Caution on TPP

Interesting that the government took two weeks longer to come to the same conclusions reached in my 19 November 2010 Trade Tripper column:

Conditions mute interest in trade deal

(BusinessWorld, 26 November 2010, by Jessica Hermosa)

Philippine interest in a multiparty trade pact which includes the United States has been tempered by the steep market opening commitments required by current negotiating parties, a Trade official yesterday said.

The process to be included in talks for the Trans Pacific Partnership (TPP) could also be cumbersome.

"The tone is more cautious than before," Ann Claire C. Cabochan, director of the Bureau of International Trade Relations, told reporters in a chance interview.

"We know the commitments now," Ms. Cabochan said, following the Philippines’ participation in the recent Asia Pacific Economic Cooperation summit held in Japan where the nine TPP negotiating countries were in attendance.

The nine are: Brunei, Chile, New Zealand, Singapore, Australia, Malaysia, Peru, the United States and Vietnam.

"It would have been our way of getting to the United States," Ms. Cabochan said.

"But it’s what they call a high quality free trade agreement with so many commitments. We’re constrained by our constitution."

The TPP deal requires members to liberalize local service industries on top of slashing tariffs on goods. The Philippine constitution, however, limits or even outrightly bans foreign participation depending on the industry.

The Philippines will also have to "engage with each of the nine" negotiating countries before it can be allowed to file its formal intent, Ms. Cabochan said.

"They really want your readiness first," she said.

In a related development, Ms. Cabochan said the schedule for the review and renegotiation of the Japan-Philippines Economic Partnership Agreement (JPEPA) could be pinned down when both parties gather for a routine meeting in March.

"[The schedule] is one of the items [on the agenda of] the joint committee meeting in Japan in March," she said.

The entry of Filipino nurses into the East Asian country will be among the issues raised, she said without elaborating.

Issues on trade in goods, meanwhile, have so far been hard to identify as the global economic downturn has made it hard to monitor the true impact of the JPEPA, Ms. Cabochan said.

Snappy replies to condomics 2

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

Right off the bat, let’s get this out of the way: Pope Benedict XVI modified the Church’s stand on condoms. NO, HE DIDN’T. This is quite clear when one reads the actual remarks of the Pope in his interview with Peter Seewald. He even asserts that the "fixation on the condom implies a banalization of sexuality." I suggest people read the commentaries of Janet Smith or George Weigel (available in the Internet) for a complete explanation of the Pope’s remarks.

However, let me just zero in on this: the Pope’s given example was in relation to "male prostitutes," who one can reasonably say mainly ply in homosexual activities. The use of the condom in relation to that immoral act is obviously not for contraceptive purposes. And it’s precisely that contraceptive function that the Church is against.

So, it means that the Pope justifies condom use to stop AIDS
. No. As the Pope clearly said "we cannot solve the problem by distributing condoms."

But it’s ridiculous to believe that popes don’t make mistakes or commit sins
. Of course it’s ridiculous. Popes are humans too. They do make mistakes. It’s only when the Pope speaks under his authority of "infallibility" (given under very specific conditions and only with regard to matters of morals or faith) that no mistakes are said to be made (e.g., the prohibition on contraceptives). And, yes, pope’s do sin. Note that popes actually go to confession regularly. They must be asking forgiveness for sins; otherwise, they’re just making a mockery of the sacrament of confession. That’s why we should all be humble, avoiding self-righteousness, because, except for Mother Mary and Jesus, we are all merely sinners trying (hopefully) our best.

Excommunication reveals the Church’s intolerance
. Wrong. Excommunication is a technical canon law matter (coming in various forms and exercised rarely) but essentially means Church recognition that somebody, by his own acts, separated himself from the community of the faithful. In short, the Church didn’t kick anybody out, it merely recognized that one voluntary placed himself out. It’s like the LTO not granting a driver’s license because you’re blind. The LTO’s refusal didn’t make you blind, it merely recognized that fact. So, it’s therefore logical for an excommunicant not to receive the sacraments because he obviously turned his back on the Church. It’s like breaking up with your spouse but still demanding sex. It cheapens the whole thing. For lack of space, let me just say, however, that the concept and process of excommunication is designed to wean the excommunicant back and the Church will welcome him with open arms. But the sincere decision to come back (like the decision to part with the Church) lies with the individual.

