (the corporate headquarters of the region’s biggest multinationals) – has become a huge battleground since December 11, two days before the grand opening of the 6th Ministerial Conference (MC6) of the World Trade Organization.

Daily, militant farmers, workers, migrants and social activists from South Korea, Philippines, Bangladesh and other countries have been launching militant actions which have stunned the Hong Kong’s youthful police and staid society for the novelty and daring of the protest activities, from the fluvial demonstrations by the Greenpeace environmental and Filipino fish campaigners to the military-like marches by the Korean farmers and trade unionists towards the HK’s Convention Center. United in their campaign against a ‘neo-liberal corporate-led globalization’, activists of all hues and beliefs have also converted the Victoria Park into a tent city hosting anti-WTO meetings and cultural programs dealing with the social, economic and gender aspects of globalization.

The activist grapevine is abuzz with stories that more dramatic confrontations and demonstrations are forthcoming before the MC6 ends on December 18. An international protest action by ‘sex workers’ from various continents are excitedly being discussed, while new Korean-led militant actions are quietly being whispered by the guerilla-like anti-WTO activists.

Why are workers, farmers, migrants and social activists from both developed and developing countries so bent on derailing the MC6 and in venting so much anger on the WTO?

One obvious answer is that the WTO has become the most concrete symbol of the social and class inequities under globalization. Hundreds of simultaneous NGO seminars and conferences that are running parallel to the WTO’s MC6 are virtually united on one conclusion – globalization, pushed by the WTO, IMF-World Bank group and neo-liberal economists, has generated across the globe more inequality, higher unemployment, deeper social insecurity and, in the case of many developing countries, widespread poverty and development failures.

Farmer suicides are also common in South Korea, Africa and in India, where some NGOs gave a figure of as much as 25,000 for the number of farmer suicides since the WTO’s formation in l995. These suicides are directly related to the asymmetry in the global trading system in agriculture, where developed countries, by lavishing their domestic corporate producers and exporters with $1 billion subsidy a day, are subverting the viability of small farming in developing countries, especially the small African cotton farmers, because of the resulting global dumping of agricultural products from the North.

The Battle within MC6

Agriculture, of course, is one major issue in the ongoing Ministerial, which is shaping into a titanic battle between the haves and the haves not.

MC6 was supposed to be the culminating activity for the Doha Development Round (DDR), a new round of trade talks launched in 2001 aimed at producing a new trade liberalization agenda for the second decade of the WTO.

However, many developing countries are unhappy because the DDR trade agenda, formulated by the WTO Secretariat and the developed countries, is overly focused on radical trade liberalization formulas – bands of tariff reduction in agriculture, tariff-reducing coefficients for industry (and fishery) and ‘complementary approaches’ in service sector liberalization. In contrast, there are hardly any concrete or constructive proposals from the WTO Secretariat, United States and European Union on how to reduce the trade-distorting agricultural subsidies provided by the developed countries, on the special-and-differential ‘flexibilities’ and ‘safeguards’ that are available to developing countries in all the three economic sectors and on how unilateral trade liberalization, which the Philippines foolishly pursued in the l980s and l990s, can be ‘credited’ as compliance to any new round of liberalization, should there be any agreement .

A number of developing countries, however, are emboldened by their success in halting the Ministerial in Seattle in l999 and in Cancun in 2003, which led to the withdrawal of the ‘Singapore issues’ (investment, government procurement and competition policy) in the current MC6 agenda. Cancun also produced two new groups of developing countries which are playing an increasingly important role in global trade talks and which have been successful in articulating the global asymmetry in agriculture – the G20 led by Brazil and India, which insists on the phasing out of the trade-distorting agricultural subsidies, and the G33, chaired by Indonesia, which seeks formal recognition to the right of developing countries to have certain products declared ‘special’ and protected by ‘special safeguard mechanisms’ (SSMs). The Philippines is a member of G20 and is one of the acknowledged leaders of G33.

Thus, organizers of the Hong Kong’s Ministerial see no immediate compromise among the WTO member countries, given the wide gap in the positions of the haves and the haves-not. They have, therefore, downscaled their fighting target – from a new WTO agreement in Hong Kong into a consensus to continue the negotiations in Geneva and to have a formal agreement sometime in 2006 through the WTO’s General Council.

