Rice is what we make of it

my Trade Tripper column in this 1-2 October 2016 issue of BusinessWorld:

If there is ever a product that most profoundly shaped Philippine politics, economic policy, and international trade, rice (along with sugar) would have to be it. Yet most policy initiatives dealing with rice are sadly defensive. Such, despite the fact, that most Filipinos implicitly profess heavy emotional investment in that little grain.

The Philippine Rice Research Institute, for one, considers “zero rice importation or self-sufficiency has always been the elusive goal of Philippine agriculture policies regardless of political dispensation. Any inferior goal is unpatriotic and criticized as a failure of the government and the nation as a whole.”

Strong stuff.

Pons Intal and Marissa Garcia (in a 2005 PIDS study) discussed the magnitude of rice’s political clout in this way: “the price of rice has been a significant determinant in election results since the 1950s.” That includes the Martial Law years. A possible exception is Estrada’s 1998 popular runaway election.

The problem is basic: we only have around 4.7 million hectares of land suitable for rice. Compare that with 7.8, 10.8, and 13.8 million hectares of Vietnam, Thailand, and Indonesia respectively. Those millions of hectares are irrigated well and fully by natural large river systems.

The Philippines does not have an equivalent inherent irrigation source and the man-made ones are poorly maintained. Ironically, the modern rice breeds we use (same with Vietnam, Thailand, and Indonesia) for greater yields and to survive require heavy amounts of water. Unfortunately, our incoming water flow is almost appallingly nil compared to the aforementioned three countries.

Thus, rice yields are at 5.75 tons per hectare (t/ha)., 3.1 t/ha., and 5.13 t/ha. for Vietnam, Thailand, and Indonesia, respectively. The Philippines does have a respectable 4 t/ha. but for an area less than half of its competitors.

Add the fact that Vietnam (land area of 332,698 sq. km.) has a population of roughly 92 million. Thailand 513,120 sq. km., for a 67 million population. Indonesia 1,904,569 sq. km., for a 255 million population.

The Philippines (area 300,000 sq. km.) needs to feed a population of 100 plus million. Rice consumption, incidentally, means not only as food but also as seed, animal feed, or other non-food uses.

The population increase also relates to the need to convert arable land for residential, commercial, or industrial purposes.

And yet, to add to the fundamental disadvantages that the Philippines has regarding rice production, is the inability of the rice industry to accept and adjust to the same: “farmer interest in rice farming has diminished through the years due to the increasing cost of rice cultivation brought about by the rising opportunity cost of labor and land and the availability of lower priced imported rice, which further dampened incentives for rice production.” Then, also “the lack of proper maintenance of irrigation facilities has meant the deterioration of these systems and the reduction in the effective life of these investments and area coverage.” (Intal and Garcia)

The issue of rice protection has cropped up (pun intended) as a decision is being made to lift WTO quantitative restrictions. When that happens, cursing and gnashing of teeth will be predictably heaped on the WTO, the multilateral trade system, globalization, and the free market.

But then: while protected industries welcome quantitative restrictions or high tariffs, the un-talked about logical unwelcome offshoot is smuggling.

So, despite the Philippines being among the world’s top importers of rice, we still had a rice smuggling problem amounting to almost 50,000 metric tons weekly (as reported by The Diplomat in 2014).

The problem is not the WTO nor smuggling; it’s the inability to feed the huge demand. An inability existing even before the Republic was born.

We’ve practically been a net importer of rice since the 1870s. Except for a small window in the early 1970s, we’ve never achieved rice self-sufficiency. And our insistence in becoming so only resulted in rice prices amongst the most expensive in Asia. Place that within the context of a poverty rate of around 25%.

The Foundation for Economic Freedom’s position calling for the removal of the quantitative restrictions is, I think, the right one: it will “lower rice prices, reduction in hunger, and lower inflation”. In the end, the poor benefits.

And food security should be better defined as managing our food stocks rather than insisting on production self-sufficiency.

Finally, we need to explore other options aside from mere restrictions, importation, and greater budgetary outlay.

One way of thinking about it: do we view local rice production as a means of feeding our citizenry or can it be shifted for cultural, social, tourism, and heritage purposes?

In short, retain the lands most suited for rice, employ willing and able farmers, yet without the pressure of rice production as the source of staple for the whole country.

By reframing rice’s importance, not necessarily now but thinking long term, we can then limit and put focus regarding people, land, money, and effort (including training and regulation) to a rice production that is doable and reasonable.

Reboot: The Philippines as strategic global player

my Trade Tripper column in the 24-25 September 2016 issue of BusinessWorld:

From the looks of it, indeed the Philippines seems like a gateway or staging point depending on how one views the map. Yet, the thinking seems based on the idea of transport vis-à-vis military mobility, of the need for air and naval bases. Unfortunately, technology seemingly diminished that aspect of the Philippines, what with missiles moving warfare away from the traditional kind and hence not necessarily tied to a location.

And yet the Philippines retains options that could keep it relevant. And interestingly, location has nothing much to do with them.

We presently have around 2 to 2.4 million Filipinos working abroad as OFW’s in various locations around the world. And while indeed, the same represents around P1.2 trillion annually in remittances, nevertheless the huge potential of OFWs remain untapped.

As a marketing avenue, political lobby force, and information network, the OFW population represents an opportunity to push the Philippines forward strategically. Not only do they represent a huge diaspora, the same is virtually a cost-cutting resource in terms of people and equipment that can be relied upon whenever the Philippine government or businesses has a need to move around in or know about other countries.

Another unexploited avenue that could elevate the Philippines’ importance is its peculiar history and culture. This was something that Singapore unfortunately took away from us. But the Philippines -- with its English speaking population and quite remarkably cosmopolitan outlook -- should have been the natural gateway of the West to Asia and vice versa.

And I’m not talking here merely of tourism but rather in terms of political and foreign relations clout. Had we played it right, we could have served as the deciding vote in any international gathering, and the natural guide and partner whenever a Western country is seeking trade, security, or international agreement with a (at the least) Southeast Asian country.

Then, there is trade.