The Church is intolerant for filing criminal charges
. No. The Church, like everybody else, has every right to avail of the rights that the law provides. Furthermore, while the Church is indeed merciful, it also advocates for justice. Which means accountability for any wrongdoing. Mercy without justice is not a loving mercy as it encourages repeated wrongs. That’s why God, who is infinitely merciful, also requires accountability ("He will come again to judge the living and the dead"). So, for example, if somebody disrupts a Mass in a church, in a manner contrary to our criminal laws, it is but just that accountability for it be made (particularly if the transgressor is not even sorry for the acts he did). We must remember that in a Mass, God is present. Any act of disrespect made during a Mass is not only a disrespect to the priest or to us but also to God. Ask the Muslims how they would feel if somebody does an act of disrespect in a mosque. Or even a family member if somebody does something boorish in a family celebration. Forgiveness? Definitely. But justice too.

Contraceptives protect female health
. No. They harm it. Various research institutions (including the International Agency for Research on Cancer, a research arm of the World Health Organization) and medical journals already attributed (particularly to oral contraceptives) dangers such as cancer (specifically breast cancer), stroke, and heart disease.

Better condoms than AIDS or abortions later
. No. Research upon research has already shown that resort to contraceptives (condoms in particular) has actually resulted in the increase of AIDS, unwanted pregnancies, or abortions. The reason is simple: rather than make people behave better, condoms give a false sense of security, encouraging the illusion of "safe sex." But condoms fail at least 5% of the time. Say you have 100,000 condom users, 5,000 of them are highly vulnerable to AIDS or unwanted pregnancies. And imagine what 5,000 AIDS carriers can do. Let us also emphasize this point: the perils of cancer, stroke, heart disease, AIDS, and unwanted pregnancies are there regardless of whether you’re a Catholic or not.

Have fun defending the faith. Although, as St. Peter says, do it with "respect and gentleness."



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

As reported by BusinessWorld, APEC leaders have decided to accelerate activities on developing free trade deals. As provided in its communiquƩ, APEC "believe[s] that a Free Trade Area of the Asia Pacific (FTAAP) should be pursued ... by developing and building on ongoing regional undertakings, such as Association of Southeast Asian Nations+3, ASEAN+6, and the Trans-Pacific Partnership, among others."

The foregoing immediately followed the so-called "first ever TPP summit" held at the APEC sidelines. The TPP has Singapore, New Zealand, Chile, and Brunei as members, with the US, Australia, Peru, Vietnam, and Malaysia in negotiations to join, while Japan and Korea are mulling over whether to indeed join or not. The TPP’s goal is to eliminate all tariffs by 2015. The Philippines has also been encouraged by certain sectors to join the TPP.

As anybody who’s read this column would know, I’m not exactly the biggest fan of FTAs. They’re difficult to follow, bureaucratically a nightmare, and promise benefits that in reality have yet to be met. For a country in which only a handful (at best) actually understand the operation of the rules of origin, sovereignty and its implications, dispute settlement and the problems of forum-shopping, classification and valuation rules, sanitary and phytosanitary measures, and technical barriers to trade (plus the all important issue of smuggling), our enthusiasm for FTAs is truly baffling.

And recent studies have not done anything to assuage my wariness of FTAs. A working paper released by the ADBI ("FTAs and Philippine Business: Evidence from Transport, Food, and Electronics Firms") found that only around 20% of the companies surveyed here in the Philippines have taken advantage of the AFTA preferential rates (pretty much the same figure that your friendly Trade Tripper suspect all these years). As discussed by the ADB working paper, a lot of Philippine firms are still baffled by the mechanics of FTAs. Other reasons have to do with "delays and administrative costs and the use of export incentives other than FTA preferences." Also, "arbitrary classification of product origin, product exclusions, and the confidentiality of information required in origin applications, [as well as] small margins of preference and non-tariff barriers employed by FTA partners." Finally, a UN University Working paper confirmed the disparity in benefits between rich and poor countries partnering up in FTA’s.

Besides, going back to the TPP, if Australia, Japan, and Korea do join, with their adeptness in protecting their agricultural sectors, how would such benefit the Philippines, struggling as it is with its agricultural products? Our agri sector contracted by 2.62% in January to September, with all the DA could be confident about is ending the year with "at least zero" growth.

As for the FTAAP, it is a free trade agreement that is far more complex and ambitious than the Philippines has ever seen. And a very good reason to be cautious about it can be summed up in one word: JPEPA. Up to now, it is still unclear whether JPEPA actually brought the benefits it promised. And note that this is an agreement that opened up our domestic market to Japanese steel, auto parts, and electronics at low or zero tariffs. This is in exchange for our nurses being able to work in Japan. Reportedly, however, the Japanese made their domestic rules (not covered under JPEPA) so stringent that so far only one Filipina nurse was able to get employment there (apparently, the Indonesians fared better, as they allegedly had two nurses able to work in Japan). So much for balanced trade.

