(these updates were taken from various sources)
> the US lost to Antigua and Barbuda at the WTO Panel level regarding US measures affecting the cross-border supply of gambling and betting services.
> China's continuing alleged violation of it's WTO commitments getting to the nerves of US Congressmen, this coming at a time that China has seemed to overtake the US in terms of export growth.
> Nevertheless, the US remains the biggest buyer of the world's goods, with over twice the global share of second-ranked importer Germany.
> Ministers from Brazil, the EC, India, the United States, Australia and Japan met in New Delhi to make a strong push for a successful conclusion to the Doha Round by this year. Still, things hang in the balance.
> "The reduced pace of global economic activity will imply lower trade growth which is expected to average maybe around 6 percent in 2007," the WTO's chief economist Patrick Low said. Pascal Lamy, WTO Director-General, on the other hand, stated that "a successful conclusion to the Doha Round holds great potential for boosting growth and alleviating poverty ... an agreement would also deliver more relevant trade rules, helping to establish a more stable and certain foundation for today's dynamic global marketplace."
> The WTO's Appellate Body issued its report regarding the compliance panel report in the case “United States — Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina”, and recommending that the United States implement fully the recommendations and rulings of the DSB.
* * * * * * * *
This week saw the last of my MCLE lectures on international economic law for the present cycle. Next week, I shall be in Baguio to participate in the Round Table discussion with the Justices of the Supreme Court on various legal issues with economic significance. The Round Table is a culmination of a training program held under the auspices of PhilJA to educate the judiciary on law and economic development.
13.4.07
24.3.07
International Law and Philippine law
A basic but misunderstood area in the study of international law here in the Philippines is the doctrine of “incorporation”. In our Constitution, the Philippines made two important assertions regarding its stand on international law: one is on the duality of international law vis-à-vis local law (sometimes called municipal law) and, secondly, is that we automatically consider international law as part of the law of the Philippines.
The latter assertion has been touched upon in a long line of Supreme Court cases. In practice, however, lawyers are seemingly in disagreement as to the extent to which international law plays a part in local legislation. Much of the belief regarding the position of international law seemingly stems from ideology or emotion, rather than a clear-eyed analysis of what international law is.
This can be seen in the discussions relating to the recent Bar exam on international law and women’s rights by some newspaper commentators. Sometimes, the same can be said for those who locally advocate for international human rights or the environment. Laudable as their advocacies are, however, the same still shouldn’t detract from the fact that international law is a highly fluid and analytical field, requiring precision thinking specially in delineating international obligations in relation to national interests.
One significant fact that must be considered is that international law does not hold a position of primacy in our jurisdiction. In our country, the one standard that embodies the legality of actions and the definition of rights is our Constitution. The Constitution reigns supreme and whenever international law (understood for the moment to be treaties or customary law) is in conflict with the former, then the Constitution will prevail. Without question. This is a legal policy we share with a number of other jurisdictions, such as the United States. In fact, there is only one country I know that expressly stated that international law prevails over its constitution. The Philippines, to be clear, is not that country.
The rank which international law holds in our jurisdiction is equal to that of a congressional enactment (i.e., Republic Acts). Thus, assuming that there is an actual conflict between international law and a Republic Act, then legal techniques on statutory construction (i.e., the tools used by lawyers to determine which law prevails over another in case of conflict between the two) would be employed. Some of such rules say that the “later in time prevails” or that the “specific law prevails over the general”. Depending on the circumstances, local law can and will prevail over international law.
In any event, the point is that international law is merely equal to congressional enactments, nothing more and nothing less. Like any congressional enactment, international law has to comply with the provisions of our Constitution and if it doesn’t then such international law will have no force or effect within our country. The words “within our country” has to be emphasized though, for outside our jurisdiction and within the realm of international law different rules will prevail regarding the operation of international law vis-à-vis local law.
Like any law, international law as a source of rights and cause of action could be restricted or restrained, particularly if required by the State’s police, eminent domain, or taxation powers. The application of a treaty’s provisions within our jurisdiction, again as a source of a cause of action, could be amended by a mere subsequent Republic Act if Congress, in its discretion, decides to do so.
Thus, declarations by officials that the Philippines can’t do a certain measure because its hands are tied by international law are false. Within our borders, the Philippines generally can do what it wants even if such goes against international law: the Congress can enact laws, the Executive branch can issue measures implementing the law, and the Judiciary can rule and uphold such law even if that law conflicts with international law. This is because, as previously stated, within our jurisdiction the one dominant and primary standard is the Constitution. As long as that law is constitutional, then - even if it is “violative” of international law - such law is valid as far as the Philippines (internally) is concerned.
Doubtless there will be some excitable reactions to the foregoing explanations. However, that will not change the fact that within local jurisdictions, the common practice among countries is to treat international law as being regulated by and subservient to their constitutions. To say that international law is to be treated within our jurisdiction as superior to our local law and our Constitution is as misleading as to say that the US embassy grounds on Roxas Boulevard is US soil (it’s not - it’s Philippine territory). As I keep saying, the faster we grasp the concept of confidently asserting our national interests vis-à-vis international law, the better international citizens we’ll be.
The latter assertion has been touched upon in a long line of Supreme Court cases. In practice, however, lawyers are seemingly in disagreement as to the extent to which international law plays a part in local legislation. Much of the belief regarding the position of international law seemingly stems from ideology or emotion, rather than a clear-eyed analysis of what international law is.
This can be seen in the discussions relating to the recent Bar exam on international law and women’s rights by some newspaper commentators. Sometimes, the same can be said for those who locally advocate for international human rights or the environment. Laudable as their advocacies are, however, the same still shouldn’t detract from the fact that international law is a highly fluid and analytical field, requiring precision thinking specially in delineating international obligations in relation to national interests.
One significant fact that must be considered is that international law does not hold a position of primacy in our jurisdiction. In our country, the one standard that embodies the legality of actions and the definition of rights is our Constitution. The Constitution reigns supreme and whenever international law (understood for the moment to be treaties or customary law) is in conflict with the former, then the Constitution will prevail. Without question. This is a legal policy we share with a number of other jurisdictions, such as the United States. In fact, there is only one country I know that expressly stated that international law prevails over its constitution. The Philippines, to be clear, is not that country.
The rank which international law holds in our jurisdiction is equal to that of a congressional enactment (i.e., Republic Acts). Thus, assuming that there is an actual conflict between international law and a Republic Act, then legal techniques on statutory construction (i.e., the tools used by lawyers to determine which law prevails over another in case of conflict between the two) would be employed. Some of such rules say that the “later in time prevails” or that the “specific law prevails over the general”. Depending on the circumstances, local law can and will prevail over international law.
In any event, the point is that international law is merely equal to congressional enactments, nothing more and nothing less. Like any congressional enactment, international law has to comply with the provisions of our Constitution and if it doesn’t then such international law will have no force or effect within our country. The words “within our country” has to be emphasized though, for outside our jurisdiction and within the realm of international law different rules will prevail regarding the operation of international law vis-à-vis local law.
Like any law, international law as a source of rights and cause of action could be restricted or restrained, particularly if required by the State’s police, eminent domain, or taxation powers. The application of a treaty’s provisions within our jurisdiction, again as a source of a cause of action, could be amended by a mere subsequent Republic Act if Congress, in its discretion, decides to do so.
Thus, declarations by officials that the Philippines can’t do a certain measure because its hands are tied by international law are false. Within our borders, the Philippines generally can do what it wants even if such goes against international law: the Congress can enact laws, the Executive branch can issue measures implementing the law, and the Judiciary can rule and uphold such law even if that law conflicts with international law. This is because, as previously stated, within our jurisdiction the one dominant and primary standard is the Constitution. As long as that law is constitutional, then - even if it is “violative” of international law - such law is valid as far as the Philippines (internally) is concerned.
Doubtless there will be some excitable reactions to the foregoing explanations. However, that will not change the fact that within local jurisdictions, the common practice among countries is to treat international law as being regulated by and subservient to their constitutions. To say that international law is to be treated within our jurisdiction as superior to our local law and our Constitution is as misleading as to say that the US embassy grounds on Roxas Boulevard is US soil (it’s not - it’s Philippine territory). As I keep saying, the faster we grasp the concept of confidently asserting our national interests vis-à-vis international law, the better international citizens we’ll be.
