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8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
http://slidepdf.com/reader/full/10-confronting-trade-development-dr-rene-e-ofreneo 1/22
Confronting
Trade & Development
Dr. Rene E. OfreneoProfessor
University of the Philippines&
Convenor
Fair Trade Alliance
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
http://slidepdf.com/reader/full/10-confronting-trade-development-dr-rene-e-ofreneo 2/22
What we learned from Cancun, HK &
Copenhagen?
Trade is war, globalization is warTrade negos intense „coz war of national interests
Examples: US, Europe on agri (want trade lib butrefuse to give up subsidies $1B/day)Brazil w/ DCs but not on agri exportsUS/EU vs. China
2003 – collapse of WTO talks in Cancun2005 – no agreement in HK2010 – still no DDR
Big powers pushing for „coherence‟ – WTO, IFIs, UN
bodies – in accordance w/ their interestsexample: liberalization on NAMA, AoA, GATS but
protection on TRIPs
Even on Climate Change in Copenhagen, US, China,
India, Russia, etc. refuse to commit due to growthissues
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
http://slidepdf.com/reader/full/10-confronting-trade-development-dr-rene-e-ofreneo 3/22
What other countries are doing?
Unified approach to trade, e.g., USTR, EU‟s TradeCommission, Canada‟s ITCan, Japan‟s MITI, etc.
Strong industry/labor/CSOs consultations, e.g., USTR has2,000 sub-industry committees and strong industry
representation in trade talks – US w/ 250-500private sector reps in WTO talks
Strong research back-up (with researches funded by theirown government & private sector)
strategizing coupled with endless capacity building fortrade negotiators and preparations (forpotential losers and winners)
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
http://slidepdf.com/reader/full/10-confronting-trade-development-dr-rene-e-ofreneo 4/22
But what’s happening in RP?
Battle for information (people kept in the dark).
Example: JPEPA text a battle of 2+ years to get
No unified approach to trade. DTI? NEDA? DA? DFA?Malacanang? TRM? BITR? Embassies in Geneva(WTO), Jakarta (ASEAN), Tokyo (JPEPA), etc?
Minimal industry consultation, e.g., AFTA 2010, CAFTA2012. -- Minimal industry coordination
Minimal PO/NGO consultation & coordination.
No clear agro-industrial visioning & framework. Ex.:Tariff Commission has no guiding framework inhearings. TC initiated ATIGA formulation?
No clear research back-up, strategizing, etc. (exceptstudies funded by foreign agencies)
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
http://slidepdf.com/reader/full/10-confronting-trade-development-dr-rene-e-ofreneo 5/22
RP: No clear answers on
strategic trade policy issues
• Defining national interests? WB? FDIs? Locals? CSOs?
• Identifying winners, losers?Potential gains, potential losses?
• Examining structure of economy vis-à-vis those of other contracting parties? Why not normal traderelations instead of “free trade” agreement?
• Strategic concerns (e.g., employment loss), strategic
industries (e.g., rice industry)?
• Defensive programs? Offensive programs?
• Conduct of trade talks? Flexibility clauses?
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
http://slidepdf.com/reader/full/10-confronting-trade-development-dr-rene-e-ofreneo 6/22
Biggest RP trade problem:no trade-agro-industrial policy harmonization
Trade an instrument to
-- promote more markets,
strengthen national industries and
create more jobs and welfare
And yet, trade policy in place has been successful
in wiping out many industries and jobs
in eroding nation’s industrial base, agricultural base
in setting back economic growth
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
http://slidepdf.com/reader/full/10-confronting-trade-development-dr-rene-e-ofreneo 7/22
What happened?
In l957, World Bank says:
RP second to Japan in Asia
But now RP is an industrial laggard in Asia
Many explanations – historical, political, cultural and economic
Economic explanations by those at the economic policy helm
Sicat-Virata (1970s) – economy not open enough
others (today) – transactional economics,
interventionist government
FairTrade Thesis: RP’s growth stunted by
absence of clear and coherent trade-agro-industrial
development framework
aggravated by neo-liberal dogma on liberalization
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
http://slidepdf.com/reader/full/10-confronting-trade-development-dr-rene-e-ofreneo 8/22
RP economy to soarunder liberalization, and yet…
Josef Yap of PIDS wrote (2003) that threedecades of „mainstream economics‟ have notproduced „economic transformation‟ for RP
RP left behind1970s – by the Asian NICsl980s – by Malaysia and Thailandl990s – by China and Indiatoday -- by Vietnamtomorrow – by Bangladesh & Cambodia?
