25.6.09

Work is prayer

Today is the feast day of St. Josemaria Escriva.

Of mad men

. . . is the topic of my latest Trade Tripper column in this Friday-Saturday issue of BusinessWorld. Excerpt:

"But that is the point. Although praying often (as we all well should), saints were never weak or passive individuals that avoided confrontation for a superficial peace. They were not — ultimately — cowardly or cynical or disloyal. Also, they were normal people who went to work, needed toilet breaks, got stuck in traffic, were betrayed by friends, suffered setbacks, followed the law, and juggled paying bills. And remember there are only two persons who walked this earth that never sinned: Jesus and Mother Mary. The rest, you and me (I’m an expert), including the saints, are vulnerable to sin. Temptations, failures, self-doubt, and difficulties come to us all. Even for the saints, life was always a daily struggle."

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Imports fell by a record 37.4%. No need for raising tariffs or protectionist policies then.

24.6.09

The trouble with buy local programs

As expected with the much criticized Buy America program comes the retaliatory Buy China program.

One bad idea breeds another. For more details on China's growing protectionism, click here.

23.6.09

New AB members

The WTO Dispute Settlement Body (DSB) appointed on 19 June 2009 the following two new members to the seven-member Appellate Body: Mr Ricardo Ramírez Hernández of Mexico for four years commencing on 1 July 2009 and Mr Peter Van den Bossche of the EC for four years commencing on 12 December 2009. The two replace Luiz Olavo Baptista, who resigned owing to health reasons with effect from 11 February 2009, and Giorgio Sacerdoti, whose second and final term expires on 11 December 2009. For profiles of the two new members, click here and here. The DSB also agreed to reappoint David Unterhalter for a second four-year term starting on 12 December 2009.

22.6.09

Tobacco, trade, and recession

US Tobacco Law signed, as reported by CNN:

"President Obama signed landmark legislation Monday giving the Food and Drug Administration new power to regulate the manufacturing, marketing and sale of tobacco. President Obama says the new law 'represents change that's been decades in the making.' The Family Smoking Prevention and Tobacco Control Act gives the FDA power to ban candy-flavored and fruit-flavored cigarettes, widely considered appealing to first-time smokers, including youths. It also prohibits tobacco companies from using terms such as 'low tar,' 'light' or 'mild,' requires larger warning labels on packages, and restricts advertising of tobacco products."

The interesting here is the probable effect the law has on fans of Indonesia's kretek cigarettes, which will most likely be included in the list of banned products. Reportedly, the problem for Indonesia is that the ban is only on the kretek but not on other, arguably similar, tobacco products such as menthol as this report states. The seeming existence of "less favorable treatment" could lead to a possible WTO dispute. More importantly for us, what effect does this have on our tobacco industry? What with Philip Morris being a major player here in the Philippines.

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Meanwhile, the World Bank predicts that the Philippines will "be one of the few countries in Asia-Pacific region to slip into 'outright recession'" this year.

In this regard, a PIDS paper entitled "Asia’s Underachiever: Deep Constraints in Philippine Economic Growth", which indicates that our culture, pervasive corruption, and outmoded institutions as the culprits behind our under-achieving economy, could be relevant reading.

21.6.09

18.6.09

Constitution, trade, and buy filipino

. . . is the topic of my latest Trade Tripper column in this Friday-Saturday issue of BusinessWorld. Excerpts:

"This reading of the Constitution was confirmed by the final arbiter of how the Constitution should be understood: the Supreme Court. Thus, in Tañada vs. Angara (GR No. 118295, 2 May 1997) the SC declared that 'economic nationalism should be read with other constitutional mandates to attain balanced development of economy,' that the 'Constitution does not rule out foreign competition,' and (most significantly) that the 'Constitution favors consumers [and that the] Constitution has not really shown any unbalanced bias in favor of any business or enterprise, nor does it contain any specific pronouncement that Filipino companies should be pampered with a total proscription of foreign competition.'

Accordingly, rather than confining itself by siding with a narrow protectionist perspective, our Constitution wisely took an even-handed, pragmatic approach that seeks competitiveness for those companies of ours willing to be competitive, promotes the general welfare, and provides our citizens that one important fundamental right inherent in a democratic and republican State: the right to choose.