Or perhaps the Indonesians are just being smarter than us over this. Their trade minister, Mari Pangestu, declared that their priority, rather than the FTAs, is to wrap up Doha. And her reasoning is so simple and correct that it’s a mystery why we can’t think the same: "At the moment, the deadlock or problems that we face in negotiating the WTO is the same as what you are going to face in FTAAP negotiations or TPP negotiations, and maybe even more because TPP is what’s called a very comprehensive or high-standard trade agreement. So if you cannot solve it in the WTO, it will be difficult to solve it in FTAAP or TPP. So for a smallish country like Indonesia with limited resources for negotiations, let’s prioritize the multilateral negotiations first."

Spot on. With all the currency and capital inflow issues, the uncertainty that a jobless US economic recovery brings and a China that showed a willingness to stop vital mineral exports to a trading partner for political ends, to make one’s country’s life more complicated by FTAs is inexplicable.

Besides, if WTO DG Lamy is correct, Doha could be a done deal by next year. This time, he may well be right and our country should focus on that rather than mucking around with FTAs. That and on building more efficient Philippine trade institutions (i.e., the Philippine Trade Representative Office) and capabilities.


Trade unsiloing as metrics synergy

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

The reports alleging our government’s insistence in not dwelling into our trading partners’ currency fray again belies the lack of intellectual design singularly contemplated regarding the orchestration of policy. This is despite the fact that most countries, our major trading partners included, have indicated with clarity their considerations. And the fact that we are fence-sitting perhaps explains why we are perceptively depreciating in other countries’ investment positioning (apart from our continuing lack of competitiveness and unmanageable red tape).

In any event, the 2010 G20 Report on Trade Measures makes pertinent points, finding that "governments have continued to exercise restraint over the imposition of new trade restrictions. The number of new measures imposed by G20 countries is still increasing, but more slowly than in the past and with a welcome decline so far this year in the initiation of new trade remedy actions (anti-dumping duties, countervailing measures and safeguards)."

This reminds us of an analogy that illustrates the proper employment of trade remedies, contingent on certain multipolar levels, whether it be in the formative, normative, or substantive sense. The toolbox analogy is commonly employed, particularly when defining the use of such mechanisms. Nevertheless, the analogy, while presenting in a certain sense a syllogism of available devices within which such rights, liabilities, and obligations are to be recognized, all of which it must be considered still fall within the parameters and restrictions laid down by general conceptions of what we consider to be sovereignty in its internal and external sense.

This inevitably comes to mind when one is considered to make a studied judgment on the rationality of the recourse to trade remedies under the WTO. The system does indicate an allomerism in the sphere of adjudication. Considerably, any trade policy should employ the synergy that is found beyond the "clinical isolation" concept, as well as the findings of the WTO panel for US -- AD/CVD on Products from China (DS379): "the status of the [International Law Commission’s Draft Articles on Responsibility of States for Internationally Wrongful Acts], and in particular whether as China argues we must as a matter of law interpret the provisions of the SCM Agreement at issue in conformity with language and concepts in certain provisions of the Draft Articles."

The multiplicity of choices available to states in the formulation of policy, therefore, does not rest at a binary level. The probabilities of the choices have arisen due in most part to the conceptual, as well as practical, implications brought about by the sovereignty characteristics of states. Claude Barfield of the American Enterprise Institute made an interesting point in his article "Overreach at the WTO": "Alternately, the WTO could adopt a variation of the so-called ‘political issue’ doctrine developed by the U.S. Supreme Court (which is meant) to provide a means for the judiciary to avoid decisions that have deeply divisive political ramifications...."

Which reverts us yet again to trade remedies. Dukgeun Ahn and William J. Moon’s argument for a new approach to causation standards, the "Cost of Production" test, is fascinating: "an additional tool that can be used as complement to Elasticity/ Partial Equilibrium Model. We propose the following hypotheses: Hypothesis 1 (H1) If the price of imports is less than the domestic marginal cost of production, we should see an immediate decline in production that is attributable to import surge. Hypothesis 2 (H2) If the price of imports is greater than the domestic marginal cost of production but lower than the domestic average cost of production, we should not observe immediate decline in production that is attributable to import surge; instead, we should expect decline sometime in the future. Hypothesis 3 (H3) If the import price is greater than the domestic average cost of production, we should not see an immediate nor future decline that is attributable to import increase."

In the end, the context of sovereignty and the horizontal restraints imposed by realpolitik will define, in a categorical if not conclusive sense, the outcome of policy formulation. Nevertheless, the probability that there would be a shift to a principle based or value based system has to be contemplated in the interpretation of the system, if not the rules, as well.