In the meantime, the developed countries are tireless in their campaigns to ‘soften’ the stand of the developing countries against a general ‘market access’ opening in agriculture, industry and services. An ‘aid for trade’ is being dangled by US Trade Representative Rob Portman, roughly $2.5 billion in all, to improve the capacity of developing countries in complying with trade liberalization commitments. The threats of the US to go bilateral or regional with the ‘coalition of the willing’ through new ‘free trade agreements’ are also continuing. And so are the not-too-subtle pressures coming from the international financial institutions (IFIs), which are seeking ‘coherence’ with the WTO on their ‘structural adjustment programs’.

Attitude of Civil Societies

Thus, Fair Trade Alliance Lead Convenor, former Senator Wigberto E. Tanada, is both pleased and worried.

He is pleased that the Philippines has aligned with other developing countries in pushing for reforms (subsidy reductions, special products, safeguard mechanisms, etc.) in the global agricultural trading system. The FTA was also informed by the government trade negotiators led by DTI Secretary Peter Favila that the Philippines is not even keen on discussing the tariff coefficients for industry and fishery under the Non-Agricultural Market Access (NAMA) because the Philippines, having reduced its tariffs unilaterally to the average level of the developed countries, should not be punished with the application of new tariff-busting coefficients. Additionally, the government also wants similar flexibilities in service trade talks, including the retention of the request-offer trade negotiation formula, which the European Union wants to junk in favor of the catch-all ‘benchmarking’ and ‘complementary approaches’.

However, former Senator Bobby Tanada is also worried that some developing countries, the Philippines included, may not be able to summon the political will to stand up to the trade talk offensive of the developed countries, who are dangling the ‘aid for trade’ carrot and policy ‘coherence’ with the IFIs. India and Brazil are reported to be wavering because of certain economic concessions being promised by the US and EU.

As to the crediting of the Philippines’ earlier and unilateral trade liberalization, the WTO rules and practices do not appear to be encouraging. There are no WTO rules on exception to any trade liberalization formulas. This is why many countries keep postponing or moderating their liberalization programs, in order to have policy space and trade marbles for negotiation purposes. The exact opposite happened in the Philippines.

Thus, what is happening in Hong Kong is the realization among many Filipino trade stakeholders, e.g., industrialists, farmers, trade unionists, civil society advocates and others that they are facing double challenges – one, the task of helping strengthen the global movement for just and fair global trade rules, and two, the task of instituting reforms in the national economy, which has been ravaged by a haphazard and unilateral liberalization pursued by the neo-liberalizers of the l980s and l990s.

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* Article published in Business Mirror on December 19, 2005

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

HONG KONG — Delegates and observers at the Hong Kong Ministerial Conference of the World Trade Organization (WTO) are virtually unanimous on what could possibly come out of the six-day meeting—no firm agreement among the member countries on any new trade liberalization targets in agriculture, industry and services.

What is likely to happen is an agreement to continue the trade talks in Geneva, where Director-General Pascal Lamy hopes to wrap up the most contentious round of global trade talks since the formation of WTO in l995.

The Group of 20 or so developing countries led by Brazil and India are adamant in their refusal to accept any tariff reduction formula without any movement on the part of the developed countries to reduce their actual, not paper (or ‘water’) ceiling, subsidies amounting to $1 billion a day, which distorts global trade in agriculture to the detriment of small producers from poor countries.  On the other hand, the Group of 33 (latest count: 44) countries shepherded by Indonesia and, yes, the Philippines is pushing for full recognition of the right of developing countries to declare sensitive crops ‘special products’ and for the WTO to set up ‘special safeguard mechanisms’ in order to protect these SPs.

And yet, the developed countries, mindful of their own farm constituencies at home, are like an immovable mountain, offering meaningless paper or ‘water’ cuts or pledges of real cuts but only after so many years, or long after the collapse of agriculture in many developing countries as what has happened in the case of the cotton-growing countries of Africa.  The acrimonious debates on agricultural trade reforms between the haves and the haves have spread even among the developed countries themselves, with the EU questioning the international ‘food aid’ of the US as a disguised subsidy program.

