is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:
Amidst news that Philippine merchandise growth slowed down last April and employment concerns were still unabated, with the World Bank providing mixed signals as to its expected scenario for the Philippine economy, the incoming administration faces an international trade situation remarkable for its ambiguity.
The uncertainty with regard to the direction of international trade is backed-up by a seeming loss of interest by people with regard to the subject. Almost a decade ago, one could not go through a week without one trade forum happening around Makati or Manila. Today, the reverse is true. The only forums on trade right now actually focus on how to slow down trade. And even then, the size of the audience (as well as the repetition of the faces one sees) doesn’t really encourage greater interest for the topics that need to be discussed.
Which is really a cause for concern because when one thinks about it, trade really is a nagging matter that wouldn’t go away even though we try not to think about it. It’s the boogeyman that would still be there even if we hide for hours under the covers. And the ironic thing about it is that the trade boogeyman brings us benefits, despite what the anti-trade people keep on harping about. Considering the coming change in government, now is even a more crucial time to determine the direction of our trade policy.
For direction is certainly what’s needed, considering the hazy picture. BusinessWorld recently reported that the numbers for April 2010 showed our merchandise export growth grinding to 27.4%, its weakest performance in five months. Month on month, the export contraction amounted to 14.5%, lower than March’s 17.1%. These numbers should be read within the context of the World Bank’s "Global Economic Prospects Summer 2010: Fiscal Headwinds and Recovery." In it, the World Bank pegged Philippine growth prospects lower than that of China, Indonesia, Laos, Malaysia, Papua New Guinea, Thailand, and Vietnam. In fact, Philippine growth prospects for its GDP of 4.4% was even lower than Vanuatu’s (4.5%) and Cambodia’s (4.8%). All this also under the context of the World Bank’s regional forecast of 8.7% growth for 2010 and 7.8% in 2011. Vic Abola of the University of Asia and the Pacific, however, disagrees with the World Bank prognosis, saying that Philippine growth could still wind up at 5.9% or "even higher." He may have a point as consumer confidence went higher than expected, particularly following the recent elections.
Confidence is certainly needed, following the operation of the ATIGA, as well as reports that APEC ministers recently agreed in Japan to push ahead with the Bogor Goals, which seeks to open trade by 2010 (for developed country members) and 2020 (for developing countries). Also discussed were plans for a Free Trade Area of the Asia-Pacific or FTAAP. Thankfully enough, the APEC ministers also came out full force on their declarations against protectionism -- committing to a moratorium on any new trade barriers, at least until 2011 (whether or not such violates WTO rules).
Indeed, protectionism seems to have been kept at bay (despite the triumphant gloating of anti-trade advocates). Recent data has indicated that trade barriers have been contained (although an increase in trade remedy measures is certainly there). On the whole, the commitment of countries with regard to protecting the gains of liberalized trade seems to be quite healthy. Which therefore should make countries focus on a more specific concern and that is trade finance.
As WTO Director-General Pascal Lamy noted recently, "trade finance is the oil that keeps the wheels of global trade running; hence our active interest and ongoing participation in global initiatives to address the impact of the global financial crisis on the availability and cost of trade finance. The fact is that around 80 per cent of world trade is financed by some form of credit." Thusly, while "liquidity is less of an issue, the problem remains one of aversion to risk, particularly in smaller players in smaller markets."
Mr. Lamy, meanwhile, laudably continues his lonely crusade to seal the Doha Round by this year. Frankly, nobody really believes that it could be done, with the US close to having its midterm elections, fears of a double-dip recession, and a president whose focus and commitment to trade is muddled at best. Part of the problem lies with trade’s continued success: world trade increased by 25% year on year (seen from the numbers for last March). Total country exports (also year on year) went up by 27%, along with imports (albeit at a slightly lower 24%). The motivation to close Doha right now simply isn’t there.
All this again proves a repeated point of this column: that while our politics insists in being local, economics -- unfortunately -- is international in scope. If we can’t grasp this fact, we might as well just focus on this:
"There’s a zombie on your lawn;
There’s a zombie on your lawn."