Which now provides you the context with which to view the utility of relying on a 'Buy Filipino' movement: yes it’s legal if it’s a private-sector-driven program; whether it’s effective is another matter. According to trade remedy petitions data, the local ceramics industry has around 50% local market share, float glass around 85%, and with soap raw materials (such as STPP) having around 90% local market share. A political party’s declaration that since 'government is the single biggest spender [then if] all national and local agencies can consciously support the campaign by giving preference to locally produced goods and services, then this would be a good start' ignores the fact that our government procurement of local products (which is legal under the WTO) is already being done since the time of President Quezon through our Flag Law. Unless a complete monopoly is what is being sought, what all this means is that a Buy Filipino movement isn’t going to be that helpful as we’re already doing it."

16.6.09

Catholicism in today's world

Three good articles about being Catholic in today's globalized, "modern" world:

The first article asks "Are you really Catholic?" Consider what it says, particularly when you frame your thinking in relation to pending law on contraception: "Either live as a Catholic Christian or don’t, but stop trying to remodel the Church to make it more appealing to the world. Learn your Catholic faith, understand it correctly and LIVE IT out in public without apologizing. Stop compromising the truth. Quit trying to rewrite Church teaching to bring it 'up to speed' with modern times. The Church is not out of step with society; society is out of step with the Church. Jesus Christ is the same yesterday, today, and forever, and thus His Church is timeless, ageless and always perfectly relevant. It is not the Church who needs to change her thinking; it is society that needs to CORRECT its thinking."

We're all sinners. We all do stupid things. But it doesn't mean one gives up trying. The problem with people today, particularly the youth, is that they're so eager to refer to human frailties as an excuse for self-indulgence.

The second article deals with this prevailing attitude today, of false "compassion":

". . . if you dare to call something wrong or immoral, or if you insist that some things are inherently good and others are inherently evil and therefore should not be allowed, then you are being exclusive and insensitive, judgmental and without compassion. If you have the temerity to actually call something a sin, well, that’s the new capital offense.

With regard to the most serious moral and social issues of our day, those with an anti-Christian agenda are trying to redefine compassion -- they equate compassion with tolerance and acceptance, and it just ain’t so. "

People should remember that while Jesus was truly compassionate and merciful, he really had zero tolerance for those who do wrong - as His reaction to the people who turned a temple into a marketplace showed.

The third article deals with good governance. Thus: "“God has not willed to reserve to himself all exercise of power. He entrusts to every creature the functions it is capable of performing, according to the capacities of its own nature. This mode of governance ought to be followed in social life."

15.6.09

Kobe gets his win

The Lakers and Kobe win in this year's NBA finals.

Good news indeed.

The Filipino and English

The Economist makes an accurate and significant observation about Filipinos and their English proficiency (click here):

"Once it claimed to have more English speakers than all but two other countries, and it has exported millions of them. But these days Filipinos are less boastful. Three decades of decline in the share of Filipinos who speak the language, and the deteriorating proficiency of those who can manage some English, have eroded one of the country’s advantages in the global economy."

11.6.09

Of treaties and executive agreements

. . . is the topic of my latest Trade Tripper column in this Friday-Saturday issue of BusinessWorld. Excerpt:

"Considering the onslaught of free trade agreements that the Philippines is entering into (aside from JPEPA, you have or may have the ASEAN-China, ASEAN-India, ASEAN-Korea, ASEAN-Japan, ASEAN-EU, and ASEAN-Australia and New Zealand), the need to lay out the extent of the Senate’s authority on such matters is clearly substantial."

10.6.09

More on buy local

Further comment on the “Buy Filipino” movement: yes it’s illegal under the WTO if it’s a government program, legal if it’s a private sector driven program. However, whether a Buy Filipino movement is effective is another matter. Note that the local ceramics industry has around 50% local market share, glass has around 85% local market share, and soap raw materials (such as STPP) has around 90% local market share. Steel probably has the same numbers. This means that a Buy Filipino movement isn’t going to be that helpful as we’re already doing it.

And noting the the announcement of Gilbert Remulla that the NP stand is: "Government is the single biggest spender. If all national and local agencies can consciously support the campaign by giving preference to locally produced goods and services, then this would be a good start," it is to be reiterated that government procurement of local products (which is legal under the WTO) is already being done since the time of President Quezon through the Flag Law.

The only way our domestic industries can thrive is to be more competitive in the export market (as our domestic market is simply too small to support our industries) and they can only be competitive if they have an educated work force and their R&D spending increases (the latter of which can be done if they have an educated management). Both of which, obviously, isn't being done, with exports down again and even the status of Manila as a livable area is being questioned, which obviously isn't good if you're attracting investors.

