PHILIPPINES AND WTO: PREPARING FOR CANCUN

MANILA, September 9, 2003  (STAR) By Manuel A. Roxas II  - (Editorís Note: This article was submitted by the author exclusively for The Philippine STAR on the eve of his departure to attend the WTO meeting in Cancun, Mexico.)

Today I leave for Cancun to lead the Philippinesí representation to the 5th Session of the WTO Ministerial Conference. The conference, to be attended by all 146 members of the WTO, is a stocktaking to gauge the progress of the on-going negotiations pursuant to the Doha Development Agenda (DDA). Its outcome will be the framework for trade rules that will govern the way global trade is conducted over the next decade.

As I contemplate our participation in Cancun, which has profound consequences for our economy, I am guided by principles that I have followed consistently during my term as the Cabinet secretary in charge of formulating and implementing our trade, industry and investment policies. There is no room for dogmatic ideologies; the litmus test for any position is how it advances our development. In Deng Xiaopingís words, it doesnít matter whether the cat is Philippines and black or white ÷ so long as it catches mice. In a nutshell, my view is that trade and liberalization are not ends in themselves but are tools for development.

Properly employed, trade policies enhance our economy in two broad ways. First it allows whatever we produce - our goods and services Ů to be sold to other countries thus stimulating our domestic economy in the process. Selling our products abroad starts a dynamic that results in jobs and livelihoods here. These enterprises attract both foreign and local direct investment, and increase our foreign earnings.

The second way we benefit from trade is when we access a wider and more affordable range of goods, services, technologies and knowledge. This means that the prices of basic commodities can be maintained at affordable levels and raw materials and components can be sourced reliably and economically.

However, dislocations and adjustment difficulties may accompany these benefits. In our case, quite candidly, some of our adjustment difficulties came about because of our own internal dynamics. Thus as expressed by President Macapagal-Arroyo, our responsibility is to manage the transitions well enough such that we ensure they are consistent with our development priorities.

My goal in Cancun is to ensure that the global trading system as administered by the WTO is equitable and genuinely contributes to our development. We must ensure that advantages from more openness do outweigh the negatives and that the disadvantaged are provided with time and safety nets to enable them to transition into the more competitive areas of the economy.

I take to heart the developmental dimension of the Doha Agenda. We fought for this at Doha and we shall carry this through to Cancun. It is imperative that Cancun fully reflect our development aspirations.

Following is a brief presentation of the Topics to be taken up in Cancun that is of utmost importance to us.

1.Trade in Agriculture

In the area of agriculture, the battlefield is on the issue of subsidies given by the rich countries to their farmers. Some estimate this to total about $ 1 billion per day. These subsidies make it difficult for us to export to them and worse, make their products cheaper when it enters our market. Moreover, there are also issues on the technical hurdles rich countries impose to make it difficult for our products to enter their markets.

The agriculture negotiations therefore must result in an acceptable program for the reduction of these subsidies leading to their elimination. There must be a clear, substantial and permanent reform in domestic price supports and export subsidies so that we can have a leveling of the playing field for our farmers. Meanwhile any imposition on us, should be tailored to what we can reasonably absorb and recognize the flexibilities - the žSpecial and Differential TreatmentÓ - that developing countries like ours will require in pursuing rural development and food security.

In the realm of tariff adjustments, we shall fight to extend our present flexibilities as these have given us certain concrete advantages: we are completing the upward adjustment on WTO Bound tariff rates on sugar from 50% to 80%. We also addressed the concerns of our vegetable farmers by raising the applied tariffs on their products.

2. Tariffs on Non-agricultural Products

Our goal in the negotiations for žNon-Agricultural Market AccessÓ (NAMA) is to preserve the flexibilities we presently have with respect to managing our tariff structure. Our industries are still undergoing their transformations. Moreover, since 1994 when the WTO was established, the global economic landscape has been altered significantly - by the Ž97 Asian Financial Crisis and its devastating impact, the continuing global economic downturn and corresponding financial market instability, and by Terrorism.

A bit of history: the Tariff Reform Program (TRP) began in 1981, continued on thru the Ž80s and in the mid 90Ūs instituted an annual automatic reduction process. This was pursuant to the economic orthodoxy of the time and was pursued by policy makers in the light of conditions then prevailing and foreseeable. In 1995, before the Asian Financial Crisis, the average of all our tariffs was about 15% (agriculture products were averaging almost 30%). The Tariff Reform Program (TRP) continued on until 2001.