Hopefully, our trade officials will be cognizant of this urgent need for right-sizing and knowledge based acquisition of trade policy, taking a 30,000-foot view and unsiloing its mentality in the process. With such, a process-flow analysis that gives a definite value-add to trade and economic bottom- lines will come into play. This is not to reinvent the wheel. Rather, it is through the correct utilization of dynamic metrics, with integrated efficiencies, that could eventually result in a deliverable consisting of finance and trade driven economic synergistic interfaces. Plug-and-play paradigms notwithstanding, a 24/7 commitment to this should not necessarily lead to a turn-key solution. The crucial factor is whether our government is on board, as part of the solution and not the problem’s cause.


China crisis and wishful thinking

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

A few weeks ago I mentioned the Sept. 24, 2010, joint statement between ASEAN and the US reaffirming "the importance of regional peace and stability, maritime security, unimpeded commerce, and freedom of navigation, in accordance with relevant universally agreed principles of international law, including the United Nations Convention on the Law of the Sea (UNCLOS) and other international maritime law, and the peaceful settlement of disputes."

As I wrote then, what could possibly be wrong with such a logical to-the-point-of-mundane statement? Nothing. But, as reported by the Canadian Press, China reacted, again predictably hysterically, that "China claims sovereignty over the entire sea and all the island groups within it."

It’s an interesting game that China is playing, appearing to be the victim while simultaneously asserting its role as Asia’s resident bully. And the attitude has seemingly spilled beyond its government. A few months ago, a Chinese trawler intentionally rammed itself into Japanese coastguard ships while within disputed waters. The position taken by China was not meant to be conciliatory. Chinese Foreign Ministry spokeswoman Jiang Yu, in an incredible display of undiplomatic-speak that would make our MalacaƱang’s Vietnam delegation spokestwits proud, dismissed Japan’s statements outright by saying that "it is futile to play tricks by deceiving the world and international public opinion" and that "Japan’s sophistry is untenable." Actually, all that Japan said was for China to remain "calm."

Sadly, in the end, Japan caved in. Setting aside national pride, Japan released the members of the trawler, including the captain that allegedly ordered the deliberate ramming into the Japanese vessels. The triumphant moment of China was not a pretty sight: the released captain glowing defiance upon arriving in a Fujian Province airport and Japan left to looking weak. Interestingly, Japanese prosecutors chose to acquit the Chinese captain on grounds of lack of premeditation. How a ship can ram not one but two vessels without premeditation is incredible. Most commentators instead credit the release due to the energy of China’s shrill reaction and to the amount of business that China bludgeons Japan’s businessmen with. This was vividly illustrated when Chinese exporters allegedly started siding with its government by withholding shipments of minerals needed by Japan’s electronics industry.

While pragmatists may claim that between the group of rocks that is the Senkaku islands and the amount of business that Japan stands to lose, the release of the Chinese sailors was a good call, such is a profound mistake.Japan undutifully gave the world a dilemma, something that will haunt it for a longer time to come. It gives China confidence as to its methods. Emphatically, it places the Philippines, which is disputing the Kalayaan and Scarborough Shoal with China, in a very difficult position. Unfortunately, part of the difficulty is self-inflicted, particularly when the Philippines decided to acquiesce to China’s vehemence and labeled the disputed group of islands as outside our baselines, categorizing them instead as a "regime of islands" under Philippine jurisdiction. The Philippines has no reason to be satisfied with its legal cleverness: China racheted up its claim to the islands anyway by calling it a "core national interest."

The Philippines should view its relationship with China with greater objectivity, not allowing itself to be dazzled by the money and business that is being dangled by China or to be awed by its supposed power. There is something unsettling in the way China employs its muscle, betraying perhaps a lack of maturity or even an insecurity, which is really bizarre to say of a country that is quite proud of its old civilization. Nevertheless, that is that and the Philippines should ensure that its longer-term interests are maintained, alongside its short-term interests. Part of this is maintaining our friendship and ties to those countries that have more or less proven their allegiance with us in one way or another.

Obviously, one of these countries is the US and the latter is clearly trying to get its grip on what China’s true ambitions are. The problem becomes more acute considering China’s insistence in maintaining its quite low-valued currency. American legislators are gearing up to go to a currency and trade dispute with China. The public seems supportive of this but, unfortunately, the Obama administration is seemingly oblivious to the danger, like Japan, of it being made to look weak in the face of Chinese clatter. This is made all the more frustrating if one considers David Frum’s view (writing for CNN.com) that the "recession was made in China ... [with China manipulating] its banking system so the accumulated surplus dollars never get spent ... and because the Chinese had so many dollars, they lent the dollars very, very cheaply," leading to "an American debt binge."

We really need better, sustained, and deeper thinking with regard to this. Twits and PSP addicts simply won’t cut it. Otherwise, as a friend of mine would say: ergo sum dim sum.