Looking at 2015 figures, one sees the following: Japan, China, the US, Singapore, and Hong Kong (in that order) remain our top trading partners. They account for more than half (53.8%) of our trade. If one also considers the rest of the top ten partners, including the EU, South Korea, ASEAN, the level of trade would reach 78.5%.

If that doesn’t give a clear enough picture, the top ten exports account for 83.5%, while the top ten imports 74%. They revolve around electronics and other manufactured goods, transport, furniture, wiring sets, chemicals, apparel, and mineral and metal components.

A narrow bench on trade if there ever was one.

And while increase in FDI for the past few years has been lauded, the same is still lower than the major ASEAN countries and, ironically, lower than that of the 1980’s and 1990’s (OECD Investment Policy Review: Philippines, 2016)

The huge missed opportunity was the inability to transform the Philippines into an air transport and maritime hub, particularly after 9/11 and definitely during the first decade of 2000.

The Philippines could have made itself a vital and necessary player in the Asian supply chain, particularly as our islands constitute natural (and suitably secure) processing zones.

Another should have been the bulking up of the workforce of the Department of Trade and Industry, as well as Customs, as preparation for the various necessary free trade agreements that the Philippines could have contemplated joining in.

Longtime readers of this column are quite familiar already with the wary stance we take regarding FTAs (free-trade agreement).

But that wariness rests on three things: the resources with which brings the ability to negotiate a trade deal beneficial to the Philippines (and not merely wishing that merely opening up of industries will magically transform the Philippine economy), the resources with which to execute the agreement (including the bureaucracy to catch violations of the rules of origin), and third was the hope that the World Trade Organization could still finagle a deal revitalizing the multilateral trading system (an eventuality that now appears to need considerable time to happen).

Fast-forward a decade later and we still haven’t moved beyond those three factors. And yet, we now are faced with around 11 FTAs that are already effective, signed but awaiting implementation, or to be negotiated (i.e., ASEAN-Hong Kong, China FTA, Philippines-EU FTA, Regional Comprehensive Economic Partnership, Philippines-European FTA, ASEAN FTA, ASEAN-Australia and New Zealand FTA, ASEAN-India Comprehensive Economic Cooperation Agreement, ASEAN-Japan Comprehensive Economic Partnership, ASEAN-People’s Republic of China Comprehensive Economic Cooperation Agreement, ASEAN-[Republic of] Korea Comprehensive Economic Cooperation Agreement, Japan-Philippines Economic Partnership Agreement).

And the forgoing doesn’t even yet include the massive Trans-Pacific Partnership.

Compare our attitude, flexibility, and sophistication on this matter with China, which currently is the top trade partner of around 120 countries. And we wonder why we have difficulty in getting traction on our West Philippine claim!

To paraphrase one foreign affairs thinker: the Philippines should mentally rearrange the world and determine its own place in it, rather than obediently see the world as international law tells it to.

A multifaceted long view of China

my Trade Tripper column in the 10-11 September 2016 issue of BusinessWorld:

Disappointing, of course, was the previous administration’s act of arbitral initiation against China but not bothering to develop a coordinated diplomatic, media, political, and legal strategy in case of victory. Then and now, even without the benefit of hindsight, the case was a forgone conclusion considering the inherent strength of the Philippines’ legal position, an outcome all the more certain once the jurisdictional hurdles were overcome.

Even assuming a follow-through strategy was indeed formulated, since it was not presented to the Filipino people’s evaluation (or at least their elected representatives) then it just doesn’t exist.

There was effectively no preparation done beyond the short-term gratification of seeing China beaten. Realizing this, commentary following the victory was diverted to pointing out that the rule of law was upheld and of the ruling’s long-term significance to international law, whatever that means.

In the meantime, while the legality of the Philippine claim was indeed solidified (as if it needed more solidifying), China’s belligerent construction in the disputed islands remained unabated, reinforcing their possession of those areas.

At most, wishful thinking focused on the strategy (if one can call it that) of “name and shame”; or the hope that other countries would file similar arbitral cases; or (as a variation of the first two) that the ruling would soften China’s will, with ensuing popular support for the Philippines rendering China pliant.

Unfortunately, those desired scenarios are still searching for clear footing: both the Philippines and China (depending on which source one reads) substantially having equal quality of support.

But for the most significant area for the Philippines, South-east Asia, the level of support unfortunately remains ambiguous.

One reason is China’s continuing economic importance. In China’s Economic Ties with ASEAN (Association of Southeast Asian Nations) : A Country-by-Country Analysis (prepared by the staff of the US-China Economic and Security Review Commission, March 2015), the Philippines’ erstwhile adversary “consistently appears among the top five trade partners for ASEAN members.”

And China as a source of economic opportunity apparently seems far from being tapped out: “although its outbound direct investment has been rising rapidly, China is still marginal to ASEAN’s overall FDI (Foreign Direct Investment) receipts.” Still, “even allowing for the possibility that MOFCOM [Ministry of Commerce] may be undercounting actual flows (for example, by not factoring in investment originating in Hong Kong), the fact remains China is not yet a major investor in ASEAN.”

What is even more interesting is this: “the degree of dependence on China as a source of exports, imports, or both varies. Where wealthier ASEAN countries have a diverse set of trading partners, poorer ASEAN countries depend heavily on China, especially as a source of imports. Vietnam’s share of Chinese export and import flows with ASEAN has increased substantially, while Singapore’s share has dropped.”

Now that is worth pondering upon as it jives with other research seemingly revealing of Chinese thinking regarding foreign relationships and the response of other countries: “previous studies confirmed that only the rich natural resources and the weak institutions countries attracted China’s OFDI (Outward Foreign Direct Investment). However, we found out that, in recent years, not only weak institutions but also good institutions with rich natural resources countries attracted China’s OFDI.” (Chinese Outward Foreign Direct Investment: Is ASEAN a New Destination?, Nguyen Thi Tuong Anh and Doan Quang Hung, May 2016, SECO/WTI Academic Cooperation Project Working Paper Series, June 2016)

The Philippines generally hasn’t felt this down to the psychological because of the continuing level of comfort we have regarding our concentrated trade with Japan and the US, and considering that China’s FDI to the Philippines remains relatively conservative.