24.1.07
Swiss miss NAMA-nam
After articles about Christmas reindeer and frappuccino wimps, I’ve been asked by friends to write again about trade. Thus, as exciting as the US primaries are, I’ll instead discuss the Zen-like world of the Swiss formula. The Swiss formula (and its variants) has taken center stage in the Non-Agriculture Market Access (NAMA) talks in the still ongoing WTO’s Doha Round. As the term indicates, NAMA involves products that are not considered agricultural or services. Interestingly, fishes and fish products, as well as forestry products, are not considered agricultural for the present discussions.
The NAMA negotiations, despite all the attention that the agriculture talks have been getting, are highly important, particularly relating as it does to the export interests of developing countries. At the heart of the NAMA discussions is the mode to be employed for tariff reductions. It must be emphasized that tariff cuts cannot be uniform for all countries, as some (usually the developing countries) still have high tariffs whereas other countries have quite low tariffs already.
The NAMA talks decided to go with a formula approach rather than the linear or product-by-product approach that were adopted in previous Rounds. At this point, it may be useful to remember paragraph 16 of the Doha Declaration (“reaffirmed” in the Ministerial Declaration adopted on 18 December 2005 in Hong Kong), which says in part:
“We agree to negotiations which shall aim, by modalities to be agreed, to reduce or as appropriate eliminate tariffs x x x The negotiations shall take fully into account the special needs and interests of developing and least-developed country participants, including through less than full reciprocity in reduction commitments.”
Eventually, the discussions boiled down to whether to use the "Swiss formula" or another approach altogether. The Swiss formula is a progressive non-linear formula for which high tariffs are cut more than low tariffs. It is called the Swiss formula because it was proposed by Switzerland during the Tokyo Round of the GATT years and is described as follows: tf = ax/(a+x) -- where x is the initial tariff rate; a is the maximum final tariff rate and the coefficient agreed to represent the level of cuts; tf is the final tariff rate that results. Thus, as one illustration puts it, a coefficient of 30 (representing a maximum final tariff of 30%) applied to an initial tariff of 100% would result in a final tariff of roughly 23%. The same cut applied to a tariff of 15% would result in a tariff of 10%. Notably, the country with the higher initial tariff made a cut of 77%, while the country with the lower initial tariff has cut by 33%. The final cut can be phased in over a certain pre-determined number of years.
The Swiss formula, advocated by the developed countries such as the US, EC, and Japan, has been considered "aggressive" in its approach to tariff cuts, in certain instances drastic and definitely deeper particularly for higher tariffs. As such, it has been considered to affect developing countries more and has accordingly been opposed by such countries. These countries, led by Argentina, Brazil and India, argue that the Swiss formula simply does not provide consideration of poor countries’ “development needs”.
Indeed, it must be remembered that in paragraph 14 of the 2005 Hong Kong Ministerial, it was stated that the tariff reduction formula to be adopted shall have “coefficients” at levels which take fully into account the special needs and interests of developing countries.
Accordingly, another non-linear type formula (sometimes referred to as the “modified Swiss formula”), which presents two coefficients that have the effect of softening the tariff cuts for developing countries, have been propounded. It can be described as follows: t1 = (a or b) x t0/(a or b) + t0 -- where t1= final bound tariff; t0 = base rate; a = coefficient for developed countries; and b = coefficient for developing countries.
That, in a nutshell, is the trade negotiators’ world of the Swiss and modified Swiss formula. It must be emphasized that after agreeing on the formula, the actual value of the coefficient must then be determined. Assuming that has been done, it must next be considered, among a heap of others, whether indeed tariff cuts in the export market help developing countries or will the effect of such cuts be mitigated by the erection of non-tariff barriers. NTB’s are actually more pernicious than tariffs for the simple fact that they are harder to identify. Another question is whether protecting domestic industry is helpful at all for the developing country. Taking it all in, one can see how difficult trade and development policy is. That is why, Swiss or modified Swiss formula aside, there is no easy formula for economic success for developing countries. All the more reason for us Filipinos to work harder and smarter.
The NAMA negotiations, despite all the attention that the agriculture talks have been getting, are highly important, particularly relating as it does to the export interests of developing countries. At the heart of the NAMA discussions is the mode to be employed for tariff reductions. It must be emphasized that tariff cuts cannot be uniform for all countries, as some (usually the developing countries) still have high tariffs whereas other countries have quite low tariffs already.
The NAMA talks decided to go with a formula approach rather than the linear or product-by-product approach that were adopted in previous Rounds. At this point, it may be useful to remember paragraph 16 of the Doha Declaration (“reaffirmed” in the Ministerial Declaration adopted on 18 December 2005 in Hong Kong), which says in part:
“We agree to negotiations which shall aim, by modalities to be agreed, to reduce or as appropriate eliminate tariffs x x x The negotiations shall take fully into account the special needs and interests of developing and least-developed country participants, including through less than full reciprocity in reduction commitments.”
Eventually, the discussions boiled down to whether to use the "Swiss formula" or another approach altogether. The Swiss formula is a progressive non-linear formula for which high tariffs are cut more than low tariffs. It is called the Swiss formula because it was proposed by Switzerland during the Tokyo Round of the GATT years and is described as follows: tf = ax/(a+x) -- where x is the initial tariff rate; a is the maximum final tariff rate and the coefficient agreed to represent the level of cuts; tf is the final tariff rate that results. Thus, as one illustration puts it, a coefficient of 30 (representing a maximum final tariff of 30%) applied to an initial tariff of 100% would result in a final tariff of roughly 23%. The same cut applied to a tariff of 15% would result in a tariff of 10%. Notably, the country with the higher initial tariff made a cut of 77%, while the country with the lower initial tariff has cut by 33%. The final cut can be phased in over a certain pre-determined number of years.
The Swiss formula, advocated by the developed countries such as the US, EC, and Japan, has been considered "aggressive" in its approach to tariff cuts, in certain instances drastic and definitely deeper particularly for higher tariffs. As such, it has been considered to affect developing countries more and has accordingly been opposed by such countries. These countries, led by Argentina, Brazil and India, argue that the Swiss formula simply does not provide consideration of poor countries’ “development needs”.
Indeed, it must be remembered that in paragraph 14 of the 2005 Hong Kong Ministerial, it was stated that the tariff reduction formula to be adopted shall have “coefficients” at levels which take fully into account the special needs and interests of developing countries.
Accordingly, another non-linear type formula (sometimes referred to as the “modified Swiss formula”), which presents two coefficients that have the effect of softening the tariff cuts for developing countries, have been propounded. It can be described as follows: t1 = (a or b) x t0/(a or b) + t0 -- where t1= final bound tariff; t0 = base rate; a = coefficient for developed countries; and b = coefficient for developing countries.
That, in a nutshell, is the trade negotiators’ world of the Swiss and modified Swiss formula. It must be emphasized that after agreeing on the formula, the actual value of the coefficient must then be determined. Assuming that has been done, it must next be considered, among a heap of others, whether indeed tariff cuts in the export market help developing countries or will the effect of such cuts be mitigated by the erection of non-tariff barriers. NTB’s are actually more pernicious than tariffs for the simple fact that they are harder to identify. Another question is whether protecting domestic industry is helpful at all for the developing country. Taking it all in, one can see how difficult trade and development policy is. That is why, Swiss or modified Swiss formula aside, there is no easy formula for economic success for developing countries. All the more reason for us Filipinos to work harder and smarter.
17.1.07
ASEAN not so fine
After all the high praises and self-congratulations that our government made relating to the recently concluded ASEAN Summit, it’s time to take stock and get back to earth.
Yes, the blueprint for an ASEAN charter is good and, yes, the call for an acceleration to achieve an ASEAN community could also be good but we do have to remember one essential fact: what may be good for ASEAN may not necessarily be good for the Philippines.
