Free Trade Agreements

From Euronews

Trade deals were stalled mainly due to large developed countries’ differences at the recently concluded World Trade Organization (WTO) 11th ministerial conference (MC-11) in Buenos Aires, Argentina. The bigger powers especially the United States (US) and the European Union (EU) pushed their own development agendas and set aside that of the lesser economies, while accusing the WTO to be biased for certain countries.

This crisis of a standstill highlights the intense maneuvers of  the world’s dominant powers in protecting their own economies. On the other end, underdeveloped countries like the Philippines can only expect more biased global trade and investment mechanisms like the WTO. These will facilitate how the big countries thrive at the expense of the smaller ones, thanks to the facilitation of the latter’s national governments.

The shift. The disagreements that stalled the WTO is rooted in how the world’s most powerful countries are shielding their economies from the onslaught of globalization. The situation has only gotten worse since the 2008 global financial crisis. The year 2016 for instance saw the lowest global gross domestic product (GDP) in three years at 2.4%, according to the World Bank, with the EU, US and Japan experiencing significantly slow growth in the same period. Of the total US$217-trillion ballooning global debt, meanwhile, one-third is by the US alone, or two percentage points bigger than the combined debt of the poorest countries across the globe including the Philippines.

Market-oriented policies promoted by developed countries have taken their toll on the global economy especially underdeveloped nations. For instance, the International Labour Organization (ILO) conservatively expects the ranks of the global unemployed to exceed 200 million this year. Over 1.4 billion of those with jobs are employed in low-paying and insecure work – especially in the Latin Americas, Asia and Africa. Workers’ wages are pegged at low rates and 2015 saw the slowest wage growth recorded in four years at 1.7 percent.

The repercussions of globalization have triggered the superpowers to increasingly turn to protectionist measures to keep market-oriented mechanisms from affecting their own industries. Yet, the crisis also drives them to persist in wielding neoliberal policies in order to fully utilize the human and natural resources of less developed countries in the continuous drive for profit.

The US’ position to shift from multilateral trade agreements to smaller regional and bilateral deals that it can dominate to push its ‘America First’ agenda would be the biggest factor in the disagreements that stalled the WTO. The US has expressed dissatisfaction towards WTO’s enforcement of existing trade rules particularly against countries it feels are employing trade distorting measures such as China.

On the other hand, the European Union (EU), which appears satisfied with its current level of trade protection, is seeking greater market access and deregulation in other WTO-member countries. Yet, it unites with the US and Japan in trying to restrain China from using WTO rules and technicalities to its advantage.

Standstill. Against this backdrop of big power rivalry, underdeveloped countries were unable to get even incremental reforms. The WTO still restricts public stockholding for domestic food security. Special Safeguard Mechanisms (SSM) for agriculture remain unworkable. Developed country subsidies that undermine small farmer and fisherfolk livelihoods in backward agrarian economies around the world remain.

Nonetheless, dragging negotiations have forestalled efforts to expand the mandate of the WTO and open up economies even more. Proposals to take up investment liberalization, discipline domestic regulation, and discuss e-commerce and restriction of fishing subsidies that would have immediate and far-reaching adverse effects on underdeveloped countries did not advance.

The abrupt barring of civil society representatives from participating in MC-11 also confirms the nontransparent and undemocratic nature of the WTO.

Redirect. The wealthiest 1% of the world including the highest-paid executives and owners of the biggest companies are the ones that benefit from governments’ market-oriented policies. According to Oxfam International, the combined wealth of the world’s eight richest individuals of US$405 billion is equivalent to the combined incomes of the 3.6 billion poorest.

The existing global trade and investment system remains grossly inequitable and disadvantageous to underdeveloped countries. This is among the biggest factors creating poverty, worsening inequality, destroying the environment, and indeed creating the conditions for political violence and repression in the Philippines and so many other countries around the world. That governments, such as the Philippines’, continue to implement neoliberal measures from local policies to trade deals like the WTO, keeps underdeveloped countries at the losing end.

The challenge remains to redirect nations towards a more just global order upholding human, economic and social rights. The farmers, workers, informal sector workers, and low-paid employees of the world will be better served if the national governments assert their economic sovereignty beyond the WTO.

From Peace History

Research group IBON said that the spirit of the Duterte administration’s rejection of official development aid (ODA) from the European Union (EU) for being used to intervene in the Philippines’ internal affairs is welcome. There is however a much clearer and stronger basis to reject ‘aid’ from the United States (US), which has used its aid programs to become the most interventionist foreign power in the country, said the group.

The Duterte government reportedly informed the EU that it will cease accepting aid from the bloc for future projects. There is still no formal explanation but it can be recalled that Pres. Rodrigo Duterte said in October 2016 that he is willing to forego financial aid from countries critical of his anti-drug campaign. He has also repeatedly said that he views foreign criticism as intervention in the country’s internal affairs.