It’s also gratifying for those taking the more hawkish position that though “Philippine balance of trade with China deteriorated in 2013, going from a decade of surplus to a $1.6-billion deficit,” standing in stark contrast to “the country’s surplus with the Asia region as a whole,” such has not been apparently disastrous for the Philippines.

Nevertheless, even though the aforementioned 2015 paper acknowledges that the Philippines “is more important to China in the political than the economic realm” and that while “Chinese FDI in the Philippines totaled only $692 million in 2012... individual deals suggest far more investment is actually flowing into the country.” And furthermore, “the Philippines has actually made investments in mainland China. The investors include the snack food company Oishi, the San Miguel brewery, and real estate businesses like Ding Feng Real Estate Co., which specializes in mixed-use developments such as condominiums, shopping malls, and hotels.”

The key, commonsensically and strategically, now, today, at this present time, is to find common ground.

First step is to re-acknowledge that there are two decades worth of agreements that the Philippines entered into with China, covering the economic to military cooperation, which the last administration seems to have short-sightedly scrapped.

It’s also important for the two countries to tune out all nondiplomatic noise and allow each side to have the space to find a mutually beneficial solution in the future.

Why saying ‘no’ to internationalism is not necessarily a bad thing

my Trade Tripper column in the 3-4 September 2016 issue of BusinessWorld:

Years ago, while giving a lecture on international trade law and emphasizing the need for the Philippines to maximize its ability to achieve policy goals, a lady bureaucrat stood up and criticized my talk by saying that our job (meaning mine as a public commentator and hers as a government official) was to “uphold the objectives of the international community.” To which I replied: no, our job is to uphold national interest.

There’s this strange belief pervading that the notion of State sovereignty is a bad thing, while internationalism (or “global cosmopolitanism”) is the “progressive” ideal that should be exclusively pushed.

One sees this in the reaction to the pronouncements of two United Nations officials (not the UN itself, mind you, but two individual special rapporteurs from the UN High Commissioner for Human Rights) criticizing the present administration regarding mounting evidence of extrajudicial killings.

Now, this article is not about the obvious immorality of and the law on such killings. Raised here, rather, is the enthusiastic reaction by some locals on the UN officials’ comments -- treating such as if they were pronouncements from on high worthy of papal infallibility.

Not that the two UN officials have no right to speak; they do. And in our system of government, everyone has the right to free expression.

But that’s different from saying that the value which the Philippine public gives such expression should not be contextualized vis-à-vis those actually here and inherently knowledgeable of the issues in their totality.

We should really stop this default attitude of believing that just because one is a foreigner or from an international organization that person therefore has special knowledge and wisdom. Frankly, oftentimes, that is not the case.

One just wonders how the French (as example, or any country) would feel if one of our own criticizes or negatively comments on the goings-on of their country.

When President Duterte pushed back against the said UN officials’ comments, the reaction was predictable: how dare he not defer to the UN when it gave donations during Yolanda, it granted us a continental shelf, etc., etc.?

Well, firstly, just because the UN acted charitably to us in our hour of need doesn’t give it (or its officials) the right to be high-handed or condescending.

We contribute (quite conscientiously) to the UN’s annual upkeep, which for this 2016 amounted to $4,108,746 (around P190 million). We tirelessly supported the UN’s peacekeeping missions (as of 2013, per Wiki, the 30th largest contributor with around 730 Filipino peacekeepers). And never forget: our 1945 vote, particularly Carlos P. Romulo’s efforts, were significant in creating the UN. So our government is well within propriety in asking what do we get in return. Criticism from lower level officials?

And the UN (specifically, the UN Commission on the Limits of the Continental Shelf) did not grant us Benham Rise -- it merely recognized our claim. That continental shelf has always been ours per international law. The practical effect of that recognition is simply to estop other countries from contesting our ownership in the future.

There are two principles at work why the Filipino’s voice should be heard primarily over the foreign or the international: one of which is sovereignty.

It should be recognizably discomforting for us when foreigners attempt to impose rules, standards, and values formulated outside our shores, beyond our jurisdiction, and with nary a tie to the Philippines.

There’s a reason why one must be a citizen (particularly natural born) to acquire the benefits of full political participation in the Philippines and that is to ensure shared cultural, political, social, property, and moral allegiance, that there is a concrete personal stake involved, and that the country be not just a venue for social reengineering experimentation of a passing ideological fancy.

The second is subsidiarity (which, like sovereignty, is enshrined in our Constitution): the idea that the smallest political component (i.e., the individual, then the family, then the town, and so forth), the one closest to the issue, should have primary and substantial authority, rather than the national or international entities.

This is why local governments and autonomous regions possess the mandate that they have under our constitutional system. And, regardless of the merit (or lack) of the idea, it’s ironic that people are pushing for federalism, supposedly to remedy the notion of an imperial central national government, but not questioning this deferential attitude towards foreign or international governments.

Interestingly, it is from The Financial Times that I got this wonderfully relevant, “possibly apocryphal,” anecdote “about George Shultz, Ronald Reagan’s secretary of state, who would point to a large globe and ask newly appointed American ambassadors to find their country. Invariably they would point to where they were going. ‘No,’ said Shultz, spinning it back to America, ‘that is your country.’”

Something for Filipinos, whether diplomats, officials, academics, or private citizens, to continually remember: other people would always have their country, the Philippines is ours.

Trump and the continuing ignorance on trade

my Trade Tripper column in this 9-10 July 2016 issue of BusinessWorld:

You know how messed up the Left is when it’s getting what it wants and yet remains angry.

After all, last week brought forth finally a global figure willing to say what Leftists have been saying for so long:

“We do not need to enter into another massive international agreement that ties us up and binds us down.” We have a “leadership class that worships globalism.” And finally, “globalization has made the financial elite who donate to politicians very, very wealthy... but it has left millions of our workers with nothing but poverty and heartache.”