Note that the three countries most enthusiastic for greater integration (i.e., Malaysia, Thailand, and Singapore) have one thing in common: strong economies that keep getting stronger. The Philippines is not in that league. In the end, by allowing ourselves to join in the ASEAN integration hoopla we may, in the end, be just used in preparing a feast that only others could enjoy.
It must be emphasized that the things we signed into last weekend with such enthusiasm are international agreements, meaning international obligations that we need to comply with. The question that we need to ask is: do we have the capabilities in meeting the demands of these obligations and, succeeding this, do we have the capabilities to attain the benefits that we expected to receive when we entered into these agreements? [the recent finding of the Heritage Foundation regarding the Philippines is relevant in this regard: "The Philippines is relatively weak in business freedom, investment freedom, monetary freedom, property rights, and freedom from corruption. The government imposes both formal and non-formal barriers to foreign investment. Inflation is fairly high, and the government subsidizes the prices of several basic goods. The judicial system is weak and subject to extensive political influence. Organized crime is a major deterrent to the administration of justice, and bureaucratic corruption is extensive." - jemy]
Some facts: our utilization of ASEAN-CEPT benefits only amount to around 20% of our trade. This does not provide a pretty picture insofar as our ability to take advantage of international rules considering the fact that we have to concede something in order to qualify for those benefits. Note that ASEAN is not even the biggest destination of our exports. With regard to garments for example, ASEAN only amounts to perhaps half of 1%. Around 80% goes to the US, with substantial exports going to Japan and the EC as well.
It is for the latter reason that I advocate focusing our attention on the WTO and the present Doha Round. There is still a small chance for the Round to be successfully concluded within the next few months. Failing that, we should then focus our attention in building up our institutions: creating a Philippine Trade Representative Office, legislating a competition policy law, and amending some of our trade remedy laws.
We should also develop a more consistent economic and trade policy. One of the things I found baffling over last weekend’s Summit is that our government was enthusiastically lauding the steps towards more integration (which involves the quickening of the lessening of our tariffs) while at the same time, just several months back, our government embarked on a review of our tariff program (with such review resulting in the increase of tariffs). This same lack of consistency can be found with regard to JPEPA: we rejected the Singapore issues in the WTO’s Doha Round (in effect saying no to the US, EC, and Japan), saying that such issues should be left to each countries’ individual discretion, and then we turn around and agree to Japan by including the Singapore issues in JPEPA.
We also have to consider that the idea of a closer ASEAN integration (which apparently is to be modeled somewhat on the EC) would entail that we surrender - again - more of our sovereign rights. This, after all, is the point of a stronger ASEAN organization, with added calls by some quarters for an ASEAN parliament and common currency. Are we really prepared, are our people prepared, to accept the idea of Singaporean, Thai, Malaysian, Indonesian civil servants determining how we run our country? Are we prepared to surrender our prerogative in setting taxes and tariffs? Are we ready to give up the Peso as our currency? Note that the British aren’t ready to surrender the Pound for the Euro. In essence, are we really ready to surrender certain portions of what the Philippines is for benefits we are not really sure we are capable of attaining? That is why we have to get it into our heads that when we think about trade policy (as well as foreign policy), we think about it in terms of decades and generations, not merely a few years. Indeed, less enthusiasm and more restraint is called for on the part of our officials.
Add to all that the fact that our government trade and economic personnel are not exactly underwhelmed by work. Add also the fact that there seems to be something wrong with our trade negotiating process as can be witnessed over the public outrage regarding JPEPA. Take all that and one can really find it strange that our government seems so enthusiastic at the fact that ASEAN is heading towards FTA discussions with Australia/New Zealand, Japan (this is distinct from JPEPA), US, and EC, apart from FTAs discussed with South Korea and China. Add, as well, the really strange fact that our government is vigorously pursuing FTA discussions with the US (after publicly rejecting the notion, to the embarrassment of US trade officials).
In the end, the biggest casualty that all the inconsistencies, lack of thought, lack of consultation, lack of restraint, lack of persistence in following through on policy, and lack of system is the people’s belief in the benefits of freer trade. When one really looks at it, what our policymakers and government officials have been doing for almost the past decade is to say they will engage in free trade, then either executes the policy badly or do the opposite (i.e., revert to protectionist measures), and then blame free trade for the bad things that happened to our economy. In the end, our people suffers, our country suffers.
So, after all the hoopla, praise, and congratulations for a well run Summit (ignoring for the moment the food poisoning that downed nearly a hundred), we should take a step back and re-examine how we proceed on trade, trade in ASEAN and (more importantly) at the WTO.
Yes, the blueprint for an ASEAN charter is good and, yes, the call for an acceleration to achieve an ASEAN community could also be good but we do have to remember one essential fact: what may be good for ASEAN may not necessarily be good for the Philippines.
Note that the three countries most enthusiastic for greater integration (i.e., Malaysia, Thailand, and Singapore) have one thing in common: strong economies that keep getting stronger. The Philippines is not in that league. In the end, by allowing ourselves to join in the ASEAN integration hoopla we may, in the end, be just used in preparing a feast that only others could enjoy.
It must be emphasized that the things we signed into last weekend with such enthusiasm are international agreements, meaning international obligations that we need to comply with. The question that we need to ask is: do we have the capabilities in meeting the demands of these obligations and, succeeding this, do we have the capabilities to attain the benefits that we expected to receive when we entered into these agreements? [the recent finding of the Heritage Foundation regarding the Philippines is relevant in this regard: "The Philippines is relatively weak in business freedom, investment freedom, monetary freedom, property rights, and freedom from corruption. The government imposes both formal and non-formal barriers to foreign investment. Inflation is fairly high, and the government subsidizes the prices of several basic goods. The judicial system is weak and subject to extensive political influence. Organized crime is a major deterrent to the administration of justice, and bureaucratic corruption is extensive." - jemy]
Some facts: our utilization of ASEAN-CEPT benefits only amount to around 20% of our trade. This does not provide a pretty picture insofar as our ability to take advantage of international rules considering the fact that we have to concede something in order to qualify for those benefits. Note that ASEAN is not even the biggest destination of our exports. With regard to garments for example, ASEAN only amounts to perhaps half of 1%. Around 80% goes to the US, with substantial exports going to Japan and the EC as well.
It is for the latter reason that I advocate focusing our attention on the WTO and the present Doha Round. There is still a small chance for the Round to be successfully concluded within the next few months. Failing that, we should then focus our attention in building up our institutions: creating a Philippine Trade Representative Office, legislating a competition policy law, and amending some of our trade remedy laws.
We should also develop a more consistent economic and trade policy. One of the things I found baffling over last weekend’s Summit is that our government was enthusiastically lauding the steps towards more integration (which involves the quickening of the lessening of our tariffs) while at the same time, just several months back, our government embarked on a review of our tariff program (with such review resulting in the increase of tariffs). This same lack of consistency can be found with regard to JPEPA: we rejected the Singapore issues in the WTO’s Doha Round (in effect saying no to the US, EC, and Japan), saying that such issues should be left to each countries’ individual discretion, and then we turn around and agree to Japan by including the Singapore issues in JPEPA.
We also have to consider that the idea of a closer ASEAN integration (which apparently is to be modeled somewhat on the EC) would entail that we surrender - again - more of our sovereign rights. This, after all, is the point of a stronger ASEAN organization, with added calls by some quarters for an ASEAN parliament and common currency. Are we really prepared, are our people prepared, to accept the idea of Singaporean, Thai, Malaysian, Indonesian civil servants determining how we run our country? Are we prepared to surrender our prerogative in setting taxes and tariffs? Are we ready to give up the Peso as our currency? Note that the British aren’t ready to surrender the Pound for the Euro. In essence, are we really ready to surrender certain portions of what the Philippines is for benefits we are not really sure we are capable of attaining? That is why we have to get it into our heads that when we think about trade policy (as well as foreign policy), we think about it in terms of decades and generations, not merely a few years. Indeed, less enthusiasm and more restraint is called for on the part of our officials.
