On the Philippine trade representative office

(speech given in 2006)

Greetings - -

When I was invited to participate in this forum on the Philippine Trade Representative (or as I’d like to call it: the RPTR), I remembered that when the Uruguay Round of negotiations were contemplating the need for an international trade organization to oversee the various trade agreements being considered, a negotiation was specifically set aside to discuss the "functioning of the GATT system" and was given the acronym "FOGS". Out of this the WTO was created. Unfortunately, more than ten years later, what was deliberated under FOGS is still under a fog. It is with this in mind that we shall approach the discussion regarding the need for the office of the Philippine Trade Representative.


Everybody, I believe, is aware of the trouble that the Doha Round is in. On 27 July 2006, the talks will be formally suspended and - with the political calendars of the big country players - may take a while before the talks are resumed. I have every confidence and desire that the Doha Round will be eventually be successfully finished (like its predecessor, the Uruguay Round). There is no choice really for I believe that the biggest losers in the suspended talks are the poor. In any event, for now, there is a justifiable concern for the relevance and effectiveness of the WTO.

Then there is the interesting shift among trade experts and commentators from an absolute belief in trade to a more cautious and conditional stance. Today, free traders are now more apt to say that trade liberalization is good but is not enough. The accepted belief now, it seems, is that trade liberalisation is no substitute for either more domestic reform or foreign aid, and that admittedly some of the poorest countries need more time to open their markets than others.

The alternative, bilateralism or regionalism, has been put in doubt. I have been a doubter since 2003, right after Cancun’s collapse. A number of our business leaders, policymakers, and academics at that time supported the idea of bilateral trade deals. I didn’t. And I still don’t. However, now, it should be noted that even the government’s own research arm, the Philippine Institute for Development Studies, is wary as far as FTA’s are concerned. The 2006 PIDS study, entitled The Boom in FTAs: Let Prudence Reign and written by Dr. Josef Yap, President of the PIDS, goes to even express doubt as to the benefits that could be derived from FTAs. In fact, the World Bank itself expressed suspicion against FTAs, highlighting the risks that poor countries face when they enter into such.

So, right now, uncertainty in every sense of the word, a fog if you will, still hangs over the multilateral trading system. This uncertainty comes in three forms: first is with regard to the overall direction of the multilateral talks, second is with regard to the benefits, if any, that we stand to gain from further liberalization and, third, how such benefits can be attained. The answer, I believe, to those uncertainties, is not a further opening up of the economy or a closing of it but something a little more basic and that is the improvement of the structure by which trade issues and policies are processed and addressed.


The other thing that I happened to think of is the power of the concept of sovereignty. In a lecture I gave at Ateneo on 14 July 2006, I pointed out that the ruling of the Supreme Court laid bare in the case of Tanada vs. Angara is a concept of “sovereignty” that is seemingly in keeping with the concept as apparently understood by international law commentators, albeit with its ambiguities, that at the same time is seemingly different from the concept of an absolute, indivisible, inalienable sovereignty, a sovereignty that is supreme and uncontrollable that had been the hallmark of previous or traditional national understanding of sovereignty.

The implication of the ruling is in fact a continuation of the legal status quo, a continuation of the ambiguity the concept of sovereignty, which is both a bane and a boon. As I said in my lecture: “Taking the positive side first, the ambiguity allows the Philippines a wide policy space within which to interpret the economic provisions of the Constitution and at the same time within which to formulate trade policy. On the minus side, the ruling in Tanada does paint the Philippines in a legal corner. For having conceded to a mitigated power of sovereignty and, if the writings of Coquia are of influence (which they are), a narrower scope of sovereignty (to mere domestic jurisdiction - which it must be remembered is narrowly getting construed by international law), then the Philippines may have just given itself a weaker legal justification for an aggressive trade policy if it so decides in the future. On a wider view, the lack of a determined compass within which to guide ambiguities in our trade future would certainly have to be engaged sooner or later”.