This personality promises to keep jobs domestically (rather than being shipped abroad), to apply protective tariffs so that local industries are freed from foreign competition, and to keep his country away from signing into new trade agreements.

And yet the Left has been strangely silent as far as Donald Trump’s trade policies are concerned.

After railing for so long against international trade, globalization, and multinational corporations, one would think that Donald Trump is the change the Left has been looking for -- the one who speaks truth to power.

It’s an interesting study in politics and psychology really.

In the end, there’s the bind, with the Left forced to contradictorily respond to Trump’s trade pronouncements by relying on the fallacy of lack of charity (akin to ad hominem): since Trump said it, then something must be wrong.

But the thing is, no matter who said it, such criticisms of trade (and globalization) are just plain mistaken. Period.

Such ignores the benefits of trade in a globalized economy: lower prices, improved quality products, greater transparency in government procurement and investment rules, increased resources for environmental protection, better labor standards, as well as larger market access for developing countries (like the Philippines), thus translating to higher incomes and more jobs.

And Trump is utterly ignorant, as David French (Free trade isn’t a burden, March 17, 2016, National Review) points out, of the fact that the US “largely embraced free trade not for the sake of the few but because it has benefited the many. Families benefit from less expensive goods. We enjoy affordable access to technology unthinkable ten short years ago, with even poor families owning smartphones and televisions that couldn’t be bought for any sum of money even last decade. By virtually every measure of material progress, we have access to more for less than ever before -- so much so that our primary national spiritual challenges include consumerism and materialism.”

The great thing about trade is the utter democratic attitude behind it: people run trade, not governments. Governments rarely buy and sell with each other. If ever, governments buy from the private sector, whether local or foreign. And international trade helps put a spotlight on such transactions by applying transparency rules present in most trade agreements.

It’s the people themselves that trade: from the multinational to the local cooperative to the small home business, exercising their freedoms to buy and sell goods and services with each other, except this time the exchange is done not merely amongst neighbors within a village but on a much bigger scale.

And the benefits of trade are enormous, extending beyond the simple numbers of economics. Countries get to know other cultures, bring peoples together, and -- quite notably -- provide a disincentive for resorting to armed conflict.

But sadly, if it can get away with it, government hinders trade through tariffs, quotas and non-tariff measures.

As I pointed in a previous column, Jonah Goldberg (Arguments against Free Trade are Deeply Flawed; April 2016) nails it: protectionists are “wrong philosophically. Countries don’t trade with other countries; businesses and consumers transact with other businesses and consumers. Protectionism is corporate welfare by other means.”

What it means is that every time regulations are imposed on trade, it is never the ordinary citizen that benefits. Prices go up (because tariffs and license fees essentially make up additional costs), the choices (and quality) amongst available products go down, and the incentive to create and produce is dissipated (thus lessening opportunities for more jobs).

Instead, who benefits are government bureaucrats squeezing businesses and consumers to shell out more money, entrenched interests (including elite families) that can now do whatever they want because they are babied away from competition, and the corrupt because regulations strongly provide incentives for those cheating the system.

In short, stopping international trade helps the old rich, prevents the creation of new wealth, and hurts the poor.

Arguably, there would be some dislocations or problems that accompany trading between countries but “the solution isn’t to rip up trade agreements or impose barriers that could trigger a trade war. The solution is to help workers maintain their standard of living through retraining, relocation or retirement if necessary.” (Counting the Ways That Trump Is Wrong on Trade; Paula Dwyer, Bloomberg, March 23, 2016).

Hopefully, the new Duterte administration brings a consistent, effective policy on international trade.

‘Brexit’ and the progressive mental meltdown

my Trade Tripper column in this 2-3 July 2016 issue of BusinessWorld:

Progressives make it sound like “sovereignty” is a bad thing. But if they’re right, then efforts by the Philippines to protect our territory against China, reject hazardous wastes from Japan, or protest alleged political interference by the US are therefore -- all logically -- wrong.

As it is, the very Filipinos in social media and academe that previously screamed “freedom,” “democracy,” “vox populi, vox dei,” and “sovereignty” now urge -- in robotic conformity with the rest of the international progressive community -- that the British people’s vote to leave the European Union be disregarded.

Instead, it’s suggested -- and again this coming not only from supposedly cosmopolitan liberals but also their clones from the local academe and media -- that the sovereign British people follow unquestioningly the dictates of politicians, the elites, academics, and foreign bureaucrats.

To see how ridiculously odious that is, try imagining the Philippines being dictated upon -- on matters including taxation, immigration, and agricultural policy -- by Indonesian, Thai, Malaysian or Singaporean bureaucrats in ASEAN.

Stop claiming national sovereignty if you find that acceptable.

What progressives try to ignore (and any one who loves reason has to really relish this part) is that the British essentially spoke truth to power. Since the Left loves nothing more than “sticking it to the man,” the fact that they’re so bitter and angry at “Brexit’s” electoral success is bizarrely ironic. Probably because “the man” (i.e., the EU officials) are progressives themselves.

Indeed. “Brexit” revealed the authoritarian mindset of those in the academic or political class: thinking they’re better than others, quickly labeling anyone disagreeing with them as xenophobic, stupid, uninformed, shortsighted, selfish, or intolerant.

Hence why writers like Olivia Goldhill pontificate that “Brexiters” didn’t really understand the philosophy of freedom, forgetting all the while that the right definition of freedom is what conservatives have been encouraging liberals to understand during the debates on same-sex marriage, euthanasia, and abortion.

So, as Ian Tuttle (“Liberal Cosmopolitans Lash Out at the Shattering of Their Worldview,” June 25 2016) points out, “both sides of the Atlantic are dominated by liberal cosmopolitans who are no longer able to acknowledge the validity of any other worldview than their own. The anti-‘Brexit’ crowd cannot acknowledge that those who voted to leave may have done so out of legitimate concerns about sovereignty or economic opportunity or security -- that is, that they may have drawn rational conclusions and voted accordingly.”

