Apec’s real winner: China

WITH all the happy talk from the participants at the 2015 Asia-Pacific Economic Cooperation (Apec) meeting, one thing is clear. Political leaders across the globe live in a fantasyland where reality is not as important as winning elections.

President Aquino discussed with Chilean President Michelle Bachelet prospects of increasing economic ties with her country in the hopes of more bilateral trade. In one way, this is a good choice and in another, a bad choice for a Philippine trading partner.

South American countries—with the major exception of Brazil—are doing fairly well with their economic growth. However, Chile is seeing a declining trend from 5.8-percent annual growth in 2011 to the current 1.9 percent. Government finances are still in order and, in some aspects, better than the Philippines but are also showing a negative trend.

However, there is a disconnect between the feel-good rhetoric of how wonderful increased trade can be and the reality of that trade itself. Chile exports $18 billion of copper cathodes, commonly used in making wiring, which is in great demand in industrialized economies like China, not the Philippines. Further, numbers 2 and 3 on Chile’s export list are copper ore and unrefined copper.

Note that the Philippines has the largest potential copper mine in Asia. We do not need Chilean copper products. After copper, Chile exports wine and grapes. We are not going to be an important export market for Chile.

On the other side of the trade equation, Chile imports oil products, liquefied petroleum gas, and to a much lesser extent, automobiles, equipment for the telecommunications industry and natural gas.

Which of the significant import needs of Chile can the Philippines help supply? The answer is none. Which of the significant import needs of the Philippines can Chile help supply? The answer is none.

But the government tries to make a big deal out of trade and business agreements between the two countries.

The Apec meeting is important primarily for the leaders and their staffs to sit down and become more familiar with each other. This can be valuable in the long run as even on a global level, personal relationships are significant. However, net results of these meetings in terms genuine Apec economic growth reveal the truth.

This is the dishonest hype. Even if the Apec agreements are nonbinding, the past initiatives have enabled Apec’s combined GDP to almost double to $31 trillion in 2013, from $16 trillion in 1989. Further, our own Filipino “experts” contend, “the main reason for this is the steady reduction in trade barriers and tedious regulations. Apec’s total trade because of reduced tariffs increased over seven times to $22 trillion from 1989 to 2013, while the rest of the world grew only 5.4 times during the same period.”

Note what is missing from the assessment of this success. China—an Apec member—had a GDP of $454 billion in 1989. In 2013 that has increased to $9.5 trillion. Therefore, in 1989, China accounted for 2.8 percent of Apec’s total GDP, and in 2013 the percentage went up to 30 percent. In other words, if Apec’s trade initiatives are such a great success, it is China that has driven that success and has benefited the most.

Remember, China has been repeatedly accused of being a currency manipulator, a nation that uses near-slave labor, protectionist trade restrictions, and whose government is continuously accused of human-rights abuses.

And about all the trade Apec programs have generated, since 1989, China’s exports value has increased 8,000 percent. Apparently, Philippine government officials are unaware that as China took advantage of all of the wonderful increase in Apec trade, the Philippines has seen its merchandize exports from garments to Christmas ornaments virtually destroyed.

In 1989 when Apec was created, the Philippines was the 41st largest economy in the world as measured by total GDP. In 2013 the Philippines was the 40th largest economy in the world. Certainly, successive Philippine governments did little to nothing to exploit any trade advantages the Philippines might have had.

Even “Apec Philippines 2015: Building Inclusive Economies, Building a Better World” is meaningless feel-good political rhetoric. China took 250 million people out of poverty, not through “inclusive growth” policies but through “total growth” policies. China averaged 10.88-percent annual GDP growth since 1989. We knew nearly 20 years ago that the Philippines needed an average of 7- percent annual growth preferably for a decade to “eliminate” poverty. Our growth has averaged 5.09 percent from 2001 until 2015.

With the presidential election about six months from now, there is a tremendous amount at stake to choose someone who can actually do something rather than talk about doing something. Inclusive growth is a nice phrase. Genuine growth requires genuine work.

*****

E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter
@mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.