Tuesday, August 26, 2014

Trade Liberalization

by Antonio C. Antonio
July 31, 2014

QUESTION:  What would be the impact of liberalized trade patterns on the Philippine forestry and upland sector?

The Philippines is a member of a multi-lateral trade association called ASEAN or Association of South East Asian Nations.  The ASEAN Free Trade Agreement (AFTA) is an agreement among ASEAN-member nations signed in January 28, 1992 which supports the region’s manufacturing sector.  The following were original countries who signed up in the AFTA; Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand.  Vietnam joined in 1995, Myanmar and Laos joined in 1997 while Cambodia joined in 1999. At present, all ten ASEAN-member countries have signed the AFTA.

The primary objectives of AFTA focus on: (a) Increasing ASEAN’s competitive advantage and edge as a production area in the world market by eliminating or minimizing tariffs and non-tariff barriers; and, (b) Attracting more foreign direct investments to ASEAN.

To increase the competitive advantage of ASEAN, a Common Effective Preferential Tariff scheme was adopted by its members.  This scheme gives ASEAN nations free and affordable access to products and services offered in the region.  The ASEAN Economic Community (AEC) will be upon us soon (2015) and it seems inevitable that ASEAN integration will come to pass.  And there really is reason for us to be apprehensive about this.  It should be noted that most, if not all, regional grouping of countries are more often dominated by the stronger economies.  The weaker states are normally benefitted only by the crumbs from the table of the more economically advanced countries.

ASEAN is made up of 10 countries.  If we ranked them, the first five should be (1) Singapore, (2) Brunei, (3) Thailand, (4) Malaysia and (5) Indonesia while the bottom half should be (6) Vietnam, (7) Cambodia, (8) Philippines, (9) Laos and (10) Myanmar.  From this rough positioning, it is easy to determine that Singapore, Brunei and Thailand will be the dominant members with Malaysia, Indonesia, Vietnam and Cambodia still exercising some degree of influence while the bottom three --- Philippines, Laos and Myanmar --- are the bit players… in Tagalog: “Susunod-sunod lang sa agos.”

It’s always nice and ideal to be part of a regional group… but it would be a lot better if we come in from a position of strength and dominance?  Of course, the official line will always be that such grouping is necessary for the stronger members to help the weaker members.  But that is, unfortunately, a myth.  Take Singapore for example… it is the smallest member state to ASEAN, lacking in natural resources compared to other member states, just a trading post in Southeast Asia, but the most progressive and financially stable in the region.  It is hard to believe that Singapore, together with the other “first five” members, will not exploit the organization to their advantage.

The Philippines ranks second to the last in terms of remaining forest cover with barely 25% left at present.  Where does this leave us now that we are at the bottom of the list in forest cover left in the ASEAN community.  It should be noted that even if Singapore is last on the list, this country’s core competence is international trade and would not at all be bothered by its lack of natural resources.  But the case of the Philippines is different.  Like most underdeveloped economies, our only bargaining chip is our natural resources.  But what do we bargain with if we don’t have it (forest resources) anymore.  How do we now compete from a position of strength?

Another contemptuous issue is the balanced utilization of natural resources.  Environmental concerns in the international community of nations have risen to higher levels in the past three decades.  Global Warming and Climate Change are now the priority concerns of everyone.  And everyone would like to hold on to the natural resources available in their respective countries in reserve while importing natural resources from others.  The more dominant and economically advanced countries are feeding on the inability of weaker economies to compete in the world market.  On the other hand, underdeveloped and developing countries have nothing to offer but their natural resources in a bid to industrialize and improve their financial positions.  The effects of this trading condition will only felt in the long term… when the poor economies find themselves poorer with the depletion of their natural resources.  The most often abused natural resources are forest and mineral resources.  Although forest resources are renewable, mineral resources, however, are not.

There is very limited number of economic activities in the upland.  The industries involved in the upland are mostly limited to agriculture, forestry and mining.  Agriculture takes a back seat too compared to mining and forestry.  Most disturbed by mining and forestry activities are the indigenous communities.  The ancestral rights of indigenous people are often violated in the name of national development.  Although there is always a promise of a better life through employment opportunities, this is more mythical than real.  Indigenous peoples, holding on to their old customs and traditions are often uneducated and unskilled to land better-paying jobs in these industries.  All there is for them to have are roughneck type of work which often do not pay much.

When trade of forest products is liberalized, the upland communities are just peripheral beneficiaries… or often not benefited at all.  Only the big business interests in the wood industry (together with downstream businesses) are the primary beneficiaries.  This is also the case in upland communities where mining is the main business activity.  Philippine upland communities will have no significant positive economic advantage with trade liberalization.

Just my little thoughts…

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