Industry, services are also battlegrounds

In industry, covered by the so-called Non-Agriculture Market Access (NAMA), the developed countries are asking all countries for a radical tariff convergence through a tariff-busting ‘Swiss’ formula or a variation of this. Many developing countries with double-digit tariff averages, some as high as 50 percent or more, are naturally howling in protest, for this effectively reduces their capacity to protect their economies from goods produced by the more efficient and technologically advanced countries.  For the Philippines, which has reduced its tariffs way ahead of other countries under a blind liberalization program supervised by the IMF-World Bank group, the proposal appears to make sense—except that the overall NAMA scheme eliminates the flexibility of the Philippines to nurture strategic industries such as those in the chemical and electric sectors or protect sensitive industries involving small producers such as those in the footwear and fishery sectors. Instead of getting involved in the technical debates on the tariff-reducing coefficients, the Philippines has correctly notified conference chair John Tsang and other WTO officials that it wants an exemption from any tariff-reduction coverage (for as much as 10-15 years) because the RP’s unilateral liberalization program has already put RP tariffs at par with the developed countries.

In services, the issue is again flexibility.  What the EU and other developed countries want is a wholesale liberalization of services through ‘benchmarking’ (or doing ‘complementary’ liberalization) with the aggressive liberalizers.  This is a major departure from the original provision of the General Agreement on Trade in Services (GATS), which says that service negotiations should be on a ‘request-offer’ basis, which allows member countries to identify which ones to open up in accordance with a country’s development priorities.    In this regard, the Philippines has taken a progressive stance by insisting on the ‘request-offer’ negotiating modality and ‘more flexibility’ in the overall service sector liberalization.

Hardly any development issue on the table

But overall, something is seriously amiss in the conference in Hong Kong.
The ongoing trade round is billed as a ‘Doha Development Round’ (DDR).  And yet, outside of the flexibilities the Philippines and other developing countries are asking in relation to the proposed new liberalization formulas in agriculture, industry and services, there are hardly any ‘development’ issues put on the negotiation tables.
This is what many civil societies outside the official deliberations are clamoring in their parallel conferences as well as in their daily marches against the  WTO. Trade unions and farmers are complaining how jobs and farms are sacrificed on the altar of free-trade globalization.

In a seminar at HK’s Indian Club on the WTO clause on ‘special-and-differential treatment’ or SDT, participants from Bangladesh, China, the Philippines, Indonesia, Taiwan, Malaysia and other countries took turns in denouncing  the inequality and insecurity affecting the working peoples virtually everywhere and the limited and unequal progress achieved by developing countries under a WTO-led globalization.  They said the lives of the working peoples, in both developed and developing countries, are simply being sidelined, if not ignored in the ongoing DDR talks.

Accordingly, trade liberalization as an economic panacea is still being bandied about as the cure-all for the economic ills of the world, when it is clear that the one-size-fits-all liberalization model of globalization is at the roots of global, regional and national inequalities and the stark poverty hounding many in developing countries.

Farmers in South Asia reported on the numerous suicides occurring in the region (as high as 25,000 in India in the last ten years or so) because of their inability to survive in a globalized trading system dominated by the big subsidizers.   In China, the media have glossed over the stories of massive dislocations affecting  scores of millions of workers in the state-owned enterprises (SOEs) and scores of millions of farmers in the countryside, who now constitute the ‘xia-gang’ or  ‘floating population’ of migrants working for a sub-human wage of less than $2  a day for jobs which can disappear tomorrow.   Other participants from the Philippines, Indonesia and other countries have similar laments.

Special differential treatment hardly given attention

What is strange is that the SDT clause of the WTO, contained in more than 150 provisions of the WTO umbrella of agreements and enshrined in the WTO Preamble itself, is hardly given attention in the MC6.   Briefly, SDT means not all countries are of the same level of development because of historical and other reasons.  Hence, it is only logical that countries should be given leeway to determine their development priorities and to calibrate their trade policies in accordance with such priorities.  In the trade policy area, SDT means  giving developing countries some flexibility  –  more liberal market access,   higher tariff commitments,  longer transitions to comply with certain commitments and safeguards against unwanted imports.

Such flexibilities are ignored in the DDR.  Worse, in the draft Ministerial text prepared by Lamy, SDT is reduced to a number of tokens for the ‘least developed countries’ (not all developing countries) such as duty-free and quota-free entry for  certain agricultural products and extension of the local-content privilege under the old Trade-Related Investment Measures (TRIMS).  In short, the WTO leadership has reduced SDT into a meaningless rhetorical clause for many developing countries like the Philippines. This is supplemented by the US and EU with pledges of roughly $5 billion for ‘aid for trade’ program, or a program on how to enhance the capacity of developing countries to meet their liberalization commitments, which is ironic, because the problem precisely of many developing nations is how to have flexibility and exemption in meeting those commitments.