Add to all that the fact that our government trade and economic personnel are not exactly underwhelmed by work. Add also the fact that there seems to be something wrong with our trade negotiating process as can be witnessed over the public outrage regarding JPEPA. Take all that and one can really find it strange that our government seems so enthusiastic at the fact that ASEAN is heading towards FTA discussions with Australia/New Zealand, Japan (this is distinct from JPEPA), US, and EC, apart from FTAs discussed with South Korea and China. Add, as well, the really strange fact that our government is vigorously pursuing FTA discussions with the US (after publicly rejecting the notion, to the embarrassment of US trade officials).
In the end, the biggest casualty that all the inconsistencies, lack of thought, lack of consultation, lack of restraint, lack of persistence in following through on policy, and lack of system is the people’s belief in the benefits of freer trade. When one really looks at it, what our policymakers and government officials have been doing for almost the past decade is to say they will engage in free trade, then either executes the policy badly or do the opposite (i.e., revert to protectionist measures), and then blame free trade for the bad things that happened to our economy. In the end, our people suffers, our country suffers.
So, after all the hoopla, praise, and congratulations for a well run Summit (ignoring for the moment the food poisoning that downed nearly a hundred), we should take a step back and re-examine how we proceed on trade, trade in ASEAN and (more importantly) at the WTO.
1.12.06
Trade notes
Just came from Bangkok in relation to some trade work. Anyway, here are some notes made while bored in the plane:
First, something to raise the hackles of anti-trade people:
"Any discussion of trade and globalization should begin with this fact: Over the last 30 years, world trade has grown twice as fast as output - and the economies that have grown fastest have been those that trade most. Nothing is more important to global economic growth than trade. Far from being a zero-sum game, expansion in trade benefits all countries - big and small, rich and poor.
Citizens of nations that reform their economies and open themselves to trade and competition have better jobs, improved living standards, and greater opportunities. At the same time, nations that try to close themselves off from competition, hinder free markets and fail to invest in their people simply get left behind. Indeed, no country has escaped poverty without opening up trade." (The Case for Free Trade, Gordon Brown and Hank Paulson, 28 November 2006, AWSJ, p.15)
So let the long cranky (and sometimes really bizarre) anti-trade comments come, he-he! But seriously, the simple fact still remains, it is those countries that open their economies and subject local industries to competition that do far better for their citizens in terms of income and standards of living than those who don't. It may be selective, partial, or gradual but the important thing is to open up.
Incidentally, while in Kinokuniya (for which I came out with Morton's "The Rothschilds" and Giddens' "The Third Way") I saw a copy of Jagdish Bhagwati's “In Defence of Globalisation”. I highly recommend readers to buy this book.
Mr Bhagwati is an eminent scholar, author of numerous important works, some with Robert Hudec (one of the acknowledged fathers of international economic law). “In Defence of Globalisation” is one designed for the layman: free of statistics, quantitative economic analysis, and is of simple ambitions. It strives admirably to educate the layman on the issues surrounding globalization and trade, and answers some of the more specious arguments raised by its detractors.
Thus, far from worsening poverty, destroying cultures, abusing the environment, and weakening democracy, Mr. Bhagwati shows the beneficial effects of globalization and the misleading premises (to put it mildly) with which globalization’s critics base their arguments.
Some uncommon wisdom learned from an economist co-lecturer at the Philja lecture series:
"We should stop beating ourselves down. Enough with the lament that 50 years ago we were second only to Japan in terms of GDP per capital and that now other countries have overtaken us from that slot. It must be remembered that 50 years ago, it was rare for a country to actually measure its GDP and the Philippines was one of the few (along with Japan and India) who did.
So if we limit the comparisons at present to the same three countries, we'd still be second to Japan in terms of GDP per capita."
Some additional uncommon wisdom:
"Countries in which it is easy to fire are also those in which it is easy to hire."
Also:
"To those who favor increasing tariffs, it must be remembered that such merely increases the motivation of the unscrupulous to increase smuggling."
Was asked by the Bangkok police to get off the walkway and walk instead on the polluted streets this morning. It appeared that their king would be driving by and the Thais don't like the idea of someone walking above the king's head. Everybody was therefore forbidden to use the walkways over the streets where the king would be passing. Interesting.
Anyway, after Suvarnabhumi Airport, the NAIA really is ... interesting. Well, let's see what happens with NAIA Terminal 3. After all this time it should be really good, considering its been aged to perfection already.
However, just found out that for some reason Thailand does not have Stolichnaya. They have Absolut, Smirnoff, and a host of other vodkas (Kristal, etc.) but no Stolich. Just another reason why I really like Manila.
Anyway, in Bangkok and thirsty for beer. Heineken? Singha? San Mig pale! Chilled to balance my Tabacalera Robusto. Even in another country, Buy Filipino.
First, something to raise the hackles of anti-trade people:
"Any discussion of trade and globalization should begin with this fact: Over the last 30 years, world trade has grown twice as fast as output - and the economies that have grown fastest have been those that trade most. Nothing is more important to global economic growth than trade. Far from being a zero-sum game, expansion in trade benefits all countries - big and small, rich and poor.
Citizens of nations that reform their economies and open themselves to trade and competition have better jobs, improved living standards, and greater opportunities. At the same time, nations that try to close themselves off from competition, hinder free markets and fail to invest in their people simply get left behind. Indeed, no country has escaped poverty without opening up trade." (The Case for Free Trade, Gordon Brown and Hank Paulson, 28 November 2006, AWSJ, p.15)
So let the long cranky (and sometimes really bizarre) anti-trade comments come, he-he! But seriously, the simple fact still remains, it is those countries that open their economies and subject local industries to competition that do far better for their citizens in terms of income and standards of living than those who don't. It may be selective, partial, or gradual but the important thing is to open up.
Incidentally, while in Kinokuniya (for which I came out with Morton's "The Rothschilds" and Giddens' "The Third Way") I saw a copy of Jagdish Bhagwati's “In Defence of Globalisation”. I highly recommend readers to buy this book.
Mr Bhagwati is an eminent scholar, author of numerous important works, some with Robert Hudec (one of the acknowledged fathers of international economic law). “In Defence of Globalisation” is one designed for the layman: free of statistics, quantitative economic analysis, and is of simple ambitions. It strives admirably to educate the layman on the issues surrounding globalization and trade, and answers some of the more specious arguments raised by its detractors.
Thus, far from worsening poverty, destroying cultures, abusing the environment, and weakening democracy, Mr. Bhagwati shows the beneficial effects of globalization and the misleading premises (to put it mildly) with which globalization’s critics base their arguments.
Some uncommon wisdom learned from an economist co-lecturer at the Philja lecture series:
"We should stop beating ourselves down. Enough with the lament that 50 years ago we were second only to Japan in terms of GDP per capital and that now other countries have overtaken us from that slot. It must be remembered that 50 years ago, it was rare for a country to actually measure its GDP and the Philippines was one of the few (along with Japan and India) who did.
So if we limit the comparisons at present to the same three countries, we'd still be second to Japan in terms of GDP per capita."
Some additional uncommon wisdom:
"Countries in which it is easy to fire are also those in which it is easy to hire."
Also:
"To those who favor increasing tariffs, it must be remembered that such merely increases the motivation of the unscrupulous to increase smuggling."
Was asked by the Bangkok police to get off the walkway and walk instead on the polluted streets this morning. It appeared that their king would be driving by and the Thais don't like the idea of someone walking above the king's head. Everybody was therefore forbidden to use the walkways over the streets where the king would be passing. Interesting.
Anyway, after Suvarnabhumi Airport, the NAIA really is ... interesting. Well, let's see what happens with NAIA Terminal 3. After all this time it should be really good, considering its been aged to perfection already.
However, just found out that for some reason Thailand does not have Stolichnaya. They have Absolut, Smirnoff, and a host of other vodkas (Kristal, etc.) but no Stolich. Just another reason why I really like Manila.
Anyway, in Bangkok and thirsty for beer. Heineken? Singha? San Mig pale! Chilled to balance my Tabacalera Robusto. Even in another country, Buy Filipino.