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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Tale of three economic policy regimes
19th century to l950 -- Colonial free trade(with Spain and later, US, interrupted by WWII)
1950s-60s -- Import-substituting industrialization(ISI)
1970s-present -- Export-oriented industrialization (EOI)
a. 1970s – LIEOb. l980s-present – Structural Adjustment Program or SAP
ALL-OUT ECONOMIC LIBERALIZATION:
Trade lib (removal of import restrictions/tariff reduction)Investment liberalization [short negative list)Deregulation (forex, agriculture, etc.)
Privatization (GOCCs, assets, BOT, services, etc.)
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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RP Thailand
Average bound tariff ratesAgriculture 34.7 % 35.5%Industry 23.4 24.2
Average applied MFN tariff ratesAgriculture 8 29Industry 4.3 14.2
Ratio of exports to GDP45 56
-------------Source: Notes of RP Ambassador in Geneva
Unilateral Total Disarmament
RP vis-a-vis Thailand under WTO, 2004
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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Share of manufacturing to total output(per cent)
Year Indonesia Mlaysia Thailand RP
1980 15.2 19.6 23.1 27.6
2002 26.6 30.0 37.1 24.1
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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Industries on the brink or have collapsed
Domestic Industries
•
Textile industry (comatose, from 250+ to 5)• Shoe industry
• Rubber/tire industry
• Vegetable industry
• Fishery industry
• Poultry (saved by avian flu) and livestock• Chemicals (organic and inorganic chemicals, fertilizers,
petrochemicals)
• Cement, tiles and ceramics
•
Processed foodstuff• Pulp and paper,
• Wood, etc.
Export Industries
• Garments, Footwear, Leather, Furniture, e.g., rattan, etc.
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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Overall scorecard under SAPFDIs came but not in a big way to effect major transformation of
economy. Overall outcomes:Enclave industrialization based on FDIs
De-industrialization (collapse of local industries)
De-agricultural development (eroded base)
But RP surviving – BAKIT?OFW phenomenon (10 % of population, $16B-21B
remittances/yr)
Call center/BPO ‘accident’
government borrowings ($53 B foreign debt)
Those who can not get jobs in shrinking formal sector or
overseas labor market, join growing informal sector
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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Relationship of Remittances to Other
Philippine External Income
0
5
10
15
20
25
*2008 2008
Tourist Receipts
Portfolio Investments
FDI's
Net BPO Income
Net Exports
Remittance Informal
Remittance Formal
Remittances All Other Income
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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Other catch basin:Informal Economy
237,00012.594,012,00014.584,046,000Unpaid workers
128,0005.001,626,0005.401,498,000Domestic Helpers
+4,795,01577.0625,151,11765.1320,492,312Informal Sector
-1,028,80515.274,894,88321.686,013,688Formal Sector
+4,894,00032,636,00027,742,000Total Employed
30,758,00Labor Force
Own-account
Wage & Salary
1,745,00036.6111,950,00038.9010,792,000
3,456,42923.177,563,11714.984,156,312
% to totalemployed
No. ofWorkers
% to totalemployed
No. of Workers
Difference20061999
Source : ECOP
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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ISI period (1950s-mid-70s)no industrial deepeningno export orientation
EOI period (mid-70s-present)no learninglimited linkagespoor entrepreneurship, national champions
market developmentbalancing protection and liberalization‘managing’ or ‘directing’ the TNCs
etc., etc.
For both regimes – no clear agro-industrial vision
Overall trade-dev’t problems
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
http://slidepdf.com/reader/full/10-confronting-trade-development-dr-rene-e-ofreneo 19/22
Scenario for 2010 & beyond?
Agriculture. Deeper crisis. Food crisis looming.Hunger looming in the countryside itself.
Industry. Deeper crisis too. AFTA now, CAFTAcoming, ANZ-FTA coming, others coming
Services. Formal Sector – depends on growth of
remittances. CC-BPO’s growth slowing down
Informal economy. Will continue to grow.
Elections coming? Stability coming?
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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More confusion:Asian noodle bowl of economic integration(as seen by ADB)
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
http://slidepdf.com/reader/full/10-confronting-trade-development-dr-rene-e-ofreneo 21/22
Fair Trade‟s 5-point econ road map
•
balanced approach to trade, growth & agro-industrial devt
strengthening “nation‟s fences” vs. smuggling & unfair
trade practices & leveling tariff/NT fences w/ others
building up nation‟s productive capacity, e.g., mobilizing
domestic investments, capacity building (not debtrepayment), & re-building eroded agro-industrial base
unleashing people‟s creative/productive capacity through
asset reforms (e.g., land reform, urban reform), HRD;anddeveloping culture of industrialism, excellence, solidarity
&economic nationalism.
8/9/2019 10 Confronting Trade& Development - Dr. Rene E. Ofreneo
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•
Walang sasagip sa Pilipino sadagat ng globalisasyon
kundi Pilipino rin!