A broad coalition of farmers’ organizations led by the Federation of Free Farmers are questioning the government rush to ratify Philippine participation in the Regional Comprehensive Economic Partnership. They are also questioning the lack of transparency and public consultation on the Philippine commitments to RCEP and their implications on the economy, particularly on the agricultural sector. RCEP, a trade pact involving the 10 Asean, 3 East Asian and 2 Down Under countries, is supposed to come into force on January 1, 2022.
The argument used by the proponents of RCEP is captured in their one-sentence slogan: “We cannot afford to be left behind.”
But have we not heard such a sweeping justification for trade liberalization before? In 1994, during the Senate deliberations on Philippine membership in the World Trade Organization, government trade negotiators, backed up by free-trade economists, warned that failure to join the WTO would be catastrophic to the country. “We cannot be left behind,” they said. And then to win over the debate, they came up with big promises: 500,000 new jobs a year in industry and 500,000 new jobs a year in agriculture as the reward for WTO membership. They added that agriculture would be a big winner not only in terms of jobs but also increased gross value added (as much as P60 billion) and huge export expansion.
The foregoing imagined gains from early WTO ratification never happened. Instead, the Philippines, beginning 1994 and 1995, has become a net agriculture-importing country, with our agricultural trade deficits growing each year. In fact, both our industrial and agricultural sectors have become stagnant, to borrow the term of ADB’s Norio Usui (Taking the Right to Inclusive Growth, ADB), since.
In the 1994 Senate debate on Philippine membership ratification in the WTO, then Senator Wigberto E. Tañada cautioned against hasty ratification and called instead for a rigorous review of national preparedness to the social and economic impact, specifically on trade and employment, of various commitments to the WTO such as agricultural tariffication and lowering of the “water” or tariffs for industry. After all, integration in the global trading arrangements through membership in the WTO, RCEP and other trade pacts produces winners and losers.
As things have turned out, we have more losers than winners under economic globalization. This is clearly reflected in our growing trade deficits. In pre-Covid 2019, the country registered a whopping trade deficit amounting to $45.5 billion, an increase of 12 percent from the 2018 deficit of $28.2 billion. This prodded then BOI Executive Director Corazon Dichosa to raise the alarm over the continuous surge in imports over exports from 2014 to 2019. She added that five countries accounted for the deficits: China (as the “bulk contributor”), South Korea, Indonesia, Thailand and Taipei. These countries happen to be all members of RCEP. With RCEP, they are likely to intensify their export offensives.
Thus, the demand of the farmers’ organizations for a review of the commitments to the RCEP, including the use of safeguards, is of utmost importance. Trade is a war of national interests. This is the meaning of Trump’s “America First” and Biden’s “Made in America”. India’s Prime Minister Nahendra Modi is now waging a campaign dubbed as “Make in India”. Incidentally, in 2019, India withdrew from the RCEP negotiations, arguing that India cannot abandon its industrial and agricultural producers. Modi also charged China of dumping and “trade protectionism.”
Of course, the ideal is for the Philippines to participate in a trade pact that, instead of eroding further its industrial and agricultural base, will build up its industrial and agricultural muscle. But we still need to be educated by DTI, DA and Neda if they have such a blueprint for this. The best solutions to correct the trade deficits and imbalances are vigorous and sustained industrialization and vigorous and sustained agricultural modernization. But are these happening?
As it is, what we are seeing are programs that tend to weaken further our industrial and agricultural sectors. For example, in agriculture, the free-trade economists and their principals in the executive and legislative departments are using inflation as an excuse to liberalize in an aimless way the importation of agricultural products such as rice, pork, chicken and vegetables. Listen to the farmers nationwide how these imports have flattened their farms and their willingness to continue the business of farming. Listen to the consumers nationwide of their complaints that these imports have failed to make agricultural commodities cheaper and affordable.
On industry, under Covid conditions, the country has the opportunity to develop its capacity to produce medical supplies such as face masks, face shields, coveralls, ventilators and so on. And yet, Filipino producers who were encouraged by the government in early 2020 to go into medical supply production were shocked when the Department of Health favored the importation instead of local production and creation of jobs in these industries. As the ongoing Senate inquiry on Pharmally shows, the foreign producers are the beneficiaries of billions of pesos allocations for the procurement of materials that can easily be produced at home.
So can RCEP save the economy? Or will our membership, like our experience with the WTO, only widen our trade deficits and weaken our industrial and agricultural sectors? Are we ready for RCEP? The government has some explaining to do to the farmers organizations, local industries and the Filipino people.
Dr. Rene E. Ofreneo is a Professor Emeritus of University of the Philippines.
For comments, please write to reneofreneo@gmail.com.