But, “if ‘Brexit’ critics are right, the European Union should be glad to be rid of the United Kingdom.” Instead, the anger of EU anti-“Brexit” people is so thick you can spread it on bread like Marmite.

And it’s really hypocritical at how easy progressives feel about rejecting the democratic process, concluding it hijacked by “populists” or “demagogues,” and instead advocate for the rule of a small, thinking elite (i.e., themselves). Simply because they didn’t get their way.

Hence you have academics and commentators desperately suggesting that the British people’s vote be ignored, hold another plebiscite, another general election, or wait for something terrible to happen. Anything. Except admit that the British people have the right to chart their own destiny.

Michael Sandel is correct: Much of the energy animating the “Brexit” sentiment is born of the failure of elites to speak directly to people’s aspiration to feel they have some meaningful say in shaping the forces that govern their lives.

The fact is, despite their intellectual pretensions or “credentials,” the anti-“Brexits” just cheapened public discourse, making the opposing sides dig deeper into their positions.

Ivory tower academics make much of the idea that there should be no “others.” Which is naive. There will always be “another” to “others”. That is reality.

Rather than imposing the idea of peoples or countries having no separate identity or differences, acknowledgement instead should be made of that “otherness,” allowing us the space to embrace it and respect it.

Not forcing people (as self-proclaimed “real experts” want) to make our individual existences uniform and, thus, inconsequential and meaningless.

The favorite game now, of course, for progressives is predicting Britain’s doom. But no political scientist or commentator can foretell how “Brexit” will play out. Anyone doing that is a fraud.

The thing is, if history taught us anything: no small select group can ever handle people’s lives better than the people themselves. “We can’t predict what will happen. But one thing I do know -- history never truly had a ‘side.’ Instead, it is the story of action and reaction, and no outcome is inevitable.” (David French, “Brexit and the End of International Progressive Inevitability,” June 25 2016)

Finally, any parallel between “Brexit” and the secessionist movement in Mindanao is completely without basis. The former is about an independent sovereign State being demanded that it allow itself to be dictated upon by unelected foreigners.

Of the so-called “Bangsamoro” issue, simply stated, international law does not allow secession or self-determination rights for religious, linguistic, cultural, or ethnic groups within a sovereign State.

Go south, grow Mindanao

my Trade Tripper column in this 26-27 June 2016 issue of BusinessWorld:

If ever there’s a set of numbers Filipinos should know it’s this: Mindanao -- blessed with so many resources that it provides 60% of our agricultural exports, not to mention minerals and fisheries -- has a land area of 135,627 km2 Singapore has only 719.1 km2, with practically no natural resource whatsoever. And yet, the latter beats the former on a GDP per capita basis of around 60:1.

Ironic, really.

Set aside agriculture, Mindanao also represents the Philippines’ biggest reserves in gold, copper, iron, and aluminum. Yet to be verified is Wikileaks claim of Mindanao’s untapped $1 trillion oil and mineral reserve.

There is also Mindanao’s strategic position, businesswise: unlike Luzon (separated from the Asian mainland by huge amounts of sea), Mindanao is practically next door neighbors with Indonesia and Timor-Leste, with Cambodia, Vietnam, Laos, Malaysia, and Thailand just further down, then New Guinea.

Which should therefore make every Filipino scandalized that 11 of the Philippines’ 20 poorest provinces are in Mindanao.

One reason is the woeful neglect in infrastructure, with Mindanao’s near daily power interruptions symptomatic of that.

But Mindanao should be the obvious choice for a marine transport system, what with trade and tourism opportunities that a fully functioning Brunei, Indonesia, Malaysia, and the Philippines East ASEAN Growth Area (BIMP-EAGA) and Indonesia, Malaysia, and Thailand Growth Triangle (IMT-GT) could bring.

That, on top of the vaunted 600 million market population of ASEAN integration.

The island also proved, so long as it can keep its peace and order situation to a reasonable minimum, its export growth rate capabilities could be double of the country’s.

As it stands, the World Bank declared Mindanao presently needing a continuous P350-billion inflow annually in investments, particularly for agriculture, infrastructure, health, and education.

Of infrastructure (aside from roads, irrigation, potable water, power generation, ports, and airports), focus should be on constructing more police stations and judicial offices.

Again, this should not be treated as a hurdle.

According to a McKinsey report, most infrastructure spending has been down particularly for developing countries. Yet, as the Wall Street Journal commentary on the report says: “Governments don’t have to be the only source of new money for projects, the report found. Worldwide, banks and institutional investors such as pension funds and university endowments have about $120 trillion in assets that could be invested in infrastructure. Making it easier to connect that money with projects could close the gap, Mr. Jan Mischke [a senior fellow at the McKinsey Global Institute and one of the report’s authors] said. ‘It’s really a fundamentally quite solvable problem.’”

Another opportunity area would be on international trade.

Interestingly, most of Mindanao’s current top trading partners are not its geographical neighbors: the US, Japan, China, Netherlands, South Korea, Singapore, Switzerland, United Kingdom, and Germany.

Here, the development of small and medium enterprises -- bolstered by easy credit and effective contract/property protection, as well as marginalizing the Armalite happy -- would be a big help.

According to the WTO: “Globally, SMEs make up over 95% of all firms, account for approximately 50% of value added and 60% of total employment. Micro enterprises, the smallest component of the SME sector, are increasingly the largest sources of employment in many developing countries, especially for women and youth.”

Unfortunately, SME’s are very much affected by trade barriers; hence the importance of arrangements like BIMP-EAGA, IMT-GT, and ASEAN.

Agriculture, while an obvious source of Mindanao’s pride, is actually illustrative of its present shortcoming.

Or its great potential.

The reason is that despite its stature, relatively speaking in terms of overall Philippine export trade, Mindanao agriculture is -- to exaggerate for effect -- actually quite pathetic.

This can be seen from Mindanao’s contribution to the country’s GDP: just meagerly above 14%, while desperately needing 12.7% of the nation’s budget (P380.9 billion) for its maintenance.

According to the World Bank, only 11% of its farmers can be considered producing for a marketable surplus, with 89% classifiable as “subsistence” (or “near subsistence”) farming.

