Trade is a powerful instrument to promote commerce and growth of an economy. It is a key to the creation of more and better jobs.
However, trade policy, poorly formulated and haphazardly implemented, can cause economic havoc, perpetuate economic backwardness and even cause massive displacement in the labor market. This is why countries have been adamant in asserting their respective national interests in trade negotiations.
Example of how trade rules perpetuate backwardness: The Philippine experience under the American colonial rule. In the 1900s, the United States enacted a US-Philippines “free trade” law and imposed this law in a one-sided manner on its colony. This arrangement was conceived to reinforce the complexion of the economy as a producer of primary agricultural/mineral products and an importer of the more expensive industrial goods. In short, the free-trade regime was used to keep the Philippines as a “hewer of wood and carrier of water” for the metropolis. The US-Philippines free-trade arrangement lasted until the 1940s. Thus, for five long decades, no significant manufacturing industry was developed in the colony.
Example of poorly formulated and haphazardly implemented trade rules: rice trade liberalization through the abolition of the regulatory functions of the National Food Authority and granting of full importation powers to the private sector. Immediately after the passage of the law, over 2 million tons of imported rice entered the market, precipitating a palay price crisis for 2.4 million Filipino palay farmers. No transition and adjustment programs were crafted for the domestic palay producers, millers and small traders. No protection measures instituted against the predatory behavior of the big rice importers-distributors. The defanged NFA could not even inspect rice warehouses because it no longer has powers to monitor and inspect rice imports. And worse, the Philippines surpassed in importation and trade liberality the big rice-producing countries, which import 5 percent to 10 percent of their national requirements, such as China, India, Indonesia and South Korea. These countries have maintained their respective State-controlled grains trading agencies whose task is to stabilize prices for producers and consumers alike, have set higher tariff rates and have remained steadfast in sustaining the modernization of their rice industry.
Examples of countries asserting national interests in trade talks: many. The most recent is the withdrawal of India from the Regional Comprehensive Economic Partnership agreement that was finalized in Thailand in the just-concluded Asean Summit. India said it is not prepared to expose its domestic industrial and agricultural producers to competition with their Chinese counterparts under the RCEP discipline. And then there is President Donald J. Trump, who has launched a trade war with China and who has caused the withdrawal of the United States from the American-sponsored Trans-Pacific Partnership. Trump’s blunt explanation: America First.
There has also been a global backlash against the global free-trade rules being pushed by the developed countries through World Trade Organization, and various regional and bilateral free-trade talks. In the WTO, the battle cry of the powerful countries is “equal rules” for all. Member countries should open up their industrial, agricultural and services markets, and should not discriminate against any trade partner under the so-called principle of most-favored nation treatment.
But equal rules for the heavyweight and lightweight players naturally have predictable unequal outcomes. This is the reason why developing countries have been asking: where are the rules based on the principle of “special and differential treatment,” a principle which gives a developing country space and flexibility in trade (e.g., tariff adjustments and exemptions for certain products) so that it can meet its development priorities in line with its existing level of development.
In the case of the contentious issue of agriculture, the United States and the European Union have been pressing developing countries to liberalize markets and remove government assistance to the small farmers. And yet, the United States and the EU have not budged on the demand of the latter to remove the huge price support subsidies that the United States (under the US Farm Law) and the EU (under the Common Agricultural Policy) have been giving their farmers, as much as $65 billion a year for the EU farmers. This is one reason why the WTO has failed to conclude its so-called Development Round, a trade negotiation round that started in 2000.
The backlash against the unjust “equality” trade rules in the global market also applies to the neo-liberal “Washington Consensus” free-trade thinking, which became the “in” thing among the economic policy-makers after the collapse of the USSR. The International Monetary Fund and the World Bank, which observe their 75th anniversary this year, played a leading role in convincing the world, especially the debtor countries, that the path to growth and development lies on the adoption of the Washington Consensus dogma. Debtor countries were asked to embrace a program called “structural adjustment program” or SAP, a comprehensive program which entailed not only the wholesale or “unilateral” liberalization of a country’s market but also the adoption of debt-oriented austerity programs.
And yet, the SAP outcomes in Latin America and other developing countries were extremely bad. In the case of the Philippines, studies of the Fair Trade Alliance, Focus on the Global South and the Federation of Philippine Industry show that SAP was instrumental in putting the economy on a slow-motion process, and, in stunting manufacturing, desolating agriculture and squeezing the populace through a series of belt-tightening measures such as the adoption (and gradual upgrading) of the value-added tax system. The SAP decades of the 1980s-1990s-2000s were lost decades for the Philippines. The Philippines, a middle-income country in the 1970s, got stuck in a low level of development and was bypassed by its Asean/Asian neighbors in the SAP decades. But thanks to the economic saviors—the overseas Filipino workers and the ICT-enabled workers in the call center/BPO sector, the country is now hailed as Asia’s next dragon.
So what is the impact of the global backlash against neoliberal globalization? The WTO Ministerial in Seattle in 1999 was shut down by the protest action of trade unions, farmers’ organizations and Church activists coming from developed and developing countries. The WTO Secretariat tried to mollify those opposed to WTO’s one-size-fits-all trade liberalization by promising a “development round.” As to the World Bank, it came up with new versions of SAPs such as “SAP with institutional reforms” (e.g., campaign against corruption) and lately, the WB has been promoting programs on social protection such as conditional cash transfer for those who have not benefited from SAP.
In the International Labor Organization, there were also intense debates on how to tame runaway globalization that rides roughshod on workers’ rights, as multinationals take advantage of “borderless” global markets to drive wages down and prevent unionism everywhere. Thus, in 1998, the ILO Secretariat in Geneva made extra efforts to push for the “reaffirmation” of “international core labor rights” through the adoption by the International Labor Conference of the landmark “Fundamental Principles and Rights at Work” recognizing the workers’ basic rights: freedom of association, collective bargaining, nondiscrimination, prohibition against forced labor and elimination of extreme forms of child labor. Subsequently, the ILO Secretariat, under DG Juan Somavia, organized its various international development programs under the theme “Decent Work,” defined as work obtained in conditions of freedom, dignity, equality and security. ILO was back as the conscience of the UN family.
It is against the foregoing background that one can appreciate the linkage between trade policy and the ILO’s decent work advocacy. Bad and unjust trade policy leads to unemployment, poverty and backwardness. A number of industrial relations scholars also trace widespread labor precarity such as the “Endo” phenomenon to the neoliberal SAP trade policy regime.
Now, recently, the ILO Manila Office came up with a book report, The impact of trade on employment in the Philippines: Country report. The book tried to summarize three theoretical economic approaches in understanding the country’s economic performance: neoclassical, political economy and new structural economics. The problems of “jobless growth,” weak industry performance and agricultural decline were also cited.
However, the book is strangely hesitant in pinning the lack of decent jobs in the Philippines on SAP and neoliberal trade policy. It is also silent on whether the Philippine trade policy regime needs an overhaul given the country’s sad performance under SAP. Without such an overhaul, can decent jobs, as envisioned by ILO, blossom?
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