Business Mirror - 10 February 2022

RCEP deferment: An opportunity to re-think trade policy
By Rene E. Ofreneo

The Senate bowed to the wishes of over 100 peasant organizations and 200 mayors of municipalities engaged in organic farm production. The senators deferred to May the chamber’s decision on whether to ratify or not the Regional Comprehensive Economic Partnership (RCEP).

This deferment is a historic pause for the nation. It should not be wasted. It should provide the Senate and Malacañang an opportunity to re-think the country’s trade policy.

Trade policy is an instrument used by countries around the world to strengthen their domestic capacities. Look how the European Union, an ardent proponent of global agricultural trade liberalization, keeps maintaining its Common Agricultural Policy, a program that provides expensive support price to EU farmers regardless if these farmers are over-producing milk and butter. Look how the United States similarly maintains an expensive subsidy program for American farmers (through its Farm Bill program that is renewed every five years) while pushing for members of the World Trade Organization (WTO) to open up their agricultural markets. Look how India’s Narendra Modi swallowed his pride by repealing last year the grain procurement laws (similar to the Philippine rice tariffication law of 2019) that his free-trade technocrats railroaded in 2020 amid the pandemic.

And yet, in the Philippines, trade policy has been reduced to a simple question of opening up the domestic market in the naïve belief by the economic technocrats that trade liberalization per se will lead to greater competition, more investments, economic efficiency, higher productivity and jobs and prosperity for all. As we all know, the authors of such one-sided trade liberalization cannot offer proof that their policy is working.

The only proof that they can offer are textbook computations of expected economic gains from trade liberalization using CGE economic modeling exercises. And when the concrete market outcomes from such exercises deviate from their modeling forecasts, these free-trade neo-liberalizers shift to simplistic sloganeering, e.g., “we cannot afford to be left behind” or “foreign investors will skip us.” Look how they have failed to explain why the neo-liberal forecasts made during the 1994 Senate debate on WTO membership ratification did not materialize: 500,000 new jobs and P60 billion GVA in agriculture every year. Que lastima!

The point is that the primary purpose of trade policy should be to preserve, enhance and sustain jobs, businesses and farms at home. This means we should not accept or promote trade policies and negotiations that tend to weaken existing industry and agriculture and the jobs in these sectors. This does not mean maintaining a universal type of protectionism. Rather, it means working for an orderly adjustment and reasonable transition program for any affected sector should there be a liberalization process. This means we should not lower our tariffs or open up a sector ahead of other countries. Our tariff reduction or liberalization program should be in accordance with our requirements to survive, grow and prosper.

The problem in the proposed Philippine participation in RCEP, an agreement that requires the wholesale opening up of the industrial and agricultural markets based on zero-for-zero tariff arrangement, is that there is very little trade-development strategizing and planning being done by the government. For example, the Department of Agriculture has agricultural attaches posted in China, Asean, Europe and the United States. And yet, in a recent DA meeting on international trade, none of these attaches even discussed RCEP and its implications on Filipino producers and consumers. The attache assigned in China is also not able to monitor and report on the smuggling of Chinese agricultural and fishery products being dumped in the Philippines.

Apparently, the overall orientation of Filipino agricultural attaches is reduced to one simple task: look for potential markets for Philippine produce and help facilitate their entry into these markets such as the observance of phyto-sanitary standards or availment of certain preferential tariffs offered by some developed countries. These attaches hardly discuss the problem of agricultural trade deficits. More importantly, they do not discuss how the small farmers and fisherfolks can be involved in this business called global trade and how such trade can affect them at the farm level.

As it is, the attaches are naturally attached to those directly involved in the global trading business. These include the big exporters/shippers, agribusiness companies, corporate plantations, corporate agricultural integrators and the large importers/retailers. Making reports on how small farmers and small fisherfolks can be affected by RCEP and global trade is obviously not part of the TOR of agricultural attaches. One wonders what is the TOR for the commercial attaches under the supervision of the Department of Trade and Industry (DTI).

This brings us back to the urgent need for an honest-to-goodness review and overhaul of the country’s trade policy regime. The Senate and Malacañang should involve all the stakeholders, the small farmers and producers in particular, in such a review process. There should be a multi-stakeholder review and dialogue, which can tackle the following:

1. Review and reversal of trade policies eroding and subverting the industrial and agricultural base of the country.

2. Identification of unfair and predatory practices such as dumping and smuggling being committed by trade partners.

3. Institutionalization of corrective remedies against unfair trade practices.

4. Full disclosure of Philippine trade commitments under the WTO and the proposed RCEP.

5. Identification of winners and losers under the various trade agreements.

6. Programs for the transformation of potential trade losers into survivors and winners.

7. Development of a holistic trade-production development program based on the needs of Philippine industry and agriculture.

As to RCEP, the following “questions” or “tests” should be raised by the Senate before making its ratification decision:

• Will RCEP participation lead to more jobs, businesses and incomes, or will the reverse happen?
• Are the RCEP trade clauses consistent with the country’s capacity to grow?
• Will the Philippines be able to survive the trade juggernaut posed by China and bigger RCEP economies?
• Is RCEP not a threat to the country’s food security?

These are just a few questions that the Senate needs to answer. It will be best if the Senate shall undertake more dialogues with the peasant organizations and pro-organic farming mayors first before making their final decision on RCEP ratification. Agricultural trade policy should be farmer-centered.

Dr. Rene E. Ofreneo is a Professor Emeritus of the University of the Philippines.