For 2001, in light of the changed economic terrain, we froze the implementation of the TRP. We also stopped the auto-reductions for 2002 and 2003 and are presently evaluating our tariffs on a per product basis with a view to providing additional breathing room for our domestic industries. Of course, during this review, we shall also be mindful of the inflationary impact of any such adjustment.

Presently (i.e. frozen at 2001 levels) the average applied tariff on our industrial or processed products is about 6%; this is the straight average, some are higher and others (particularly raw materials not locally produced) are lower. TodayŪsŪ average applied tariffs are about one-fourth the maximum (or žBoundÓ) tariff rate that we are committed to in the WTO.

Thus any formula that we agree to must not contain elements that lock-in the present disadvantages that we suffer under. Certainly, we want to preserve whatever headroom we have at present so we can continue to adjust our tariffs to suit our development imperatives.

3. New Issues

We differ with certain developed Members of the WTO on whether to begin negotiating the so-called New Issues (also known as the Singapore Issues, these include: investment policy, competition policy, government procurement, and trade facilitation). We see their substantive implications for our interests as highly uncertain. These issues may appear trade-related and seem useful additions to the roster of WTO rules. Indeed, we are not against the desirability of foreign investment or the benefits of competition policy, the value of a transparent procurement system, or the importance of trade facilitation. But we are troubled with applying a whole new set of rules to them, to be imposed from the outside, and subject to binding dispute settlement procedures at the WTO. Aside from infringing on our sovereignty, it would provide the protectionists in developed economies new and sophisticated tools weapons to use against developing economies such as ours.

Thus we shall be advocating for continuing the present žlets study itÓ status of these items.

4. Trips and Public Health

With respect to an important social issue I am keenly interested in, we continue to pursue unconventional solutions to the problem of providing affordable medicines to the poor. Thus we actively support efforts (first introduced by us and many others in the Doha Development Agenda) to relax rules on patent protection of medicines so that we can continue our parallel importation program as well as compulsorily license the production of medicines or purchase the same from third countries. Accordingly we fought for the right for each country to define, in our own terms, when a state of national emergency exists and which diseases are to be covered by the compulsory licensing of medicine manufacturing.

5. WTO Rules and Discipline

In the area of WTO rules, while playing within the system, we have applied ourselves and interpreted the rules aggressively in order to maximize our benefits and level the playing field:

We consider trade-related investment measures or TRIMS as an option in pursuing our industrial policy. When the commitment to eliminate TRIMS was due at the end of 1999, we applied for, negotiated and eventually secured an extension of three years. Thus, our local auto parts makers were given more time to adjust to the removal of the local content requirement imposed on vehicle manufacturers.

The WTO non-discrimination principle (also known as the MFN principle) is a powerful provision. On this basis, during our Ministerial Conference in Doha we successfully negotiated fairer market access for our canned tuna to the European Union. Accordingly the EU agreed to provide us a tariff rate quota of 9,000 metric tons at 12% per year, which is Ĺ the then applied MFN rate of 24%.

We rely on trade remedy measures to cushion our industries from the injurious effects of imports that are unfairly traded (anti-dumping) as well as those that are simply too competitive (safeguards). Recent applications of these safety-net measures include those for cement, ceramic tiles, paper, float glass and mirrors among others.

Accordingly, in Cancun, we shall campaign vigorously therefore that the principles, objectives and effectiveness of existing WTO rules on trade remedies are not diluted in the ongoing negotiation on Rules.

In closing, as can be seen from the positions we have taken on each of the issues, we shall strive to make the Cancun Ministerial Conference truly live up to the Development Agenda we set forth in Doha. Indeed while we recognize that a liberalized trading environment is a desirable end-state, we are more concerned with the process of how we get there. We must properly manage these transformations and their accompanying dislocations.

Accordingly, our job in Cancun is to create and preserve whatever policy space we require in order to pursue our unique development, trade and financial needs. Our obligation to our people in the Philippines is to put food on the table today and not merely promise a better life tomorrow.


Reported by: Sol Jose Vanzi

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