Liberalization for its sake

This is why there is so much polarization — and tension – in the MC6, inside and outside the HK’s Convention Center. Trade as an instrument for development is being reduced by some neo-liberalizers into a simplistic question of liberalization for liberalization’s sake.  Their trade agenda is reduced to more liberalization in agriculture through bands of tariff reduction, more liberalization in industry through tariff-reducing coefficients and more liberalization in services through ‘benchmarking’ or ‘complementary approaches’.

In contrast, the Philippines and other developing countries are asking for safeguards in agriculture, tariff flexibility in industry and ‘policy space’ in services.   This is a good stand but this is clearly not enough.  Real development requires growth in industry, agriculture and employment.  Such development is only possible if countries are given maximum flexibility to determine their priorities and calibrate their trade polices in accordance with such priorities, consistent with the SDT principle of the WTO itself.

Fleshing out such development priorities and doing serious trade-development calibration are the real challenges facing the Philippines and other countries under globalization.

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*Article published in Manila Times WTO Watch section on December 17, 2005.

HONG KONG — The Philippines has taken a lead role in the developing countries’ bid to force the rich member countries of the World Trade Organization to cut their subsidies, open their markets and give less developed nations a break from further tariff reductions on their industries. With 10 other countries, the Philippines signed a strongly worded position paper on the conditions that the group said needed to be met for negotiations to proceed on the so-called non-agriculture market access (NAMA).

The signatories, which included Argentina, Venezuela, Brazil, China, Egypt, India, Indonesia, Namibia, Pakistan and South Africa, said the developed countries have been ?reluctant to offer their fair share? in the NAMA talks.

The NAMA negotiations cover all industries, including fisheries, that fall outside the agreement on agriculture (AOA). Products under NAMA represent about 90 percent of global trade.

“The ambition in NAMA cannot be viewed in isolation. It has to be proportional and commensurate with the contributions by developed countries in other market access areas. Developing countries cannot be expected to pay for the much-needed reforms in the agriculture sectors of developed countries,” the Group of 11 (G11) countries said in a statement.

G-11 position

The European Union, United States and Japan have been pushing for the binding of all but five percent of tariff lines, which would lead to a further tariff reduction on fishery products and allow the entry of cheaper imports.

The position paper of the G11 countries was submitted to John Tsang, chair of the Sixth WTO Ministerial Conference, on Dec. 13. The WTO conference at the Wan Chai Convention Center here runs until Dec. 18.

The Fair Trade Alliance’s Wigberto Tañada, who is an adviser to the Philippine negotiating team, said the Philippines wants a 15-year tariff reduction break for Nama products.

He said the government wants the WTO to give credit to the Philippines? unilateral liberalization by giving the country 15 tariff-reduction-free years to allow domestic industries to catch up with foreign competitors.

The Philippines, which is leading the G33 countries, another trade bloc seeking special listing and special safeguard mechanisms for sensitive agricultural products, scored a major victory as some 110 countries expressed support for G33 proposals.

Manuel Teehankee, the Philippines? permanent representative to the WTO, said the Philippines also did not want to move from its position on the General Agreement on Trade and Services, which would adversely affect its $8-billion labor export sector.

He said the developed countries were “not happy¨ because they cannot impose sanctions under the current request-offer system? under which a country can decide to open up its services sector to foreign ownership and control through bilateral agreements. (INQ7)

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

As the good American poet Robert Frost put it, ‘good fences make good neighbors’. They are also essential in building strong economies.

Fences that are too high are a signal that one does not intend to do business with the outside world. They also nurture complacency and inefficiency among the protected sectors. Thus, in the early l960s, when then President Diosdado Macapagal abandoned the rationing of the nation’s foreign exchange earnings to ‘new and necessary industries’ in favor of the IMF’s ‘decontrol’ program and the establishment of uniform high tariff walls, the economy slowed down and the bullish local industry turned anemic.

On the other hand, fences that are too low are an invitation for foreign conquest. Since 1980, when the country adopted a radical tariff reduction schedule under the IMF-WB’s ‘structural adjustment program’ (SAP), imports of all types and sizes have flooded the archipelago, decimating many local industries. In the l990s, tariff cuts were even deepened and reinforced by the country’s liberalization commitments to the World Trade Organization (WTO) and the ASEAN Free Trade Agreement (AFTA).