7.10.06
Of trade treaties and multinationals
There are still a lot of interesting issues cropping up regarding the nature and process of trade treaties. One big issue is the difference between treaties and executive agreements, and on this issue hangs the question on whether the legislative branch of government would have a say on whether the Philippines should indeed enter into a new international commitment. In one article of mine, I wrote:
"The Supreme Court also held in Commissioner of Customs vs. Eastern Sea Trading that treaties (which will require Senate concurrence for validity) generally refer to basic political issues, changes in national policy and permanent international arrangements; while executive agreements (which do not require such concurrence) refer to adjustments of detail carrying out well-established national policies, and temporary arrangements."
One reason why these issues keep getting raised is the ongoing confusion on how international law is to be considered in relation to Philippine law (specifically as a basis for a cause of action and not really on the question of effectivity thereof). This is further compounded by the fact that we seem to make no distinction between treaty law and customary international law, and for which we apply in both instances the doctrine of incorporation (rulings of the Supreme Court have indicated this, mostly using as basis Article II, Section 2, of the Constitution).
Other jurisdictions, particularly the US and the UK, have made such distinctions and with regard to treaty law, the transformation doctrine is usually employed and thus their need for an enabling law. The US, it must be noted, also makes a distinction between treaties and executive agreements, and further make distinctions between self-executing and those which are not self-executing. To appreciate the complexity of the US process, it has formulated four methods by which treaties are said to apply within the domestic jurisdiction. Add to this the "TPA" mechanism between the president and Congress. Japan's practice apparently is to constitutionally consider international law as part of the law of the land, with some instances indicating that international law could even be considered of having a status higher than that of its own constitution. The Philippines, the US, the EC, and a host of other countries do not follow this practice and have consistently held, at least as far as within their own particular jurisdictions are concerned, that constitutional provisions apply over and above that of international law.
* * * * * * *
One interesting comment I got from a kind reader was with regard to the power of multinational corporations. This argument - which essentially says that multinational corporations have become more powerful than nation States, thus resulting in the diminishing of State sovereignty - has been raised a long time ago. And has been quickly debunked. I won't take up much space on this but the reasons why such is untrue lies in two words: "government" and "competition".
Note that multinational corporation's wealth, vast as it is, is still subject to territorial constraints in that whatever the business or asset or fund it would still have to land within the jurisdiction of a State. These assets don't just float around, after all, and thus would be subject to State regulation. [Interestingly, an article came out in today's issue of Business Mirror, discussing the issue of corporate nationality in the context of increasing globalization. See the 9 October 2006 issue, page C1, "The Rise of Corporate Nationality" - jemy] Boeing, GE, and Microsoft, no matter how big they are, still has to bow before anti-trust lawyers of the EC and the US. Big multinationals here in the Philippines, believe it or not, are powerless if the government suddenly decides to increase tariffs on an agri product or enters into a trade agreement involving industrial products. Those of you who are familiar with trade know what I'm talking about. Besides, ever wonder why large corporations are into environmental causes, labor development, etc? It's to protect their brand, their reputation. That gives you an indication how fragile corporate power is vis-a-vis that of governments. People (and their governments) can turn against them anytime. Witness what happened a few years back when a clothing/shoe company got charged with employing child labor in another country.
Besides, for those who are concerned with the power of multinationals, the solution is more freer trade and not less of it for the simple reason that they get to be subjected to competition. IBM vis-a-vis Microsoft, or GM vis-a-vis other auto companies are just a few examples. In a situation where freer trade is the norm, it is the consumers (with their power of choice), the people (with their empowerment), and their elected government that rules and not the vested interests of a few. That is not the case in our country, where protectionist policies essentially shield oligarchs and thus result to the detriment of consumers and the general Philippine public.
Contrary to the misconception of many, the Philippine economy is not that open. Liberalized trade does not mean only tariffs but rather a whole range of measures. The ironic thing about it all is that while our governments may mouth free trade slogans it doesn't necessarily mean they follow through. So essentially we still have a not so open economy but with the impression by many (because of the pronouncements) that we are. Hence, we suffer all the ill consequences of protectionist policies and trade liberalization gets the blame. What this country needs really is greater, consistent, and better managed trade liberalization.
Nobody is saying that multinationals are saints and if one is concerned with their power then one should be disconcerted about the possibility - should they so decide - of them tying up with the local oligarchy and exploiting our resources, with the rest of the population having little or no say in the matter. The solution, again, is more transparency and greater trade liberalization. Admittedly, markets could and can go wrong and, yet, supporters of freer trade know this and thus our ongoing and constant campaign for the enactment of competition policy laws in this country. In any event, for anybody who has worked in a corporation, one would know that size and power are all transitory, that such is still in the hands of the consumer and the nature of the competition. Microsoft, Nokia, Yahoo!, Samsung, and a host of others were just small operations until they hit it big. A lot of the giants at the time they were starting out are no longer around or not as big now as they were then (look at IBM, BT, or GM for example). Unfortunately, the benefits of competition and more equal opportunity for wealth access (which results in only a small number of people possessing a greater portion of the country's wealth) is sadly lacking in this country.
Nevertheless, for all the concern regarding multinationals, it must be remembered that they bring in much needed capital, income, and jobs to this country. They are some of the largest taxpayers here and do the country a great deal of good. They are also involved in a lot of governance projects, as well as in charitable works. The training, technology, and exposure that they are giving our citizenry is substantial and beneficial. Which is more than I can say for our oligarchic class.
For those who like numbers, there are a lot of formal published studies (which I noted elsewhere in this blog) that show that the wealth of corporations are not all that it's cracked up to be vis-a-vis the wealth and power of States and their governments.
24.8.06
The WTO
There seems to be some sort of trade fatigue going around these days, with people refraining from thinking or discussing anything that has to do with international trade. One reason perhaps is that the world economy, as is normally happens, things being cyclical, is cooling down. Another is that the Doha Round of negotiations just went off the rails.
However, there are some who continue to discuss issues relating to international trade. Unfortunately, quite a few of them are those who know next to nothing on the subject.
Some insist on ranting against the WTO. Why? Some people persist on the wrong notion that, because of the WTO, Philippine tariff rates went down. However, it must be remembered that the WTO rules were framed in such a way that countries (including the Philippines) have a great deal of leeway in formulating their domestic rules so as to ensure that they get the most out of WTO membership. If our tariff rates are low (which they aren't that low really) it's because of our unilateral (meaning self-imposed) commitments made at ASEAN. [Note that we have just recently agreed to an expanded free trade system with ASEAN, a sort of EU type common-market system, by 2015, thus speeding up the process by 5 years. This is upon the initiative of Indonesia] Our bound rate commitments in the WTO are quite high (e.g., sugar is at 80%), with some products having no bound rate commitments at all (e.g., cement, ceramics). The WTO never asked us to engage in free trade, never asked us to unilaterally lower our tariffs to the levels that we have now, and the WTO rules have enough safety provisions by which a country can use to protect itself in cases where trade harms it enough. People should really just take the time to read the rule book.
Some people have complained that, because of the WTO, a lot of our vegetable farmers lose their livelihood due to the flooding of Chinese or Taiwanese garlic, onions, etc. Again, this is nonsense. Such vegetables are coming in not because it was our commitment in the WTO but because some of our unscrupulous businessmen are engaged in the smuggling of such vegetables. Obviously, we never committed to allow smuggling and the WTO never asked us to allow smuggling. If those vegetables are getting in, don't blame the WTO but blame the businessmen engaged in smuggling, and our government officials tasked with regulating/stopping smuggling.
Which leads to another point, that whatever we are bound to do as WTO Members it is because we committed ourselves voluntarily. It was not dictated upon us. To anyone who complains about the "green room", it must be remembered that in the end, all 149 Members would have to agree (by consensus) to whatever new commitment is there. As we have consistently wrote, the WTO is not dictatorial, if ever, it is too democratic (sometimes) for its own good.