6.6.09

Buy local as red herring

BusinessWorld reports on local industries pushing for their own Buy local program:

"A business group is pressing a campaign urging consumers, companies and the state to patronize locally made goods, yesterday announcing plans for a 'Buy Pinoy, Buy Local' trade fair and a list of preferred products. These efforts, the Federation of Philippine Industries (FPI) said, will ensure that the Filipino behind the production of a sack of flour, steel bar, ceramic tile and whatnot will keep his job despite the crisis."

Frankly, while such a private non-governmental program is most likely legal under WTO rules, really, however, such is essentially useless considering the minimal size of the domestic market. As well as the moral hazard of helping industries that just complacently allowed themselves to be less than competitive. The Philippines just fell to 43 out of 57 countries in terms of competitiveness, with business efficiency ranking a lowly 32 out of 57, according to the World Competitivenes Yearbook. Blame is not solely government: productivity and efficiency we rank 53, with our R&D or scientific infrastructure down to 56. The Philippines now lags behind Indonesia for the first time since 1997 and we are now in the bottom among the same group of countries with population greater than 20 million (18th) and also in those whose GDP per capita are less than $20,000 (17th).

Interestingly, "FPI President Jesus L. Arranza, however, said 'We cannot expect other countries to patronize our products. We have to depend on ourselves ... to make this country prosperous. [Our aim is] to save and create jobs.'" Which is really precisely the point. Rather than laying the responsibility on the Filipino consumer, who already has enough problems making ends meet trying to find cheap but better quality goods, the local industries should have spent their time and energy developing the export market, making their products more competitive, and placing more funding for training and research. Which obviously they did not do.

The Filipino consumer already has to struggle with the low income or salary he is getting from these companies. It must be emphasized that these industry leaders, company owners and managers are being paid to do just one thing: to make their companies and industries competitive. If they can't do this, after all the years of being urged to be more competitive, efficient, open-minded, and forward looking, I don't see why the ordinary Filipino, who is doing his job, should help these rich guys out.

Somehow, the words of Philippe Legrain in his classic Open World rings true today:

Many of the losers of globalization do not deserve our sympathy at all. They are the cosseted ‘national champions’ that are incapable of being world beaters, the fat cats that have gorged themselves at our expense: loss making national airlines, hopeless nationalized industries, favored companies run by cronies that have politicians’ ears (and pad out their bank accounts). By all means, help the people who work for these companies. But don’t protect the companies themselves."

US grounds zero

. . . is the topic of my latest Trade Tripper column in this Friday-Saturday issue of BusinessWorld. Excerpt:

"In any event, the AB in the present case found that in a number of instances 'the United States has failed to comply with recommendations and rulings of the DSB in the original proceedings.' The AB declared that 'the zeroing methodology, as applied by the United States in the administrative reviews at issue, was inconsistent with Anti-Dumping Agreement Art. 9.3 and GATT Art. VI:2, as it resulted in amounts of anti-dumping duties that exceeded the foreign producers’ or exporters’ margins of dumping.' It must be noted that under Article VI.2 of the GATT and Article 9.3 of the ADA, investigating authorities are required to ensure that the total amount of anti-dumping duties collected on the entries of a product from a given exporter shall not exceed the margin of dumping established for that exporter."

1.6.09

The Constitution, trade policy, and the WTO

Contrary to others’ declaration on the matter, the Philippine Constitution wisely left ideology out when referring to the manner on how to achieve Philippine economic and trade interests. It is not protectionist nor is it an advocate of liberalism. Rather, it seeks, as stated in its Preamble, to “build a just and humane society”. Thus, Article II, Section 19 (The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.) and Section 20 (The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments.) should be read alongside the principle of our republic that: “The maintenance of peace and order, the protection of life, liberty, and property, and promotion of the general welfare are essential for the enjoyment by all the people of the blessings of democracy.” (Article II, Section 5)

Furthermore, even though Article XII, Section 12, states that: The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods,” nevertheless, in the end, the State is to “adopt measures that help make them competitive.” This is then followed by Section 13: “The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity.” Note the priority again given to serving the “general welfare”. The idea is not merely for the State to look after or care for a select number of sectors but for all, whether it be manufacturers or farmers, distributors or importers, sellers or consumers.

Finally, note that the very first section of Article XII declares that the “goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people.” Compare that with the goals of the WTO as stated in the preambular paragraphs of the Marrakesh Agreement which is the “raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.” From the foregoing one can see that our Constitution is well supported by the objectives of the WTO.

Accordingly, rather than confining itself by siding with a narrow protectionist perspective, our Constitution wisely took an even-handed, pragmatic approach that seeks competitiveness for those companies of ours willing to be competitive, promotes the general welfare, and provides our citizens that one important fundamental right inherent in a democratic and republican State: the right to choose.