The one-sided lowering of the nation’s tariff fences, way ahead of China, Thailand and many developing countries, has been an unmitigated disaster. The Philippines has become a net agricultural importing country, incurring an agricultural trade deficit amounting to $1 billion a year. Today, the country is importing virtually all its food requirements – rice, corn, poultry, livestock, vegetables, spices, wine, dairy products, sugar, confectionary, fruits, juices, cooking oil, flour and so on ad nauseam. The sterling performance of export pineapple, banana and mango cannot make up for the general weakening of over 90 per cent of agriculture and the steady decline of rural incomes in the last two decades.

As to industry, the sector has failed to expand despite the proliferation of electronic and auto assembly plants in Regions III, IV and VI. This is due to the ensuing collapse of the domestic producers of shoes, rubber, textiles, plastics, ceramic tiles, steel, electrical appliances, vehicles and so on. Even some multinationals such as Colgate and Johnson and Johnson have found it more attractive to dismantle their local manufacturing facilities and shift to import-and-distribute business. Overall, the Philippines is de-industrializing, while the rest of East Asia is rapidly industrializing!

The above developments have been aggravated by the bizarre way by which the laws on WTO valuation and safeguards have been interpreted and implemented, abetting technical smuggling and tilting the field against local producers. Imports are valued on the mere say-so of the importers, who pay low tariff and VAT tax, e.g., a pair of shoes valued at only P50.00 and paying less than P10 worth of duties and VAT. As to safeguards, this is allowed under the WTO. And yet, the Supreme Court, in a double-barreled attack against the home producers, sustained two debatable lower court rulings: one, removing the authority of DTI and DA secretaries to impose safeguard tariffs without a positive finding by the low-level Tariff Commission and two, affirming an importer’s prerogative to seek a TRO against a safeguard order on issue of constitutionality. The Philippines is the only WTO member country which has managed to clip its own power to impose safeguards against injurious imports!

What then should be done?

It is clear that one major task for the Filipino advocates of fair and just trade is to mount a battle for an equitable global economic order at both the home and international fronts.

In Hong Kong, the challenge is how to resist the demand of the developed countries to demolish the remaining tariff fences and restrictions protecting the economies of developing countries, while pushing for reforms in the unfair trade practices of the developed countries and for recognition of the right of developing countries to craft trade policies on the basis of their own development priorities. The Department of Agriculture is at least trying to do something, by joining the global demand for developed countries to phase out the latter’s trade-distorting subsidies of $1 billion a day and by pushing for the right of developing countries to have special products (SPs) that can be covered by more flexible tariff measures and special safeguard mechanisms (SSMs). Unfortunately, the government has no similar initiative for industry and it is not clear what is its stand on the US-EU demand for developing countries to open up their industrial (including fishery) and service sectors wholesale.

Of course, the developed countries have no problem demanding for deep tariff reductions, for their economies already enjoy high level of protection — high technological fences (through the intellectual property rights), high product and phyto-sanitary standards (which weed out unwanted imports such as what Australia is doing to our fruits), government’s industry assistance (subsidies, R & D, marketing support, etc.), advanced physical and social infrastructures, and political will in enforcing global trade rules (such as imposing safeguards on surging imports and sending back imports with questionable valuation).

In contrast, the Philippine problems are very basic – how to summon the will to admit past liberalization mistakes and how to forge a national consensus on rebuilding the nation’s fences and putting industry, agriculture and domestic employment back on the growth path.

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* Article published in the Philippine Daily Inquirer “Talk of the Town” column on December 11, 2005.

 

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

Wigberto E. Tañada, Lead Convenor

Trade is a powerful instrument to promote growth, job creation, and sustainable development  if it is based on a clear and balanced development framework and if it provides weaker parties, such as the Philippines, space to push their own development priorities based on flexible trade commitments.

However, trade can also be an instrument in perpetuating global inequality. Was it not during the American colonial period (1900-l940) when “free trade” was used in transforming the Philippines into an exporter of cash crops and minerals and an importer of finished American goods? This colonial free trade experience, shared by many “hewers of wood and carriers of water” in the developing world, was the basis of a world divided between the haves and the haves-not.