Another is that most of Mindanao’s agriculture exports are in “raw” form. Which leaves the potential for value adding or processing, thus opening the possibility of greater income for its farmers.

“The value of farm products can be increased in endless ways: by cleaning and cooling, packaging, processing, distributing, cooking, combining, churning, culturing, grinding, hulling, extracting, drying, smoking, handcrafting, spinning, weaving, labeling, or packaging.” Accordingly, “value-added products can open new markets, create recognition for a farm, expand the market season.” (ATTRA, Adding Value To Farm Products, 2006).

Finally, there is taxation: there is no constitutional reason why Congress can’t make an income and corporate tax system allowing for special and differential treatment for Mindanao.

This should encourage more investments in the area and de-clog Luzon’s population of 50 million plus (in an area of just around 12,000 square kilometers more than Mindanao) vis-à-vis the latter’s 25 million.

Ultimately, whatever change comes to Mindanao could, should, and must be for the country’s unified good.

Our China policy: separating movies from reality

my Trade Tripper column in the 11-12 June 2016 issue of BusinessWorld:

An interesting phenomena common enough in politics is the difficulty people have with differentiating reality from wishful thinking. True and without fault, everyone would like the world to be something better. But it is one thing to work towards an objective, and another mistaking a hoped for ideal as the present state and then proceeding as if the illusion were true.

The same goes for foreign policy.

Because no matter how developed our talent for imagination may be, we simply do not have the capability and resources, including military strength necessary, to back up our declared policy objectives.

Our aerial territory is open to any foreign plane whizzing by (detected or not), the waters we claim are plugged with enough holes that to declare archipelagic sea-lanes is almost comical, and our official borders are so dysfunctional that drugs, other contraband, and even illegal aliens can go in and out at will.

These are some of the parameters hedging the Philippines in when dealing with China, which the US military recently described (US Department of Defense, Military and Security Developments Involving the People’s Republic of China 2016) as having improved: “its ability to fight short-duration, high-intensity regional conflicts at greater distances from the Chinese mainland.”

Furthermore, “China demonstrated a willingness to tolerate higher levels of tension in the pursuit of its interests, especially in pursuit of its territorial claims in the East and South China Sea.”

Unfortunately, the excessively belligerent attitude (frankly, by all sides) raised the possibility of armed conflict all too sadly real.

The US Council for Foreign Relations (Contingency Planning Memorandum No. 14, April 2015) thus warns of a possible “conflict between China and the Philippines over natural gas deposits, especially in the disputed area of Reed Bank, located eighty nautical miles from Palawan. Oil survey ships operating in Reed Bank under contract have increasingly been harassed by Chinese vessels. Reportedly, the United Kingdom-based Forum Energy plans to start drilling for gas in Reed Bank this year, which could provoke an aggressive Chinese response. Forum Energy is only one of fifteen exploration contracts that Manila intends to offer over the next few years for offshore exploration near Palawan Island. Reed Bank is a red line for the Philippines, so this contingency could quickly escalate to violence if China intervened to halt the drilling.”

Simply put, “the United States could be drawn into a China-Philippines conflict because of its 1951 Mutual Defense Treaty with the Philippines.”

Publicly, the US has been declaring repeatedly its refusal to take any side in the ongoing territorial dispute in the region.

Couple that with the US Defense Department’s recognition that “China still seeks to avoid direct and explicit conflict with the United States.”

Unfortunately, not many in the Philippines are taking the hint regarding this, a foolishness ironically forcing everybody’s hand in the matter.

So, despite the US’ utter good sense, perception-wise its “failure to respond would not only set back US relations with the Philippines but would also potentially undermine US credibility in the region with its allies and partners more broadly. A US decision to dispatch naval ships to the area, however, would risk a US-China naval confrontation.”

A quite key consideration is that China’s ambition to be the respected primary world leader hinges on possessing secure economic dominance. Which, had there been no problems, needed a half century more of peaceful co-existence with other countries.

Note that trade in the West Philippine Sea/South China Sea region is almost $6 trillion, nearly a fifth of that generated by the US.

Certainly, the Philippines may have its allies, particularly in trumpeting the virtues of the “rule of law.” But also do remember that our ASEAN partners, as well as Japan and South Korea, are getting closer to economic dependence on China than they have ever been before.

Unfortunately, China’s economy is suspected of being on the back heel.

The Economist (The Coming Debt Bust, 7 May 2016) pointing out that “the country’s debt has increased just as quickly over the past two years as in the two years after the 2008 crunch. Its debt-to-GDP ratio has soared from 150% to nearly 260% over a decade, the kind of surge that is usually followed by a financial bust or an abrupt slowdown. China will not be an exception to that rule.”

So to put it mildly: the possibility of China’s dreams being dashed because of an economic cock-up could motivate the latter to induce everybody into a scenario that no sane country could want.

All the more if a country (i.e., the Philippines) is nowhere near physical and mental readiness for it.

What’s interesting about the foregoing is that you can be sure both China and the US know this. And you can also be sure that both countries know there is a one in four chance things could go deadly wrong.

Gratifyingly, the incoming administration seems to know it as well.

For a Philippine policy of greater international trade

my Trade Tripper column in this 4-5 June 2016 issue of BusinessWorld:

In news that quite likely caused the Left to undergo gleeful paroxysms (rather than their usual outraged convulsions), the IMF was said to report (via a paper, “Neoliberalism: Oversold” by Jonathan Ostry, Prakash Loungani, and Davide Furceri; June 2016) that “instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion.”

At a time when socialist and “progressive” ideas are poised to dominate the world, for the IMF -- which the British newspaper The Independent labeled as “one of the key international proponents” of neoliberalism -- to admit the foregoing seems to have put the proverbial final nail upon the hated free market.

However, closer study reveals the IMF’s verdict as narrower than publicized. The “assessment of the [neoliberal] agenda is confined to the effects of two policies: removing restrictions on the movement of capital across a country’s borders (so-called capital account liberalization); and fiscal consolidation, sometimes called ‘austerity,’ which is shorthand for policies to reduce fiscal deficits and debt levels.”