Then there is the complaint that the WTO is dominated by the rich countries and is merely a vehicle for such rich countries to further exploit the poorer countries. Again, this argument belies the lack of understanding on the system and its nature. Firstly, you have the consensus rule, by which all 149 Members have to agree on a measure. The reason why Doha is sputtering is because the rich countries were stopped by an effective grouping of poorer countries from ramming their demands upon the latter. If the WTO were not around, such a thing could not have happened (more on that later). Secondly, the argument conveniently forgets the fact that with the WTO you have the most (without exaggeration) effective and efficient international dispute settlement system around. Here you have a system where a country as poor as Brazil can beat a powerhouse like the US. Finally, there is simply no alternative to the system. People have consistently used the analogy of international trade as a boxing match between a heavyweight (i.e., the US) and a lightweight (i.e., the Philippines), thus emphasizing the mismatch. The point is, even without the WTO the fight goes on. How anybody can actually think that without the WTO trade and business stops is beyond me. Business goes on, trade goes on. Thus, the analogy of the boxing match is that the fight goes on, with the difference being that if you have the WTO the fight would have a set of rules, with a system that allows you to litigate if somebody cheats, and a forum for countries to band together against the rich big ones.
Which leads to the next point of some people (thankfully they are only a few) that it would be better to do away with the WTO and instead have the Philippines go with bilateral trade deals. The lack of a sense of reality and common sense in the proposal is incredibly overwhelming. In any event, I have written about this before and will not duplicate the points in this entry. Let me just say that if these people want Philippine companies subjected to a world of multiple - and highly complicated - rules that can be readily exploited by multinational companies (which has the resources to master the rules, analyze them, and take advantage of them quickly) and by which our already overworked government agencies would have to grapple with (thus in all probability leading to an increase in smuggling and technical smuggling) then whose side are these people on?
Then you have some people complaining about rich country illegal subsidies, non-tariff barriers, etc. As if the WTO created those things. In reality, those things were in existence even before the WTO came into being. In fact, the WTO was created, in part, to actually provide a mechanism in order to get rid of the subsidies and the NTBs.
Finally, and most illogically, is the joy of some people when the Doha Round got waylaid. Doha was an attempt to correct certain imperfections in the rules and system (and, having said that, there is no such perfect system). There were, supposedly, some rules that were slanted against developing countries and in favor of developed countries. Doha was supposed to correct that slant. Now think: with Doha comatose the status quo remains and the status quo being: the continued presence of some rules which are slanted against developing countries in favor of developed countries. What is there to be happy about that? Granted, no deal would perhaps have been better than a bad deal. However, the fact that we have been deprived a good deal should make us mad and sad, not happy.
The WTO is not perfect. Nothing is. But it is the best thing we have. It gives trade a set of rules, a dispute system second to none, and a forum for groupings of countries with similar interests. Some people criticize the WTO for not guaranteeing an even or level playing field. The problem with that is what is a "level playing field"? There is no such thing explicitly defined. Nor can it be even if people try. Admittedly, some of the reasons for the confusion regarding the WTO are that those who advocate for it get carried away by their own rhetoric. What is to be remembered is this: the WTO never promised the undefined level playing field, never imposed free trade, or aspired for free markets. Its goals are more humble and real: that "the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development". I suggest people take at least few minutes to read the Marrakesh Agreement. Why anybody would oppose those goals is beyond me.
Contrary to the thoughts of some, trade negotiators and trade experts are not naive people. They know that competition is harsh, they know that our trading partners are looking out for themselves first and foremost, and they know that markets fail. That is why we need the rules precisely because the competition can get really nasty. As for markets failing, the mere fact that competition policy is being discussed urgently at the WTO way way back is an acknowledgement that markets do fail and is sometimes in need of correction.
The naivety actually lies with the anti-WTO lot. Thus, you have some people criticize the WTO for not completely reigning in richer, more powerful countries and having everybody being completely equal. Right. That only happens in smurf land. Or, as Homer Simpson would say, in "Happy Land in a gumdrop house on Lollipop Lane". Even the UN makes a distinction, officially, between the powerful countries and the less powerful. That's why there is the Security Council permanent members. At least you don't have that distinction in the WTO. In the WTO, unlike in the UN, every member has veto power.
The problem with the anti-WTO activists is that they act as if they're infallible. Which they're far from being. Nobody is. They have to realize the incredible struggle that our trade negotiators and policy makers do to keep up, just keep up, with the bewildering details that international trade demands. If they really believe in what they preach, all fine and good, but they also have to accept that a clear majority of Filipinos are believers in trade and globalization. Who are they to say that they alone can be right and that the majority of Filipinos dumb enough or misled enough to be in the wrong? Besides, if they think that the economic direction of the country is wrong then let them run for office. Let them get accountability for their opinions and thoughts. The problem is, they won't get elected because of their hysterical approach to policy making, which requires a cooler mind and a restrained disciplined intellect. Filipinos are smart enough to recognize that. If they say they don't have the resources to win an election or at least have their voice heard, then welcome to the real world because the Philippines, in the international community, is faced with the same problems vis-a-vis the rich boys like the US and the EU.
One thing we have to remember about international trade is that it only ensures smoother transfer of goods from one country to another. It does not force people to buy imported goods. It does not force Filipinos to drink Coke (instead of Sarsi), wear Nike (instead of ... Boston), eat McDonald's (instead of Tonang's palabok), watch My Super Ex-Girlfriend (instead of I Wanna Be Happy), or use a Nokia cellphone (instead of using the ... public payphone). If our countrymen prefer such goods because either they're better, cheaper, or just because, who are these anti-trade activists to tell them otherwise? The solution is not to deprive people of choice but to make better Philippine goods. If the option is really there to get a good Philippine product, most Filipinos would certainly buy Filipino. But if that option is not there then people may not want to opt for some Philippine products not because they're not nationalistic but because they don't have the luxury of gambling their income on more expensive but uncertain products. Thus, it would be better if the anti-trade activists practice what they preach: stop using laptops, don't drive cars, don't eat foreign foods, don't read foreign books (might as well be consistent), don't wear foreign clothes and shoes. They shouldn't watch foreign movies. They should buy only local goods even if they're more expensive and not as good (thus, on the latter, reward the inefficient over the efficient). These anti-trade activists should do it because they're probably the ones with the income to spare, as most of the rest of our countrymen who are under poverty levels need all the cheap but good products they can buy with their meagre incomes.
I have read anti-WTO literature, specially those being relied on a lot by local anti-WTO activists. However, when you analyze what is being said in those literature (particularly the reasonable ones that bat for lessening of subsidies, more market access for poor countries, better balance for intellectual property particularly for medicines) they are not really against the WTO. And they are not really against trade. What it comes down to is that those literature, taking their natural and logical conclusion, are actually asking for an improved WTO and international trade system. That actually is what Doha is supposed to be about. Ironic. What is also ironic is that anti-WTO activists have a habit of resorting to trade liberalization and globalization to have access to all these imported or foreign anti-WTO literature. Then use their imported laptops or pc's to broadcast their thoughts to the rest of the world. Ironic. And funny. Funny because the anti-trade group seems so sure of themselves, their information, and their sources. However, it must be considered that for every Chomsky, Stiglitz, or Bello that the anti-trade people can quote, the rest of the world has Legrain, Bhagwati, or Habito (or Alburo). For every Confessions of an Economic Hitman (which I've read), there is also Why Globalization Works (or A World Without Walls). Obviously,therefore, there is a lot that can be learned from each side, particularly for so complicated a topic. I know that trade advocates take the criticisms of the system to heart and thus you would presently find a lot of serious analysis on what actual form international trade should take and if such can be or should be country specific. Thus, for the anti-trade advocates, a little open-mindedness and intellectual humility is perhaps needed to make the discussions on the subject more constructive.
