10 Confronting Trade& Development - Dr. Rene E. Ofreneo

8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo

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Confronting

Trade & Development

Dr. Rene E. OfreneoProfessor

University of the Philippines&

Convenor

Fair Trade Alliance



What we learned from Cancun, HK &

Copenhagen?

Trade is war, globalization is warTrade negos intense „coz war of national interests

Examples: US, Europe on agri (want trade lib butrefuse to give up subsidies $1B/day)Brazil w/ DCs but not on agri exportsUS/EU vs. China

2003 – collapse of WTO talks in Cancun2005 – no agreement in HK2010 – still no DDR

Big powers pushing for „coherence‟ – WTO, IFIs, UN

bodies – in accordance w/ their interestsexample: liberalization on NAMA, AoA, GATS but

protection on TRIPs

Even on Climate Change in Copenhagen, US, China,

India, Russia, etc. refuse to commit due to growthissues



What other countries are doing?

Unified approach to trade, e.g., USTR, EU‟s TradeCommission, Canada‟s ITCan, Japan‟s MITI, etc.

Strong industry/labor/CSOs consultations, e.g., USTR has2,000 sub-industry committees and strong industry

representation in trade talks – US w/ 250-500private sector reps in WTO talks

Strong research back-up (with researches funded by theirown government & private sector)

strategizing coupled with endless capacity building fortrade negotiators and preparations (forpotential losers and winners)



But what’s happening in RP?

Battle for information (people kept in the dark).

Example: JPEPA text a battle of 2+ years to get

No unified approach to trade. DTI? NEDA? DA? DFA?Malacanang? TRM? BITR? Embassies in Geneva(WTO), Jakarta (ASEAN), Tokyo (JPEPA), etc?

Minimal industry consultation, e.g., AFTA 2010, CAFTA2012. -- Minimal industry coordination

Minimal PO/NGO consultation & coordination.

No clear agro-industrial visioning & framework. Ex.:Tariff Commission has no guiding framework inhearings. TC initiated ATIGA formulation?

No clear research back-up, strategizing, etc. (exceptstudies funded by foreign agencies)



RP: No clear answers on

strategic trade policy issues

• Defining national interests? WB? FDIs? Locals? CSOs?

• Identifying winners, losers?Potential gains, potential losses?

• Examining structure of economy vis-à-vis those of other contracting parties? Why not normal traderelations instead of “free trade” agreement?

• Strategic concerns (e.g., employment loss), strategic

industries (e.g., rice industry)?

• Defensive programs? Offensive programs?

• Conduct of trade talks? Flexibility clauses?



Biggest RP trade problem:no trade-agro-industrial policy harmonization

Trade an instrument to

-- promote more markets,

strengthen national industries and

create more jobs and welfare

And yet, trade policy in place has been successful

in wiping out many industries and jobs

in eroding nation’s industrial base, agricultural base

in setting back economic growth



What happened?

In l957, World Bank says:

RP second to Japan in Asia

But now RP is an industrial laggard in Asia

Many explanations – historical, political, cultural and economic

Economic explanations by those at the economic policy helm

Sicat-Virata (1970s) – economy not open enough

others (today) – transactional economics,

interventionist government

FairTrade Thesis: RP’s growth stunted by

absence of clear and coherent trade-agro-industrial

development framework

aggravated by neo-liberal dogma on liberalization



RP economy to soarunder liberalization, and yet…

Josef Yap of PIDS wrote (2003) that threedecades of „mainstream economics‟ have notproduced „economic transformation‟ for RP

RP left behind1970s – by the Asian NICsl980s – by Malaysia and Thailandl990s – by China and Indiatoday -- by Vietnamtomorrow – by Bangladesh & Cambodia?



Tale of three economic policy regimes

19th century to l950 -- Colonial free trade(with Spain and later, US, interrupted by WWII)

1950s-60s -- Import-substituting industrialization(ISI)

1970s-present -- Export-oriented industrialization (EOI)

a. 1970s – LIEOb. l980s-present – Structural Adjustment Program or SAP

ALL-OUT ECONOMIC LIBERALIZATION:

Trade lib (removal of import restrictions/tariff reduction)Investment liberalization [short negative list)Deregulation (forex, agriculture, etc.)