To emphasize: the point being made very clearly here is that at a time when protectionism is being lauded, international trade was not the actual target of the IMF’s confessional.

This is important because with a new Philippine government set to come in, the temptation to reverse policies on trade liberalization will predictably be there.

This amidst the bizarre politics within the very country everyone is looking for leadership in relation to trade and that is the United States. As described by Daniel Ikenson (“Trade on Trial, Again”; June 2016), its thinking on trade seems to have taken a turn to the surrealistically unfortunate:

“To cheering crowds, Donald Trump promises to slap duties on imports from China and Mexico and to use the tax code to punish US companies that outsource parts of their operations abroad. Bernie Sanders vows to tear up NAFTA and other free trade agreements, calling them ‘a disaster for American workers.’ Hillary Clinton, a co-architect of the Trans-Pacific Partnership trade agreement (TPP), now opposes that deal, while promising to disregard certain US treaty obligations with China.”

Nevertheless, if Filipino demagogues against trade are correct, then they should be very happy right now.

Philippine trade performance so far has been dismal: preliminary figures as of March, our exports went down by 4.5% (to $4.61 billion), while our imports went up by a whopping 11.71 or $6.36 billion. This represents a trade deficit of $7.1 billion.

The foregoing within the context of final trade figures for 2015 of $58.83 billion, with imports at $71.07 billion, resulting in a trade imbalance of $12.24 billion. That amidst a foreign direct investment performance averaging for the past five years (ending 2015) at P41129.66 million.

Most of our imports come from Japan: $12.4 billion (21.1% of total Filipino exports), United States: $8.8 billion (15%), China: $6.4 billion (10.9%), Hong Kong: $6.2 billion (10.6%), and Singapore: $3.6 billion (6.2%).

Top export partners (using the 1st semester of 2015 as basis) are Japan (at top spot), followed by China, US, Singapore, and Hong Kong.

The problem here is that our trade -- both in terms of goods and identity of our partners -- is narrow in breadth, with 82.7% of our exports revolving merely around ten product groups, while our trading partners list is dominated by Asian countries (the latter accounting for 60% of our total trade). APEC itself constitutes 80%. On the other hand, trade with the EU hovers merely around 11%. And business with Australia and New Zealand leaves a lot of room for improvement.

But we know the protectionist lobby (i.e., the Left backed up ironically by the oligarchs) by railing against trade merely ensures the continued poverty of 51% of Filipinos (who think themselves poor), 26 million Filipinos (that are actually below the poverty line), and at least 12 million of our citizens (sadly living in “extreme poverty”).

The problem, as Ikenson himself admits, is that “the case for free trade is not obvious. The benefits of trade are dispersed and accrue over time, while the adjustment costs tend to be concentrated and immediate. To synthesize Schumpeter and Bastiat, the ‘destruction’ caused by trade is ‘seen,’ while the ‘creation’ of its benefits goes ‘unseen.’”

Indeed, trade, whether in the form of exports (whose benefits should be obvious) or imports (which “deliver more competition, greater variety, lower prices, better quality, and new incentives for innovation”) can only be good for a still economically developing country like the Philippines.

Global inequality there may be, along with domestic inequalities. But such could certainly be mitigated by rising incomes: poorer countries that traded saw per individual incomes rise 3.6% higher than closed economies; and Jeffrey Sachs and Andrew Warner (1995) found that poor countries with more open trade grew six times faster than those resorting to protectionism.

In sum, the incoming Duterte administration would certainly do well to continue the trade liberalization policies that have helped sustain our drive for economic progress.

For a strategic, coherent Philippine foreign policy

my Trade Tripper column in this 28-29 May 2016 issue of BusinessWorld:

For foreign policy, perhaps it’s time for a reset. And resets need a plan. And plans involve a consideration of where one is and going to. That is why international relations fundamentally should be conducted in complete unity with the identity and values of the Philippines.

Or put another way, our foreign policy should be but the mere extension of our domestic, also recognizing that these are matters strategically, patiently, and deliberately played out in decades, and that there is more to foreign relations than just facilitating the documentation and regulation of our overseas workers.

For a start, this means a healthy regard for the rule of law. This is particularly true as we are pushing that principle in relation to China and the West Philippine Sea. If extra-judicial measures are resorted to, even de facto, as domestic policy, we can’t reasonably expect the Chinese to do the same.

It also means respecting human rights, particularly freedom of expression and religion. Considerably so, when there’s around 2.5 million of our countrymen abroad who we do not want discriminated against for being Filipinos (or acting or speaking or believing as they do).

This includes not raising the issue of the death penalty at this time, with about 80 Filipinos on death row overseas. It’s simply incongruous to request clemency for fellow Filipinos when we are putting them to death ourselves.

Going back to China, the incoming administration’s declared policy of reaching out and focusing on the positives of our relationship with it is the correct step.

Discussions and agreements should be hashed out allowing for mutual exploration and use of the disputed areas and resources, without necessarily prejudicing sovereignty claims at a more opportune future time.

Enhanced trade arrangements should be raised, particularly with the Philippines supporting and joining the Regional Comprehensive Economic Partnership agreement led by China. Along with the Silk Road aspirations of the latter.

Preferably, all that be at least initiated before the Hague arbitral tribunal releases its decision in our case against China.

As for Mindanao and the ongoing Bangsamoro issue, one fundamental change that should definitely be done is to overtly and declaratively categorize the same as a domestic matter. This includes having the Department of the Interior and Local Government leading negotiations from now on.

Further on that: revival of the BIMP-EAGA is a definite priority, along with a viable transport system among the trading countries. Long-term investment and tax incentives should be given, encouraging Filipino businesses from all over the country and overseas to set up in the area.

We need to strengthen our relationship with Russia. Trade between our two countries hovers around $1 billion, with around 4,500 overseas Filipinos working there (mostly in Moscow). Even adding tourism in, the economic aspect of the relationship is quite anemic considering that we are the closest tropical country to Russia (at least its eastern part) and pales in comparison with other APEC countries (of which Russia is a part of).

