was my Trade Tripper column in the 16-17 October 2015 issue of BusinessWorld:
Everybody is agog over the passing of the Trans-Pacific Partnership (TPP). Even people I know that only have a passing interest in international trade are all of a sudden asking, in somewhat hushed, noticeably excited tones, about its implications for the Philippines. So the curmudgeon in me might have been more apparent this time around when my reply revolved a mere two words: not much.
To begin with, nobody outside the negotiators has really studied the TPP. The actual, official texts may be released (particularly by the US) by early next month.
Having said that, the TPP, of course, is an expanded version of the 2005 Trans-Pacific Strategic Economic Partnership Agreement and currently includes as parties Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States. The TPP covers almost 40% of the global economy and affects not only tariffs but also services, investment rules, patents (including over pharmaceuticals and even, allegedly, control of public information), agriculture, the environment, and government procurement.
Of those 12 TPP members, the Philippines already has existing free trade relationships with seven -- Association of Southeast Asian Nations (ASEAN) Common Effective Preferential Tariff (CEPT), ASEAN-Australia and New Zealand, ASEAN-Japan, Philippines-Japan Economic Partnership Agreement -- plus the Asia-Pacific Economic Cooperation and the (now unfortunately expired and still awaiting renewal) Generalized Scheme of Preferences (GSP) relationships with the US.
So on that specific regard, one question that we need to ask is how the Philippines is faring with regard to utilizing its already available free trade agreement benefits.
Not much if we’re to judge by the CEPT (with some studies pegging it at a mere 20%) and US GSP (which reportedly has a utilization rate of 70% but with the context that the goods covered only constitute 10% of total Philippine exports to the US).
Heritage Foundation’s Economic Freedom Index is quite instructive in this regard: this 2015, the Philippines overall showed improvement.
But there were concerns raised regarding “open markets”, with “trade freedom” getting a lowered score. Noted, is the average tariff rate at 4.8%. “Domestic companies are favored in government procurement bids. Rice producers are subsidized and protected from competition. Foreign investment in several sectors is restricted.”
For regulatory efficiency, business freedom also showed a lowered score due to the fact that “incorporating a business takes 16 procedures and 34 days. Completing licensing requirements remains time-consuming, taking about three months on average. The labor market remains structurally rigid, with varying degrees of flexibility across economic sectors and regions of the country.”
The 2014-2015 Global Competitiveness Report almost reflects the Economic Freedom Index -- lamenting regulatory inefficiency and red tape and lackluster rule of law. But it does give us good marks in “intensity of local competition.”
The insight that I suggest from the two international reports is twofold: First, we really don’t have an issue as to us being plugged into the international trading system, what with our membership already into the World Trade Organization (WTO), in addition to several free trade agreements.
Finally, the problem is our internal structures that only prevent us from benefitting substantially from international trade.
Of what use is Philippine membership in more trade agreements for ordinary Filipinos if they’re bogged down by red tape and high taxes, amidst world-beating-in-being-horrible airports, the world’s worst traffic, slow online speeds, flooding amidst water shortages, and the incredibly bizarre inability to produce simple drivers licenses and passports?
Now, the position of my fellow experts and commentators on the matter is that membership in more trade agreements such as the TPP will provide external pressure for the Philippines to shape up.
But that is wishful thinking.
For two reasons: One, we’ve long been members in other trade agreements and look at us now. So much for external pressure.
Finally, as a sovereign country, I don’t see the point in wanting the Philippines rendered vulnerable to international litigation simply because our country can’t do things unilaterally because our government officials can’t muster the political will to do what is right.
Besides, note our quite jubilant reaction in the immediate aftermath of the Cancun WTO Ministerial debacle of 2003 (amidst the huge disappointment expressed by the US), immediately followed up by our quite unsubtle public rejection of US invitations to enter into a trade partnership with it right there and then.
This has therefore led, to the present day: when the Philippines expressed public interest in joining the TPP, this was simply responded to with a set of conditions for us to comply with -- improved rule of law, opening up foreign ownership of businesses or property, addressing State ownership of certain industries, strict protection of intellectual property, and so on. Clearly, the US has little patience with flaky allies.
In any event, the TPP still has to go through the constitutional processes of its members. The US, in particular, being already in its presidential election season, may see a TPP vote no earlier than next year.
That should give the Philippines a modicum of time to put its priorities right.