In any event, if the anti-trade activists really believe that a protectionist approach (I refuse to call an approach that says the Filipino can't succeed in the global market place "nationalistic") is the best way forward, the WTO rules provide enough reasonable leeway for us to get away with it. However, if they want to completely close our borders and get out of the WTO then they should go bat for the idea. Remember, however, that if we do close our borders then do not think that the other countries will be happy to open their markets to us. If these anti-trade activists really believe that a lessening of our exports, higher prices for domestic consumers, lesser access to production materials are all better then go for it and work to have the Philippines get out of the WTO. We'd probably be the only country on earth to want to do so but who cares? China is a member. Iraq wants to be a member, so does Russia, Vietnam, Iran, Afghanistan, and Lebanon. Mahathir's Malaysia is a Member. Hugo Chavez's Venezuela is an original WTO Member. Chavez - the hero of the anti-trade lot - may mouth anti-trade slogans but he sure does not reject the benefits of oil trade and other such trade to keep his people happy and him continuing in power. In fact, Chavez, just today, unveiled plans to trade/export oil to China. But then who cares? Our local anti-WTO activists, so sure are they that international trade doesn't work (perhaps relying on analysis from some foreign anti-trade economists) have come across something that the rest of the world doesn't know. I am sure they have already provided for the possibility of us, by our lonesome, making all the televisions, cars, shoes, computers and laptops, milk, rice, meats (cannned or fresh), all the cement we need, all the steel we need, all the fishing equipment we need. I am sure they already have provided for all the technnology we'd ever need to manufacture all the stuff mentioned and more. They have come to the conclusion that all the medicine we need we can make by ourselves from scratch - from scratch as we can't use patented products that either have to be imported or need a foreign trade component (incidentally, the WTO was in the process of loosening up patent rules). I'm sure the anti-WTO activists have already assumed into their calculations the huge amount of cheap labor that would be available due to the returning OFW's, etc. who would now have to return home either because of retaliation by our former trading partners or simply because we don't have the WTO rules on services to protect them anymore. Finally, I'm sure they've also found a way to pay the equivalent income to those people who'd lose their jobs if the multinational companies up and leave and decide to take their business to "nationalistic" countries like Vietnam, Malaysia, Indonesia, or China.
Enough, therefore, of the name calling. Of calling our hardworking and patriotic trade negotiators or policy makers as traitors. If they are traitors, then what do you call domestic industry CEO's who fail to upgrade their facilities, fail to improve production methods, fail to give proper training to their staff, fail to foresee market trends, fail to protect the employment of the people working for them, and - after all is said and done - buy themselves mercedes benz's or family vacations to Hong Kong? The point is, international trade is an inherently difficult and complicated subject, for which name calling, hysterics, and sloppy thinking will be absolutely of no help.
What is needed here is constructive dialogue and - more importantly - disciplined informed thinking between the various sectors of our society. Thus, read the anti-WTO lit if one must but such should be read more carefully. Then, don't be one-sided or narrow minded, read WTO lit as well. Also important, read the WTO texts in the original. Take the effort. We're all in this together, rise or fall: government, business, academe, religious, etc. The headlines may scream "impeachment" and politics as usual but the rest of the world goes on. Trade goes on [in fact, at present, global trade growth is going much faster than global GDP; this information should be read alongside the fact that the Philippines still has a trade deficit, with only the electronics sector exports doing particularly well]. So should we keep on going - all of us together - as well for our country.
However, there are some who continue to discuss issues relating to international trade. Unfortunately, quite a few of them are those who know next to nothing on the subject.
Some insist on ranting against the WTO. Why? Some people persist on the wrong notion that, because of the WTO, Philippine tariff rates went down. However, it must be remembered that the WTO rules were framed in such a way that countries (including the Philippines) have a great deal of leeway in formulating their domestic rules so as to ensure that they get the most out of WTO membership. If our tariff rates are low (which they aren't that low really) it's because of our unilateral (meaning self-imposed) commitments made at ASEAN. [Note that we have just recently agreed to an expanded free trade system with ASEAN, a sort of EU type common-market system, by 2015, thus speeding up the process by 5 years. This is upon the initiative of Indonesia] Our bound rate commitments in the WTO are quite high (e.g., sugar is at 80%), with some products having no bound rate commitments at all (e.g., cement, ceramics). The WTO never asked us to engage in free trade, never asked us to unilaterally lower our tariffs to the levels that we have now, and the WTO rules have enough safety provisions by which a country can use to protect itself in cases where trade harms it enough. People should really just take the time to read the rule book.
Some people have complained that, because of the WTO, a lot of our vegetable farmers lose their livelihood due to the flooding of Chinese or Taiwanese garlic, onions, etc. Again, this is nonsense. Such vegetables are coming in not because it was our commitment in the WTO but because some of our unscrupulous businessmen are engaged in the smuggling of such vegetables. Obviously, we never committed to allow smuggling and the WTO never asked us to allow smuggling. If those vegetables are getting in, don't blame the WTO but blame the businessmen engaged in smuggling, and our government officials tasked with regulating/stopping smuggling.
Which leads to another point, that whatever we are bound to do as WTO Members it is because we committed ourselves voluntarily. It was not dictated upon us. To anyone who complains about the "green room", it must be remembered that in the end, all 149 Members would have to agree (by consensus) to whatever new commitment is there. As we have consistently wrote, the WTO is not dictatorial, if ever, it is too democratic (sometimes) for its own good.
Then there is the complaint that the WTO is dominated by the rich countries and is merely a vehicle for such rich countries to further exploit the poorer countries. Again, this argument belies the lack of understanding on the system and its nature. Firstly, you have the consensus rule, by which all 149 Members have to agree on a measure. The reason why Doha is sputtering is because the rich countries were stopped by an effective grouping of poorer countries from ramming their demands upon the latter. If the WTO were not around, such a thing could not have happened (more on that later). Secondly, the argument conveniently forgets the fact that with the WTO you have the most (without exaggeration) effective and efficient international dispute settlement system around. Here you have a system where a country as poor as Brazil can beat a powerhouse like the US. Finally, there is simply no alternative to the system. People have consistently used the analogy of international trade as a boxing match between a heavyweight (i.e., the US) and a lightweight (i.e., the Philippines), thus emphasizing the mismatch. The point is, even without the WTO the fight goes on. How anybody can actually think that without the WTO trade and business stops is beyond me. Business goes on, trade goes on. Thus, the analogy of the boxing match is that the fight goes on, with the difference being that if you have the WTO the fight would have a set of rules, with a system that allows you to litigate if somebody cheats, and a forum for countries to band together against the rich big ones.
Which leads to the next point of some people (thankfully they are only a few) that it would be better to do away with the WTO and instead have the Philippines go with bilateral trade deals. The lack of a sense of reality and common sense in the proposal is incredibly overwhelming. In any event, I have written about this before and will not duplicate the points in this entry. Let me just say that if these people want Philippine companies subjected to a world of multiple - and highly complicated - rules that can be readily exploited by multinational companies (which has the resources to master the rules, analyze them, and take advantage of them quickly) and by which our already overworked government agencies would have to grapple with (thus in all probability leading to an increase in smuggling and technical smuggling) then whose side are these people on?
Then you have some people complaining about rich country illegal subsidies, non-tariff barriers, etc. As if the WTO created those things. In reality, those things were in existence even before the WTO came into being. In fact, the WTO was created, in part, to actually provide a mechanism in order to get rid of the subsidies and the NTBs.
Finally, and most illogically, is the joy of some people when the Doha Round got waylaid. Doha was an attempt to correct certain imperfections in the rules and system (and, having said that, there is no such perfect system). There were, supposedly, some rules that were slanted against developing countries and in favor of developed countries. Doha was supposed to correct that slant. Now think: with Doha comatose the status quo remains and the status quo being: the continued presence of some rules which are slanted against developing countries in favor of developed countries. What is there to be happy about that? Granted, no deal would perhaps have been better than a bad deal. However, the fact that we have been deprived a good deal should make us mad and sad, not happy.
The WTO is not perfect. Nothing is. But it is the best thing we have. It gives trade a set of rules, a dispute system second to none, and a forum for groupings of countries with similar interests. Some people criticize the WTO for not guaranteeing an even or level playing field. The problem with that is what is a "level playing field"? There is no such thing explicitly defined. Nor can it be even if people try. Admittedly, some of the reasons for the confusion regarding the WTO are that those who advocate for it get carried away by their own rhetoric. What is to be remembered is this: the WTO never promised the undefined level playing field, never imposed free trade, or aspired for free markets. Its goals are more humble and real: that "the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development". I suggest people take at least few minutes to read the Marrakesh Agreement. Why anybody would oppose those goals is beyond me.