Nevertheless, the Philippines and Russia have always been generally in good terms: the former being the first democratic country to reach out to the then Soviet Union during the Cold War (the effort led by then Executive Secretary Alex Melchor and then Major Joe Almonte). In 2012, Russian naval vessels made a goodwill visit to the Philippines, signifying the potential for a deepening of relations between the two countries.

Also suggested are acquiring defense pacts with our longtime trading partners: Japan, Australia, New Zealand, and South Korea.

The Philippines and Australia already have a working arrangement on protection of our transport systems; we have an understanding with Japan on maritime security; and our military history with South Korea peaked with the 1950’s Philippine Expeditionary Forces to Korea.

Incoming president Duterte did well to reiterate the strong relationship the Philippines has with the United States. The shared political and cultural values are too embedded for us not to do so.

Though we should definitely join the Trans-Pacific Partnership, we must also encourage the US to commit itself to leading a revived multilateral trading arrangement through the World Trade Organization.

Furthermore, we should also realize that historically and geographically, we have the potential to play a significant role similar to that of Great Britain vis-à-vis the US and Europe. Perhaps more so.

Our location in the Pacific is not only strategic but also freed us from the various intra-continental conflicts between Vietnam, Thailand, Malaysia, Singapore, and Indonesia. This makes us not only the perfect conduit for the US towards Asia but also a pragmatically objective mediator for our neighbors.

Finally, even in diplomacy, talk is futile unless one has the muscle and will to back it up. Our foreign policy must be partnered with a strong, robust military.

Indeed, increasing defense spending and reviving mandatory military service for all college-age students is ironically a good first step towards a coherent, strategic foreign policy.

Making ASEAN our neighborhood and our business

my Trade Tripper column in the 21-22 May 2016 issue of BusinessWorld:

The best thing we could do now really is to set our sights a little bit closer to home. And our home is in ASEAN.

At the outset, let me explain that there is a difference between our government entering into further trade agreements without adjustment on the capacity of the bureaucracy (and by extension, the private sector) and private sector initiative to take advantage of already opened markets.

The latter is what we should be doing.

Most of our population isn’t even aware of the developments in ASEAN, much less their overall significance. So enmeshed are we with domestic politics that we fail to give proper focus to a region that forges on regardless of what happens in the Philippines internally but definitely significant impact the lives of its citizens.

ASEAN constitutes almost 20% of our trade: with exports at least $9 billion, while imports around $15 billion. The trade deficit of $6 billion should be seen as an opportunity for the Philippines and not a minus for ASEAN. Thirty-five percent of our ASEAN trade is interestingly with Singapore, a country of minimal resources but maximum talent.

As I’ve said before, trade may be perceived as global but geography is still paramount. Around 60% of our total trade is with Asian countries, with Japan and China leading the pack.

Competition from the other ASEAN countries shouldn’t even make Filipinos hesitate. ASEAN products have not obliterated Philippine business. And this is so even though tariffs for almost all products (except sugar and rice) have been down to nothing, true even way before the touted 2015 ASEAN integration.

If ever there’s a hurdle that needs to be overcome is the need to diversify Philippine product offerings.

If one looks at the top products traded within ASEAN, they consist almost of the same products that the Philippines primarily offers: mineral fuels and oils, electrical machinery, sound and television equipment, precious metals and jewelry; rubber and plastics; and chemicals.

Aside from foreign direct investment, tourism is positively one area for improvement, considering that the top five country visitors to the Philippines (i.e., South Korea, US, China, Japan, Australia), none are from ASEAN. Singapore comes in at 8th and Malaysia at 10th.

Another significant hurdle deals essentially with mind-set: that we do not consider ASEAN as “domestic.”

By this, I mean that we have not imbibed the thinking that ASEAN is our neighborhood, that we are part of this community.

This should change.

In terms of job opportunities, our co-ASEAN members should open doors for Filipinos. Consider that Singapore’s jobless rate is at less than 2%. Malaysia’s at around 3.4%, with a poverty rating of less than 1%. Indonesian unemployment is less than 6%, with poverty 11.3%. Even Vietnam registered unemployment of less than 2.5%, with poverty at above or high 12%.

The point is that the Filipinos, confronted with an unemployment rate of around 6.5%, (SWS surveys peg it somewhat at 22%) and poverty above 25%, could certainly do with a little bit more opportunities and those opportunities perhaps lie with ASEAN.

Furthermore, there is also the matter of taxes, with the income tax regimes generally amongst other ASEAN countries certainly more desirable now than that of the Philippines.

So with regard to Filipino employment, particularly with a population whose average age is around 23-years old, ASEAN could be key.

Most people look to Central Asia, Europe, or the US for work when ASEAN has an array of Mutual Recognition Agreements for licensed physicians, dentists, nurses, architects, engineers, accountants, surveyors, and tourism professionals that pass certain conditions.

With their talent, creativity, and training, comparative advantage of Filipinos seemingly lead to skilled or managerial positions, rather than the unskilled (of which there is an abundant competition right now admittedly from other ASEAN countries).

And quite excitingly, the opportunities don’t end with ASEAN but actually could be said to begin with it.

ASEAN already has free trade agreements with South Korea, Japan, Australia, New Zealand, China, and India. Combined, ASEAN and its trading partners offer Filipino products and services a market the size of almost half of the world’s population.

The trick though is not to think in terms of capturing the market singularly but rather in recognizing that international trade patterns have changed, and that Filipino companies have greater chances of slipping in the production chain rather than being the primary manufacturer of a finished product.

For Filipino companies in a position to be that kind of manufacturer, then a familiarity with ASEAN’s various offerings should allow for a more diverse sourcing of raw materials and talent.

It would definitely benefit Filipinos to learn more about ASEAN, the provisions and intricacies of the various agreements surrounding it, as well as the differing political and legal systems of each of the members.

Indeed, it is ironic that Filipinos pride themselves in being cosmopolitan yet are quite unfamiliar with the possibilities in their very own neighborhood.