Today, developed countries and their neo-liberal economists have been talking about free trade once again, this time to promote a romanticized notion of a borderless global economy. We are being pressed by the developed states  and even by some of our own economic technocrats  to embrace a new round of trade liberalization in support of free trade through a cacophony of trade agreements under the World Trade Organization (WTO)  Agreement on Agriculture, Non-Agriculture Market Access, General Agreement on Trade in Services, and Trade-Related Intellectual Property Rights. This is what the Hong Kong’s Ministerial Conference in December this year is all about.

We in civil society know better. A decade of WTO membership and a quarter of a century of pursuing the neo-liberal dogma favoring an accelerated and one-sided liberalization have neither alleviated poverty nor increased jobs in the Philippines.

Many in the developing world have also become painfully aware of the imbalances in global trade. The issue is not further trade liberalization per se but fairness in global trade rules. Why open up to global trade the agriculture sector of the Philippines and other developing countries when the developed countries do not play fair by subsidizing their farmers to the tune of US$1 billion a day? This distorts global trade in agriculture and subverts the capacity of small farmers in developing countries to compete.

Why not recognize the right of developing countries to develop their industrial and agricultural sectors and maintain jobs in these sectors? Why undermine the power of government in the delivery of basic services, such as health and education, by opening this up in favor of transnationals and big corporations. Why reduce the capacity and flexibility of developing countries in producing cheaper drugs? Why not give life to the WTO’s oft-repeated clause on the inherent right of developing countries to a “special and differential treatment” in global trade since not all countries are created equal and have different capacities? Why kick away the ladder to higher development through a one-size-fits-all trade liberalization formula?

False Hopes

Unfortunately, our government has not clearly defined where it stands on key issues tabled in the forthcoming ministerial conference in Hong Kong. Yes, it has joined the global battle of the Group of 20 developing countries against the trade-distorting agricultural subsidies provided by the developed countries and the efforts of the Group of 30 or so nations seeking full recognition of the right of developing countries to “special products” and “special safeguard mechanisms.” But during the recent official WTO assessment of Philippine liberalization compliance, the government failed to point out the devastating impact on the economy of the existing trade liberalization program and the need for the country to have some breathing space from it. Further, we read with dismay the official claim that trade liberalization has been good for the Philippines in general and that the government is prepared for more of it.

But has trade liberalization really been good for the country?

In l994, during the debates on Philippine membership in the then newly organized WTO, I cautioned my colleagues in the Senate not to foolishly rush such membership, if no readiness program for our industry and agriculture had been crafted and if the supposed safety nets for our workers and farmers were not fully in place. The late Sen. Blas F. Ople and then Sen. Gloria Macapagal-Arroyo ignored our arguments, citing the imaginary gains for the economy that early membership would cause, including the imaginary jobs that such membership would create.

Today, the jury is out. Many of the promised gains did not materialize.

The proponents promised half a million new jobs a year in industry and half a million new jobs a year in agriculture. Together with the jobs being created by the fast-expanding services sector, such growth in jobs would have wiped out our unemployment problem in five to seven years. Instead, our unemployment and underemployment have deepened since. The latest figures show that we have five million unemployed and over six million underemployed.

The massive unemployment is due to the collapse of many industries such as textiles and rubber and agricultural cropping areas such as corn and vegetables. Another explanation is the failure of new industries to grow and expand. In fact, the only Philippines export winner, electronics assembly, is not even dependent on trade liberalization per se, for this industry is based on the global outsourcing by electronic transnationals to their own production outfits based in duty-free economic zones or industrial parks.

Our agricultural exports have steadily declined while our agricultural imports have risen tremendously. We are now a net agricultural importing country and the ratio of agricultural imports to exports is now close to two-to-one. Trade liberalization and agricultural deregulation are killing local agriculture.

Another reason for the colossal collapse of industry and agriculture is the failure of the government to crack down on smuggling and import dumping, abetted by the precipitate shift to the WTO’s “transaction valuation.”

This system of valuation has been widely abused by importers and corrupt customs officials to mean simply “as declared by the importers themselves” (in sharp contrast to the old home-consumption valuation based on the value of goods as sold or priced in the exporting countries themselves). Thus, we have shoe importers declaring a pair of leather shoes to cost as low as $.50 (50 US cents) a pair, which means payment of super-low tariffs of 7 percent (or $.035) and 10 per cent VAT (or $.050), or a total of less than P5 total tax for a pair that fetches between P500 and P1, 500 at Greenhills.

Homemade Tragedies

Of course, some of our problems are homemade.

