For the Philippines, the policy is clear: take the road less traveled, even in trade. This was why both the government and the private sector agreed that, to diversify exports and improve the country’s trade activities, the nontraditional markets should be explored and utilized, as well.
In a report, titled “Mainstreaming trade to attain the SDGs,” the World Trade Organization (WTO) advised developing countries and least-developed countries (LDCs), among others, to diversify their exports and keep up with the 2030 Agenda for Sustainable Development and its Sustainable Development Goals (SDGs). The global trade regulator said trade diversification is of paramount importance for these countries given the changing environmental conditions.
“With the current decline in commodity prices, developing countries and LDCs are receiving less income for their raw material exports. Diversification into other exports should be high on the list of priorities, therefore, for countries dependent on commodity exports,” the report read.
“To assist their diversification efforts, these countries need predictable market-access conditions and capacity building. This will help in achieving decent work and economic growth, fostering industrialization, innovation and infrastructure, reducing inequalities among countries and increasing participation in world trade,” it added.
The government has responded to the challenge but via a different tack. While the WTO urges developing countries, such as the Philippines to exploit “predictable market access conditions,” Manila headed instead for the nontraditional markets, such as the BRICS countries (Brazil, Russia, India, China and South Africa, as well as the European Free Trade Association.
According to Trade Secretary Ramon M. Lopez, President Duterte directed the appropriate agencies to improve trade with nontraditional markets while maintaining economic relations with Manila’s major trading partners, such as Japan, the United States and the European Union. This was to the advantage of the country, Lopez said, as trade diplomacy would benefit exporters.
He cited as example the country’s warmer relations with China and Russia, whose leaders President Duterte personally admires. At the same time, Lopez said Manila is reviewing its free-trade agreement (FTA) with Japan while also working on the FTA with the US as a result of the meeting between President Duterte and his Washington counterpart Donald J. Trump last November.
He also said the country is moving closer to a large-scale trade agreement in the form of the Regional Comprehensive Economic Partnership (RCEP). The RCEP will consolidate the bilateral FTAs of negotiating-economies Australia, China, India, Japan, New Zealand, South Korea and member-states of the Asean.
The Philippine Exporters Confederation Inc. (Philexport) is similarly confident the country will improve its export reach in the coming years. Philexport President Sergio R. Ortiz-Luis Jr. said they are considering bringing in more products to the BRICS countries.
“We are focusing in product development and improving our agricultural production, including high-value crops. We are also looking at more exports to the BRICS countries,” Ortiz-Luis told the BusinessMirror.
For Lopez, the Philippines has started diversifying its export markets. Also, efforts have since been made to assist local producers expand their product base to bolster their competitiveness, the trade chief added.
“As we work on export diversification both on products and markets, as well as increasing value addition for our products, we are building further the production capacities of existing product winners, which the country is known for, or where we have clear comparative advantage,” Lopez told the BusinessMirror.
The trade chief also recognized the improving production capacity of the country’s neighbors in Southeast Asia, and said this was the reason the government is ramping up efforts to make the Philippine investment climate attractive.
“Despite being the huge producer of electronic, agriculture and agriculture-based products like bananas, pineapples and coconut, supply capacities have been hitting the limits and we need more investments to ramp up capacities and jobs. We are improving the investment climate, infrastructure, logistics and foreign exchange capacities that will encourage more manufacturing activities,” Lopez added.
Aside from diversifying exports and value addition, the WTO also told countries to adhere to and strengthen the multilateral trading system to help achieve the SDGs. The call comes at a time the WTO and the trading principle it promotes are at risk due to the perceived escalation of trade relations between the US and China.
The report also suggested that governments should pursue efforts to reduce further trade costs. The WTO said at least 18 million jobs will be generated in developing countries if the Trade Facilitation Agreement or TFA, which aims to lower trade costs across the globe, is fully rolled out.
On top of this, the WTO recommended that member-countries build supply-side capacity and trade-related infrastructure; apply flexible rules of origin to increase utilization of preference schemes; enhance the services sector; and ensure that nontariff measures do not become barriers to trade.
Also cognizant of the rising digital platform, the WTO said member-countries should make so-called e-commerce a force for inclusion as this can be easily reach a broader network of buyers. Last, the global trade regulator said support for micro, small and medium enterprises must be allowed to participate actively in the global value chain.