IBON noted that EU aid accounts for a very small share of total ODA to the country. The US$227 million from the EU in 2015 was just 1.5% of total ODA for the year. Even if aid from multilateral agencies is not counted, EU aid to the Philippines is still less than 3% of total bilateral aid from individual donor countries. Japan leads with a 65% share of total bilateral aid followed by the US at 15%, Australia at 7%, and Korea at 6 percent.

The US meanwhile, according to IBON, is the most interventionist foreign power in the country and aggressively interferes in the country’s economic and political affairs far beyond what the aid figures might indicate. Former United States Agency for International Development (USAID) Administrator Andrew Natsios has candidly said that ‘development aid’ is “the most important tool of American influence in the developing world”.

IBON added that the US is the single-biggest foreign influence on Philippine economic policy-making. Taking just the period since 2011, the US government had been using the US$739 million Partnership for Growth (PFG) initiative to bring the Philippines into its flagship Asia-Pacific economic integration scheme – the Trans-Pacific Partnership (TPP) agreement. Though the new US Trump administration has junked the TPP, the PFG will certainly still be used to push pro-US economic policies, said the group.

There is also the US$1 million USAID-funded The Arangkada Philippines project (TAPP) administered by the American Chamber of Commerce from 2010 to 2016. This lobbied policymakers on 471 policy recommendations of which some 80% have been started or already completed, noted IBON. In addition to this, there are four other USAID economic policy intervention projects cumulatively worth some US$50 million (Php2.4 billion): Trade-Related Assistance for Development (TRADE), Facilitating Public Investment (FPI), Investment Enabling Environment (INVEST), and Advancing Philippine Competitiveness (COMPETE) Project. These are multi-year projects but it is still striking that their combined budgets rival the personnel expenses of the government’s entire economic planning agency National Economic and Development Authority (NEDA), IBON observed.

According to IBON, the US wants policies that benefit American corporate export and commercial interests as well as create the kind of free market-driven trade and investment system in the Asia-Pacific that allows it to maintain its hegemony and dominant economic position. US intervention in Philippine economic policy-making has always been to serve its own economic interests and not to develop the country, IBON said.

Yet international development cooperation should be about development and improving the lives of people, said the group. Rejecting US ‘aid’ will send the strongest possible signal that the Duterte administration indeed upholds independent foreign policy including in the vital economic realm, IBON concluded. ###


Sugar cane plantation. Khanh Hoa province. Vietnam
​​The fight of Filipino peasants such as the farmworkers of Hacienda Luisita and Lapanday Foods Corporation for land, food, and justice, stands to be further undermined once the Philippine government fully accedes to the China-backed mega Free Trade Agreement (FTA) Regional Comprehensive Economic Partnership (RCEP).
While the controversial Trans-Pacific Partnership (TPP) was seemingly put off by United States president Donald Trump, RCEP is now a major highlight in the currently Philippines-chaired Association of South East Asian Nations (ASEAN) meetings towards its 50th year summit in November this year. Millions of Filipino farmers will be among those at the losing end of the RCEP agreement which intends to remove all remaining protection over the Philippine economy towards unhampered trade and investment. Here are the reasons why:

1. RCEP threatens the country’s food security. A Philippine Institute for Development Studies (PIDS)-funded study shows that rice production would sink by 4.3% as import volume rises by a huge 33.15% under RCEP.  Another PIDS study projects that Philippine rice import volume could increase by 100% from the current 2.2 million metric tons (MT) to 4.4 million MT from 2017 to 2022. This is especially when the Philippine quantitative restriction* (QR) on rice under the World Trade Organization’s (WTO) Agreement on Agriculture is lifted this July. 

Studies show that the income of already impoverished rice farmers will drop by 29% upon the lifting of the rice QR. This is because subsidized cheap rice imports will flood the domestic market, compete with local rice expensively produced by Filipino farmers who lack State support, and depress more the farmgate price of palay. The Philippines is among the five RCEP countries in the list of the world’s biggest rice importers.
Weakening rice production will lend to shrinking agricultural production. While palay used to account for almost one-fourth of the gross value added (GVA) in agriculture at current prices, its GVA has been falling by 10.4% annually from 2014 to 2016, contributing to overall agriculture decline of almost 1% yearly.
This trend will worsen with greater liberalization and a deluge of rice imports under RCEP and WTO. This will impact on the livelihood of close to 20 million Filipinos, or about a fifth of the national population, made up of 2.5 million small farmers, several hundred thousand farm laborers and other workers involved in the supply of farm inputs and machinery, milling/processing, warehousing, transport, other services, and related economic activities. It will impact on the entire nation’s food security, much more that of the direct food producers.
FTAs like RCEP will also open up countries’ natural resources further to foreign investments. Pushing amendments to the Philippine Constitution to make it attune to investment liberalization can lead to full foreign ownership of arable lands, converting more land supposedly devoted to food and other national needs to profit-seeking ventures of few big and foreign corporations, such as ecozones and tourism complexes. This will worsen the country’s food insecurity and make land distribution to farmers even more remote.