Privatization (GOCCs, assets, BOT, services, etc.)



RP Thailand

Average bound tariff ratesAgriculture 34.7 % 35.5%Industry 23.4 24.2

Average applied MFN tariff ratesAgriculture 8 29Industry 4.3 14.2

Ratio of exports to GDP45 56

-------------Source: Notes of RP Ambassador in Geneva

Unilateral Total Disarmament

RP vis-a-vis Thailand under WTO, 2004





Share of manufacturing to total output(per cent)

Year Indonesia Mlaysia Thailand RP

1980 15.2 19.6 23.1 27.6

2002 26.6 30.0 37.1 24.1



Industries on the brink or have collapsed

Domestic Industries

•

Textile industry (comatose, from 250+ to 5)• Shoe industry

• Rubber/tire industry

• Vegetable industry

• Fishery industry

• Poultry (saved by avian flu) and livestock• Chemicals (organic and inorganic chemicals, fertilizers,

petrochemicals)

• Cement, tiles and ceramics

•

Processed foodstuff• Pulp and paper,

• Wood, etc.

Export Industries

• Garments, Footwear, Leather, Furniture, e.g., rattan, etc.



Overall scorecard under SAPFDIs came but not in a big way to effect major transformation of

economy. Overall outcomes:Enclave industrialization based on FDIs

De-industrialization (collapse of local industries)

De-agricultural development (eroded base)

But RP surviving – BAKIT?OFW phenomenon (10 % of population, $16B-21B

remittances/yr)

Call center/BPO ‘accident’

government borrowings ($53 B foreign debt)

Those who can not get jobs in shrinking formal sector or

overseas labor market, join growing informal sector





Relationship of Remittances to Other

Philippine External Income

0

5

10

15

20

25

*2008 2008

Tourist Receipts

Portfolio Investments

FDI's

Net BPO Income

Net Exports

Remittance Informal

Remittance Formal

Remittances All Other Income



Other catch basin:Informal Economy

237,00012.594,012,00014.584,046,000Unpaid workers

128,0005.001,626,0005.401,498,000Domestic Helpers

+4,795,01577.0625,151,11765.1320,492,312Informal Sector

-1,028,80515.274,894,88321.686,013,688Formal Sector

+4,894,00032,636,00027,742,000Total Employed

30,758,00Labor Force

Own-account

Wage & Salary

1,745,00036.6111,950,00038.9010,792,000

3,456,42923.177,563,11714.984,156,312

% to totalemployed

No. ofWorkers

% to totalemployed

No. of Workers

Difference20061999

Source : ECOP



ISI period (1950s-mid-70s)no industrial deepeningno export orientation

EOI period (mid-70s-present)no learninglimited linkagespoor entrepreneurship, national champions

market developmentbalancing protection and liberalization‘managing’ or ‘directing’ the TNCs

etc., etc.

For both regimes – no clear agro-industrial vision

Overall trade-dev’t problems



Scenario for 2010 & beyond?

Agriculture. Deeper crisis. Food crisis looming.Hunger looming in the countryside itself.

Industry. Deeper crisis too. AFTA now, CAFTAcoming, ANZ-FTA coming, others coming

Services. Formal Sector – depends on growth of

remittances. CC-BPO’s growth slowing down

Informal economy. Will continue to grow.

Elections coming? Stability coming?



More confusion:Asian noodle bowl of economic integration(as seen by ADB)



Fair Trade‟s 5-point econ road map

•

balanced approach to trade, growth & agro-industrial devt

strengthening “nation‟s fences” vs. smuggling & unfair

trade practices & leveling tariff/NT fences w/ others

building up nation‟s productive capacity, e.g., mobilizing

domestic investments, capacity building (not debtrepayment), & re-building eroded agro-industrial base

unleashing people‟s creative/productive capacity through

asset reforms (e.g., land reform, urban reform), HRD;anddeveloping culture of industrialism, excellence, solidarity

&economic nationalism.



•

Walang sasagip sa Pilipino sadagat ng globalisasyon

kundi Pilipino rin!

Documents

10 Confronting Trade& Development - Dr. Rene E. Ofreneo