Tripping on trade again

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

Some "fans" told me to stop mucking around and write again about trade. Fine. Here goes: as I discussed recently, nobody really believes that Doha could be closed this year, what 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. The UK is now with a new government that would need a few months to get a grip on the power it lost for more than a decade.

Also, part of the problem lies with trade’s continued success: world trade increased by 25% year on year (according to March figures). Total country exports and imports also rose year on year. Simply put, the motivation to close Doha right now isn’t there.

And, as is usual with the developed countries, they never practice what they pompously preach to developing countries. While mouthing off declarations of continued adherence to the Doha Development agenda and the benefits that trade brings to everyone, particularly poor countries, the rich countries nevertheless continue to screw up the playing field. According to the Organization for Economic Co-operation and Development (OECD) report: "Agricultural Policies in OECD Countries: At a Glance 2010," trade distorting subsidies among developed countries (in terms of Producer Support Estimates) "rose by US$252 billion in 2009, which was the equivalent of 22 percent of total farm receipts in that year."

The danger, of course, for developing countries like the Philippines is to be tempted to go full throttle on the FTA bandwagon. Or its practical opposite, which is to revert to our past (and failed) protectionist policies. There is a probability of also glossing over the importance of trade finance, which, as WTO Director-General Pascal Lamy noted recently, "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 percent of world trade is financed by some form of credit."

Having said that, Philippine tariffs on practically all imports from the original ASEAN five should go 0%. Add to this an assortment of products coming from China, Australia, New Zealand, Korea, and Japan. While definitely good news for consumers, businessmen here (particularly for the automotive and electronics sectors) are trying to put a brave face to an otherwise more competitive (and definitely, for the Philippines as a whole, welcome) situation. Reportedly, the likely gainers would be hog exporters and soap makers. The rest would most probably find themselves vulnerable to foreign competition, which is really all the better for the Philippines.

China, under the ASEAN-China free trade deal, should remove tariffs on 90% of goods from the Philippines. Various stages of tariff reductions are also in the works for Philippine goods exported to Japan, Australia and New Zealand, and Korea. Whether local business will actually be able to take advantage of the tariff reductions and produce as needed by demand is another matter.

Which leads to this thing that must be emphasized -- a point I’ve been making repeatedly ad nauseam -- and that is, the mere presence of FTAs would not necessarily mean increased business for the Philippines. This thought should be tied up with the OECD report "OECD Innovation Strategy," which declared that "innovation and coherence in policy interventions can spur economic recovery." Which is really quite obvious when you think about it. However, as the report goes, "innovation policies should encompass a wide range of activities in addition to the standard research and development (R&D). Other critical areas include design, marketing and organizational changes. Consequently, innovation should be addressed and encouraged in an increasingly horizontal approach, through a wide spectre of policies."

Lest people forget, the Philippines is still locked in the midst of several significant trade disputes. There are the two complaints we filed way back in 2002 against Australia (DS270 and DS271) due to its alleged discriminatory treatment of our fruit and vegetable exports. Interestingly enough, nobody seems to be inclined to proceed with this long-pending case, with not even a panel being formed (despite taunts hurled our way). However, gratifyingly enough, there was good news indeed in our third-party complaint in DS375/376/377 -- EC Measures on certain ITA Products.

Then there’s DS371, formally designated as Thailand -- Customs and Fiscal Measures on Cigarettes from the Philippines, as well as the dispute formally lodged as Philippines -- Taxes on Distilled Spirits (docketed as DS396). The EC’s complaint against the Philippines in the latter case centers on whether Philippine excise taxes on distilled liquor (as imposed by RA 9334) discriminate against imports and in favor of domestic products.

And, finally, whatever happened to the competition policy bills pending in the Senate last year? Or, for that matter, the Trade Representative Office bill?

The coming days should be interesting.