2. RCEP will pose a threat on poor Filipino farmers who rely on saving and exchanging seeds for their planting needs.  In Asia, it is said that farm-saved seeds account for as much as 90% of all seeds used in the region. But the long tradition of farmers of saving and freely exchanging seeds among themselves has been under relentless attack by big agribusinesscorporations promoting Intellectual Property Rights (IPR)-protected agrochemical-intensive seeds including the so-called high-yielding varieties (HYVs), genetically modified (GM) seeds, as well as hybrid seeds.

There are alarming proposals that may privatize farmers’ seeds through RCEP: first, Japan and Korea’s proposal that all RCEP countries join the UPOV 1991**; (2) Japan’s proposal to ‘criminalize’ seed saving; and (3) India’s proposal to codify traditional knowledge and make it available to patent offices. FTAs like RCEP allow corporations to rake in bigger corporate profit by displacing farmers’ seeds and replacing them with patented, commercial seeds that farmers have to buy. This will also mean more expenses and greater bankruptcy and poverty for farmers.

3. RCEP will further restrict the Philippine government from using policy and regulatory tools to promote national economic development.

​ ​

“Fair and equitable treatment” of foreign investors is one of the rights that negotiators want RCEP to guarantee. This pertains to a “standstill” on laws and regulations, according to critics of RCEP. It means that RCEP governments are not allowed to revise or amend their existing laws if it would harm the interest of RCEP investors.

This principle is problematic especially for underdeveloped countries like the Philippines. Many poor countries do not yet have the needed laws or a sufficient regulatory capacity to deal with emerging economic, environmental and other issues, to which they are more vulnerable, that may impact their development and people. For instance, RCEP will prevent the country from advancing a genuine agrarian reform program that would distribute land for free to tillers and institute sufficient support services to farmers and farmworkers as central to a genuinely people-centered development program.
It will also further prevent government from reversing neoliberal policies and programs that have been causing massive economic and social harm. Thus, RCEP can also hinder the Philippines from revoking trade and investment policies that have caused the deterioration of the agriculture sector and that currently opens the country’s land and agricultural resources for big and foreign corporations to plunder. 
Additionally, one of the contentious issues that have emerged in the RCEP negotiations is that of the investor-state dispute settlement (ISDS). With it, foreign corporations from RCEP countries could legally oblige RCEP governments to implement the deal’s provisions on investment protection and file charges before an international tribunal in case the latter fails to fulfill such obligation. Reports say that foreign investors can be considered to have won 67% of such cases against RCEP governments, but with the latter having to shell out for legal fees 70% of the time. For countries like the Philippines, whose poor majority are farmers and fisherfolk, the ISDS is not only another financial burden but an affront to the sovereign will of a nation to decide what is best for its people.

4. RCEP will not necessarily increase Philippine food and agriculture exports and will further undermine the country’s agriculture sector. Philippine trade officials claim that the Philippines would push for more exports of local goods in the RCEP to include agri-food commodities such as canned tuna, fresh pineapple, mango, garments of synthetic fibers, raw cane sugar, crude coconut oil, cut tobacco, bananas, coconut, copra, and cooking oil. But the country could not expect to increase exports or substantially gain from more trade liberalization. RCEP markets have already been opened up for Philippine productss in the past, but the country has not taken advantage of this so-called market openness. This is because the country’s weak manufacturing base and underdeveloped infrastructure continue to hamper any potential to improve production. In other words, the country needs to focus more its efforts on developing domestic production for domestic consumption, instead of the competitive yet uncertain markets.

Trade and investment liberalization has only seen the deterioration of the Philippine agriculture sector, increasing agricultural deficits and the deluge of foreign products to the detriment of the Filipino farmers. 
FTAs have not served the country’s development contrary to promise. Instead of agreeing to FTAs, the government should seriously consider breaking free from unequal agreements the Philippines is already in and refuse to be bound to more of the same.

*Quantitative restriction (QR) limits rice importation into the Philippines to protect Filipino rice farmers and consumers
**UPOV 1991 or the 1991 Act of the International Union for the Protection of New Varieties of Plants is a set of common standards on how countries should implement plant variety protection. But it is biased towards seed companies whose patented varieties are protected, which farmers could not save nor exchange unless they pay or government allows it. 

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