Contrary to the thoughts of some, trade negotiators and trade experts are not naive people. They know that competition is harsh, they know that our trading partners are looking out for themselves first and foremost, and they know that markets fail. That is why we need the rules precisely because the competition can get really nasty. As for markets failing, the mere fact that competition policy is being discussed urgently at the WTO way way back is an acknowledgement that markets do fail and is sometimes in need of correction.
The naivety actually lies with the anti-WTO lot. Thus, you have some people criticize the WTO for not completely reigning in richer, more powerful countries and having everybody being completely equal. Right. That only happens in smurf land. Or, as Homer Simpson would say, in "Happy Land in a gumdrop house on Lollipop Lane". Even the UN makes a distinction, officially, between the powerful countries and the less powerful. That's why there is the Security Council permanent members. At least you don't have that distinction in the WTO. In the WTO, unlike in the UN, every member has veto power.
The problem with the anti-WTO activists is that they act as if they're infallible. Which they're far from being. Nobody is. They have to realize the incredible struggle that our trade negotiators and policy makers do to keep up, just keep up, with the bewildering details that international trade demands. If they really believe in what they preach, all fine and good, but they also have to accept that a clear majority of Filipinos are believers in trade and globalization. Who are they to say that they alone can be right and that the majority of Filipinos dumb enough or misled enough to be in the wrong? Besides, if they think that the economic direction of the country is wrong then let them run for office. Let them get accountability for their opinions and thoughts. The problem is, they won't get elected because of their hysterical approach to policy making, which requires a cooler mind and a restrained disciplined intellect. Filipinos are smart enough to recognize that. If they say they don't have the resources to win an election or at least have their voice heard, then welcome to the real world because the Philippines, in the international community, is faced with the same problems vis-a-vis the rich boys like the US and the EU.
One thing we have to remember about international trade is that it only ensures smoother transfer of goods from one country to another. It does not force people to buy imported goods. It does not force Filipinos to drink Coke (instead of Sarsi), wear Nike (instead of ... Boston), eat McDonald's (instead of Tonang's palabok), watch My Super Ex-Girlfriend (instead of I Wanna Be Happy), or use a Nokia cellphone (instead of using the ... public payphone). If our countrymen prefer such goods because either they're better, cheaper, or just because, who are these anti-trade activists to tell them otherwise? The solution is not to deprive people of choice but to make better Philippine goods. If the option is really there to get a good Philippine product, most Filipinos would certainly buy Filipino. But if that option is not there then people may not want to opt for some Philippine products not because they're not nationalistic but because they don't have the luxury of gambling their income on more expensive but uncertain products. Thus, it would be better if the anti-trade activists practice what they preach: stop using laptops, don't drive cars, don't eat foreign foods, don't read foreign books (might as well be consistent), don't wear foreign clothes and shoes. They shouldn't watch foreign movies. They should buy only local goods even if they're more expensive and not as good (thus, on the latter, reward the inefficient over the efficient). These anti-trade activists should do it because they're probably the ones with the income to spare, as most of the rest of our countrymen who are under poverty levels need all the cheap but good products they can buy with their meagre incomes.
I have read anti-WTO literature, specially those being relied on a lot by local anti-WTO activists. However, when you analyze what is being said in those literature (particularly the reasonable ones that bat for lessening of subsidies, more market access for poor countries, better balance for intellectual property particularly for medicines) they are not really against the WTO. And they are not really against trade. What it comes down to is that those literature, taking their natural and logical conclusion, are actually asking for an improved WTO and international trade system. That actually is what Doha is supposed to be about. Ironic. What is also ironic is that anti-WTO activists have a habit of resorting to trade liberalization and globalization to have access to all these imported or foreign anti-WTO literature. Then use their imported laptops or pc's to broadcast their thoughts to the rest of the world. Ironic. And funny. Funny because the anti-trade group seems so sure of themselves, their information, and their sources. However, it must be considered that for every Chomsky, Stiglitz, or Bello that the anti-trade people can quote, the rest of the world has Legrain, Bhagwati, or Habito (or Alburo). For every Confessions of an Economic Hitman (which I've read), there is also Why Globalization Works (or A World Without Walls). Obviously,therefore, there is a lot that can be learned from each side, particularly for so complicated a topic. I know that trade advocates take the criticisms of the system to heart and thus you would presently find a lot of serious analysis on what actual form international trade should take and if such can be or should be country specific. Thus, for the anti-trade advocates, a little open-mindedness and intellectual humility is perhaps needed to make the discussions on the subject more constructive.
In any event, if the anti-trade activists really believe that a protectionist approach (I refuse to call an approach that says the Filipino can't succeed in the global market place "nationalistic") is the best way forward, the WTO rules provide enough reasonable leeway for us to get away with it. However, if they want to completely close our borders and get out of the WTO then they should go bat for the idea. Remember, however, that if we do close our borders then do not think that the other countries will be happy to open their markets to us. If these anti-trade activists really believe that a lessening of our exports, higher prices for domestic consumers, lesser access to production materials are all better then go for it and work to have the Philippines get out of the WTO. We'd probably be the only country on earth to want to do so but who cares? China is a member. Iraq wants to be a member, so does Russia, Vietnam, Iran, Afghanistan, and Lebanon. Mahathir's Malaysia is a Member. Hugo Chavez's Venezuela is an original WTO Member. Chavez - the hero of the anti-trade lot - may mouth anti-trade slogans but he sure does not reject the benefits of oil trade and other such trade to keep his people happy and him continuing in power. In fact, Chavez, just today, unveiled plans to trade/export oil to China. But then who cares? Our local anti-WTO activists, so sure are they that international trade doesn't work (perhaps relying on analysis from some foreign anti-trade economists) have come across something that the rest of the world doesn't know. I am sure they have already provided for the possibility of us, by our lonesome, making all the televisions, cars, shoes, computers and laptops, milk, rice, meats (cannned or fresh), all the cement we need, all the steel we need, all the fishing equipment we need. I am sure they already have provided for all the technnology we'd ever need to manufacture all the stuff mentioned and more. They have come to the conclusion that all the medicine we need we can make by ourselves from scratch - from scratch as we can't use patented products that either have to be imported or need a foreign trade component (incidentally, the WTO was in the process of loosening up patent rules). I'm sure the anti-WTO activists have already assumed into their calculations the huge amount of cheap labor that would be available due to the returning OFW's, etc. who would now have to return home either because of retaliation by our former trading partners or simply because we don't have the WTO rules on services to protect them anymore. Finally, I'm sure they've also found a way to pay the equivalent income to those people who'd lose their jobs if the multinational companies up and leave and decide to take their business to "nationalistic" countries like Vietnam, Malaysia, Indonesia, or China.
Enough, therefore, of the name calling. Of calling our hardworking and patriotic trade negotiators or policy makers as traitors. If they are traitors, then what do you call domestic industry CEO's who fail to upgrade their facilities, fail to improve production methods, fail to give proper training to their staff, fail to foresee market trends, fail to protect the employment of the people working for them, and - after all is said and done - buy themselves mercedes benz's or family vacations to Hong Kong? The point is, international trade is an inherently difficult and complicated subject, for which name calling, hysterics, and sloppy thinking will be absolutely of no help.
What is needed here is constructive dialogue and - more importantly - disciplined informed thinking between the various sectors of our society. Thus, read the anti-WTO lit if one must but such should be read more carefully. Then, don't be one-sided or narrow minded, read WTO lit as well. Also important, read the WTO texts in the original. Take the effort. We're all in this together, rise or fall: government, business, academe, religious, etc. The headlines may scream "impeachment" and politics as usual but the rest of the world goes on. Trade goes on [in fact, at present, global trade growth is going much faster than global GDP; this information should be read alongside the fact that the Philippines still has a trade deficit, with only the electronics sector exports doing particularly well]. So should we keep on going - all of us together - as well for our country.
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