US elections, the WTO, and trade

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

Amid all the social issues tersely debated not only in the Philippines but all over the world, international trade goes on, albeit not too much in the spotlight but of great importance nevertheless. It’s fair to say that a lot of the decisions the Philippines will take (particularly in the elections for 2013), as well as the decision that the United States will make this November, will significantly impact the economy of our country for a decade to come.

That the upcoming November presidential election in the US is a significant trade-related matter for the Philippines is without doubt. The difference between the candidates is stark. Jagdish Baghwati, writing for Handelsblatt, considers US President Barack Obama being "under siege from the labor unions who were hostile to trade, was resolutely opposed to closing the Doha Round unless numerous concessions were made to appease its business lobbies." Accordingly, as concluded by Dr. Baghwati, the Obama administration "killed Doha… it was killed by President Obama who had ironically been awarded the Nobel Peace Prize by Norway in the expectation that he would promote multilateralism and turn his back on US unilateralism!"

On the other hand, Republican candidate Mitt Romney seems more welcoming of trade (at least for the US and for its favored trading partners). As Washington based trade lawyer Andrea Ewert wrote, the theme of a possible Romney administration on the area of trade is to: "1. Expand market access for US businesses through trade agreements; and 2. Confront China." Accordingly, "Romney promises to pursue new trade agreements with nations committed to free enterprise and open markets, and to create a Reagan Economic Zone." As far as China is concerned, "Mitt Romney promises to: (i) impose targeted tariffs or economic sanctions; and (ii) designate China a currency manipulator and impose countervailing duties, i.e., increased duties imposed by an importing country to compensate for subsidies given to producers or exporters of the exporting country."

In the meantime, Russia and Vanuatu recently joined the World Trade Organization, raising the WTO’s membership to 157. The entry of the two countries is important, both for quantifiable and symbolic reasons. As WTO Director-General Pascal Lamy puts it: "Both accessions show that joining the WTO remains high on the countries’ agendas since trade can bring a predictable and stable basis for economic growth. This is especially important as the world goes through troubled times and continues to suffer from one of the worst global economic crisis in memory. Joining the WTO is a sign of confidence in the organization and in what it can deliver for its members."

By its accession agreement package, Russian agreed to fully implement "all WTO provisions, with recourse to very few transitional periods. On average, the Russian Federation will apply a final bound tariff for 7.8% for goods and has made specific commitments on 11 services sectors." As far as tariff ceilings are concerned, Russia’s "final legally binding tariff ceiling for the Russian Federation will be 7.8% compared with a 2011 average of 10% for all products: The average tariff ceiling for agriculture products will be 10.8%, lower than the current average of 13.2% The ceiling average for manufactured goods will be 7.3% vs. the 9.5% average today on manufactured imports."

Vanuatu, on the other hand (see WTO.org), intends to "fully apply all WTO provisions and did not require recourse to any transitional period except on intellectual property and on the publication of trade information. Vanuatu will apply an average final bound rate of 39.7% and has made specific commitments on 10 services sectors. The services sector has been growing and now accounts for three-quarters of Vanuatu’s GDP."

The entry of Russia is significant for Philippine businesses. As Kemal Dervis of the Brookings Institution states in Finance & Development, "the world economy is going through a major structural shift, with emerging markets rapidly catching up to advanced economies." This is supported by Santiago Cueto of International Business Law Advisors: "According to the United States’ Export.gov division, nearly 96% of consumers live outside the US. Moreover, two-thirds of the world’s purchasing power is in foreign countries." Furthermore, citing the International Monetary Fund, there are "as many as 150 emerging international markets nearing economic expansion. Other countries such as Brazil, Russia, India, China, South Africa are seeing tremendous growth." The logical conclusion, according to Mr. Cueto, is that "small businesses looking to increase sales and profit, reduce dependence on the domestic market and stabilize seasonal fluctuations should consider exporting."

There’s indeed a lot of uncertainty in the global economy. But there are definite areas of opportunity for Philippine businesses to take full advantage of, which can result in greater revenues for the country, better jobs, better education, better standard of living for Filipinos.

That is, if only we can shift our focus on the things that matter rather than wasting time arguing about the gutter that is the RH Bill.