As provided by the WTO, we enacted safety net laws against dumping and export subsidies. And yet, we have a weak state incapable of decisively implementing these laws.

The United States, European Union, Australia, Thailand, India, Brazil, and other countries routinely impose safeguard tariffs as high as 100 percent, or sometimes as much as 200 percent, against sudden import surges. Here, importers have no difficulty securing court injunctions against the impositions of safeguard tariffs, citing strangely the supposed “unconstitutionality” of the law. Worse, the Supreme Court upheld, in the case of steel and cement products, the validity of the injunctions against the safeguards law or Republic Act 8800, thus sustaining indirectly the “unconstitutionality” argument.

Given the glaring failure of the government to support local industry and agriculture through cheaper credit, more efficient infrastructures, better research and development, market development assistance, and so on, the recent court rulings on safeguards are truly a cause for national concern. The Philippines is discriminating against its own producers!

Another homemade tragedy is the Philippine adoption of a unilateral and one-sided trade liberalization program, which has made our applied tariffs much lower than our binding rates under the WTO and virtually equal to the free-trade 0-5 percent tariffs under the ASEAN’s Free Trade Agreement (AFTA). With our tariffs equal to only one-third of those of Thailand and much lower than those of China, India, Brazil, and South Africa, our industrial and agricultural products cannot compete, not in such an uneven playing field.

Due to this unilateral trade liberalization, imposed as part of the IMF-World Bank structural adjustment conditionality way back in l980 (and implemented vigorously since), our tariff rates are virtually the same as those of the developed countries. However, there are big differences  the developed countries maintain peak tariffs as high as 200 percent or more for sensitive products (we do not have any), they have developed a complicated system of product certification which keeps out unwanted imports (such as what Australia has done with our mango and banana exports), and they can act decisively on import surges (while we have succeeded in rendering RA 8800 inutile and in making the Philippine economy one giant ukay-ukay center for virtually everything).

A Riot of Proposals

In the meantime, the country is being bombarded with new trade liberalization proposals. Aside from those mentioned above, there are proposals for an “ASEAN Economic Community” and Priority Integration Projects (PIPs) under the ASEAN.

It was only when Chinese Premier Jintao visited the country that our officials admitted that an “early harvest program” with China had been inked. This has naturally alarmed our vegetable farmers in the Cordilleras because smuggled GMO vegetables from the Chinese mainland are the ones killing the local vegetable industry.

An economic partnership agreement is also being negotiated with Japan by a handful of technocrats who have refused so far the requests of Congress for a copy of the draft text, the tentative list of included and excluded products, and the commitments that each country is making.

The non-transparent process of trade negotiation is also extended to the Philippine-US bilateral free trade agreement, which the beleaguered Arroyo administration has recently announced as in the pipeline. If the US-Singapore bilateral free trade agreement is any guide, such a bilateral agreement with the US and other countries dangerously limits the flexibility of the country in crafting and pursuing its own development agenda. For aside from the usual zero-tariff regime, bilaterals also include non-trade issues such as investment, government procurement, trade facilitation and competition policy, the very issues that were roundly rejected by developing countries and led to the collapse of the WTO’s Cancun Ministerial in 2003.

Development for Whom?

Of course, the basic issue remains: what is the overall development framework that the government is pursuing in relation to all these trade initiatives?

For whom are we liberalizing? Are we not supposed to be winners, too? What then and where are the safety nets and adjustment measures that we are undertaking to ensure a win-win and painless transition for our society, for our workers and farmers, in particular? What are the corrective measures that the government should have by now instituted to make the rules fair and just to our very own producers?

The evidence is clear and more than compelling. It is beyond reasonable doubt. The Structural Adjustment Programs and the neo-liberal policies we have been implementing have not worked to our advantage. In fact, it has further damaged and eroded our already weak agro-industrial base.

It is now time to have a serious re-assessment of our trade and development priorities and a major overhaul of our existing trade policy regime.

—————

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

 

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?” 

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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  • 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.
  • FairTrade seeks to promote a job-full and progressive Philippine economy through: (1) the promotion of fair trade rules and active agro-industrial policies based on the existing development needs of the nation, (2) the development of a positive agro-industrial culture to foster innovation, hard work and solidarity between and among the productive sectors of Philippine society, and (3) the transformation of an economy debased and stunted by colonial mentality, unequal trade and neo-liberal dogma into a modern, sustainable and broad-based.
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