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Bilateral free trade costlier than WTO

Manila Times | December 11, 2003

Bilateral free trade costlier than WTO

By Roderick T. dela Cruz, Researcher

THE option of forging separate bilateral free-trade agreements (FTAs) with various countries could put the Philippines at a tighter disadvantage than it presently is under the World Trade Organization (WTO), government negotiators and economic experts admitted.

“There is no such a thing as a level playing field in bilateral negotiations,” former Ambassador and Trade Secretary Cesar Bautista told a business forum recently.

Bautista, who now serves as chairman and president of Unilever Philippines, claimed that the best chance of developing countries for a balanced international trade is through the WTO, a multilateral trading system comprised of 148 economies.

While acknowledging that countries today are more interested in bilateral talks, Bautista insisted that bilateral or even regional agreements couldn’t replace the multilateral trading system espoused by the WTO.

He argued that the Doha Development Agenda, which was tackled in Cancun, Mexico last September, would be beneficial to both developed and developing nations, if this could only be implemented.

The Doha round is supposed to be concluded by January 1, 2005.

The 5th WTO ministerial conference collapsed in Cancún, as developed and developing countries clashed over the issues of export subsidy in agriculture and the so-called Singapore issues. The WTO general council would try to revive the talks in its headquarters in Geneva, Switzerland on December 15.

With the impasse in WTO, economists from the University of Asia and the Pacific noted the dramatic rise of initiatives to create free trade blocs and adopt bilateral FTAs in Asia.

Two countries are said to be engaged in an FTA when they allow their products and services to leave and enter their ports freely, meaning without tariffs or restrictions.

In a paper entitled “Aftermath of WTO in Cancún: Bilateral Free Trade Areas,” UA&P economists noted that several Asian countries are already negotiating with the US for a bilateral FTA, following the collapse of the WTO talks in Mexico.

However, Assistant Agriculture Secretary Segfredo R. Serrano, the head of the Task Force on WTO Agreement on Agriculture Renegotiations, warned that negotiations for a bilateral FTA are more strenuous than the WTO talks.

“Mas ipitan ang labanan sa bilateral (The negotiation is more confrontational at the bilateral level),” he said. “It is harder and more detailed.”

Serrano said larger economies, which have more resources and budget for technical negotiations, enjoy the advantage in the bilateral talks. “It is hard to imagine that the US would treat the Philippines as its smaller brother in the negotiation,” he said.

He said that under bilateral FTAs, the Philippines has to discuss different issues with all of its trading partners. “How many bilateral agreements do we need to sign then?”

On the possibility that the Philippines will pull out of the WTO and pursue bilateral FTAs instead, Serrano said this remains to be studied. The option, he said, is only possible if there is a “guarantee to the Filipino people that it will produce good results.”

Serrano suggested that all bilateral agreements should be pursued in favor of the Philippines and in support of the defensive interests of its agriculture sector.

Economic experts claimed that the Philippines needs to forge FTAs with at least three of the world’s largest economies: the US, Japan and China.

The Fair Trade Alliance, however, described as inadvisable the proposed RP-China FTA, since both countries produce the same products and are direct competitors in the export market.

For its part, an official of the Board of Investments suggested that before the Philippines enters into an FTA with any country, it should first review the list of all of its sectors and industries that stand to gain or lose under the proposed FTA.