Dealing with future challenges
In a briefing I gave in one of the workshops conducted by the House of Representatives, I gave the following recommendations in relation to meeting the three uncertainties I mentioned above:
> Improving the country’s governance, public transparency, business infrastructure (including credit access, stability of contracts, infrastructure development, transportation, energy, and a responsible workforce), other domestic reforms (such as lessening of corruption, better education, improvement of the peace and order situation, and judicial reliability);
> An effective competition policy;
> Review and amend some of our trade related legislation, particularly RA 8752 (the anti-dumping law), RA 8800 (the safeguards law), Section 304 of the TCCP, Sections 401/402 of the TCCP, and RA 9135 (the customs valuation law);
> Establishment of a formal consultative mechanism, by which private sector participation in the formulation of positions and the conduct of negotiations is institutionalized. Included in this suggestion is the conduct of periodic and regular hearings in Congress to determine the state of our trade activities.
> Conducting congressional review of trade agreements and included in this is the refinement of our rules to remove any ambiguity as to the need for our elected representatives to have a say in our entry into any trade agreement. This is especially with regard to the ongoing confusion regarding the classification of trade agreements into “treaties (which need Senate concurrence) and “executive agreements” (which do not). Thus, it is suggested that new rules be issued clarifying this matter so that any substantive trade agreement (and most trade agreements are substantive) will have to be submitted to the Senate for its concurrence or at least to a Congressional review. A process clearly needs to be established whereby trade agreements being entered into are reviewed and discussed publicly. If such review is not practically possible during the negotiations stage so as not to undermine the strategies being employed, then an oversight committee (perhaps by Congress) should be established, with powers to conduct public hearings on the propriety (or not) of such agreements on a regular or periodic basis.
> Caution on FTAs. As I mentioned above, I have had considerable doubts as to the benefits that FTAs can bring to the Philippines. However, concomitant to this is the bureaucratic difficulties that FTAs can impose on our government resources. Each and every FTA come with its own set of practical and at the same time highly technical problems. Most significant among these would be that pertaining to the rules of origin, the overlapping jurisdictions by the different dispute settlement systems in place between the multilateral trading system and the different FTAs, and the non-tariff subjects (such as customs procedures, sanitary and phytosanitary measures, technical barriers to trade, and - perhaps - the issue of smuggling).
> Establishment of formal written trade policy, by which the government shall lay down publicly, in writing, a detailed draft of what our trade policy actually is. The USTR, for instance, regularly publishes a white paper containing its trade policy objectives for all to comment - thereby allowing the USTR to refine its approach and make it more responsive to US national interest. Adopting a similar practice in the Philippines would not only better inform the public as to where the government intends to take us in terms of trade but would also give the most affected stakeholders (which is us, the private citizens) the opportunity to speak out on the wisdom of such policy.
> Finally, the creation of the RPTR. Trade negotiations of today are highly different from the trade negotiations of the past. Ten years ago, our prime trade activities circled around two or three countries. Now our partners are becoming more varied and, incidentally, Asian-centric. The inter-relatedness of the matters under trade discussions is greater. There is, obviously, a need for greater coordination between the different government agencies that deal in trade and affect trade. Also, most interestingly for me, considering that it is a well accepted fact that today’s multilateral trading system has definitely moved away from the previous negotiation’s based system to the present rules based system, there seems to be a dearth of lawyers working within government that focus on trade. The multidisciplinary approach to our trade activities needs to be recognized and developed.
Thus, the creation of the Office of the Philippine Trade Representative (RPTR) is recommended. This should not necessarily be a huge bureaucratic creation, at least at the outset. When the USTR was created in 1962, its legal counsel’s office was composed only of two men . Incidentally, when the Office of the US Trade Representative (USTR) was created, the reasoning of the US Congress that created it was that trade policy should not be entrusted to the State Department (which it is said looked out for the interests of foreigners or broad foreign policy goals) or the Commerce Department (which always looked out for narrow domestic political interests) but rather to an office that would take the objective position and have trade as its only mission.
For the RPTR, it is ideal that the same be peopled with professionals of diverse backgrounds: diplomacy, law, economics, finance, etc. It has to be the primary source of information on matters dealing with international trade and, at least with regard to issues arising principally from trade negotiations, be responsible directly to the President.
The office must be given the responsibility of organizing an inter-agency committee that will effect closer coordination among the different affected or involved agencies of government. There should also be a mechanism set up that will result in the constant and consistent consultation with the Philippine Congress. There should also be a process formulated that will provide Congress the avenue with which to exercise “oversight” functions over the office of the trade negotiator (i.e., annual briefings, etc.)
Finally, the office of the trade representative should be handed the responsibility - through a formalized process - of consulting directly and constantly with the members of the private sector.
In this regard, note must be taken of the USTR system of an established private sector advisory committee system. These advisory committees provide “information and advice with respect to U.S. negotiating objectives and bargaining positions before entering into trade agreements, on the operation of any trade agreement once entered into, and on other matters arising in connection with the development, implementation, and administration of U.S. trade policy”. Thus:

“The trade policy advisory committee system consists of 26 advisory committees, with a total membership of up approximately 700 advisors. Recommendations for candidates for committee membership are collected from a number of sources including Members of Congress, associations and organizations, publications, and other individuals who have demonstrated an interest or expertise in U.S. trade policy. Membership selection is based on qualifications, geography, and the needs of the specific committee. Members pay for their own travel and other related expenses, must obtain a security clearance.

Under the Trade Act of 2002, each advisory committee is required to prepare a report on proposed trade agreements for the Administration and Congress. These reports are made public on USTR’s website.”
Thus, if indeed we are looking at the creation of the office of the RPTR then the establishment of a private sector advisory committee system is strongly advised. This would resolve the suggestion above that a formal consultative mechanism be established. This is only fair considering that it is the very interests of the private sector that is at stake in international trade negotiations and policy determination. Furthermore, by having the private sector part of the process, we as much as possible develop a coherent voice in the negotiations, gain credibility for the position taken, acquired a substantial amount of intellectual resource for the development of the position, and - most importantly - avoid the seeming mistakes made in the Uruguay Round (and the concomitant finger pointing that followed it).
In conclusion - -
I am definitely not calling for us to be isolationists or protectionists. The point here is that, if one looks at the uncertainties prevailing in the multilateral trading system and at the ambiguity that the concept of sovereignty brings, the Philippines somehow seems to be faced with a valuable opportunity to re-calibrate the way it deals with the challenges of international trade.

The first step is perhaps to come to the realization that we need to remove ourselves from the protectionist/free trade simplistic debate and acknowledge the fact that trade is merely a means to an end. We also need to internalize the fact that trade is an utterly complex matter, that there is nothing absolutely certain about trade and no one size fits all formula that we could or should want to duplicate en toto. From this, we need to realize that the Philippines need a strong and deliberate foundation from which to move out and confidently engage our trading partners.

Thus, for the present, rather than formally and legally burdening ourselves with further international obligations or seeking to do so, it is suggested instead that that we prioritize reorganizing and making our house in order: improving governance, refining our laws and processes, and strengthening our institutions. On the last, the creation of the office of the Philippine Trade Representative is a big step in the right direction.

Thank you. I think I shall stop here.