Tuesday, December 20, 2005

Demystifying the World Trade Organization

The way the discussions on the outcome of the recent WTO Ministerial Conference are shaping up, it’s as if the future of this country is anchored on the outcomes of those gabfests. The truth is that the Philippines’ prospects, lies solely on what we are doing internally to shape up the economy as the forces of globalization, good or bad, rages on.

Is the government really doing something to make agriculture competitive? Are there funds for vital economic infrastructure? Are the schools producing a well-trained workforce that can handle the requirements of the emerging knowledge economy? Those are the more relevant questions that we need to do something about rather than the staid provisions of WTO ministerial declarations.

It’s funny that government negotiators were “so happy” with the talks that produced only vague provisions about the removal of European subsidies by 2013 and the promises about giving better treatment to African cotton in the US market. If one reads the ministerial statement more carefully, the entire document is ampao [popped rice], devoid of any tangible provision on anything. It’s as if it was drafted so the ministers would have another round of junkets in Geneva. And it’s also amusing that critics seem to think the Philippine economy would crumble even before the ink used to sign that document has dried.

Analysts tend to think the WTO shapes globalization. Reality is that the WTO is nothing but a global bureaucratic talking shop that is just reacting to global events. That institution is actually just playing catch up to make sense of the accelerating chaos brought about by rapid technological change and greater mobility of capital, people, and ideas. As such, policy changes that it proffers will always be piecemeal and incremental. Don’t be surprised if the next round of talks will produce another meaningless document.

For two reasons. First, the decisions in WTO are made through consensus. A single no vote could torpedo the entire ministerial talk. Since there are 149 members at varying stages of economic development, they could only agree on a ministerial declaration by adopting the least common denominator. That’s the reason why the Hongkong gabfest produced only one time-bound provision, the elimination of export subsidies by 2013. (By the time, a lot of farmers in Africa would have died for failure to access important markets.) Second, and the more important, is the paradox that while member countries believe that liberal trade is beneficial (and yes, with Communist governments in Vietnam, China, and recently Cuba are the most eager supporters), they negotiate like dyed-in-the-wool mercantilist of the 1800s whose idea of development is beggaring thy neighbors. This is because negotiators are always under pressure at home to pander to vested interests.

It’s true that the country’s tariff structure has been on the downtrend since we signed up with the Marrakesh Treaty in 1994 that gave birth to the WTO. It’s true that we aligned many of our trade policies as a result of the Marrakesh Agreement. But we did so primarily because our policy makers believed, rightly or wrongly, that we need to do away with the dirigiste policies of the past, of monopolies and cartels, and of high tariff walls that werte sheltering inefficient crony industries. These reforms were actually of our tariff reform program that started in 1981 and continued until 2004.

But mind you, the Philippines actually complied superficially with the WTO requirements, just like most other countries including the United States and Europe, and retained actually a lot of protective covers on many agricultural commodities including rice, corn, sugar, and poultry, and other “sensitive products.” The Philippines has retained a host of many restrictions including the constitutional limitations on ownership in telecommunications, insurance, banking, securities, financial services, advertising, public utilities, shipping, media and so many others. Since everybody else is doing the same, we could expect that future negotiations would be more acrimonious and prone to deadlock. And while the WTO is sorting endlessly some of these tangles, the world is changing fast.

Now we have call centers, medical transcriptions, and other information technology enabled services generating billions of dollars worth of exports and creating thousands of jobs. Now, we are getting more than $10 billion worth of remittances each year that are boosting domestic demand, thus giving life to factories. Banks and related industries are more and more getting money from outsourced financial services. All these are happening without any clear cut international agreements on trade in services and people mobility.

It used to be that agricultural experts would jump like chimpanzees every time agriculture grows at 2 percent. Now, given good weather, the farm sector could actually grow at 6 percent. And that’s because under a liberal trading environment, farmer-entrepreneurs and agribusiness companies could have greater access to inputs, packaging materials, and biomedics. It’s not paradise, but it’s not hell either as conjured career activists when they cracked their heads against cop’s truncheons in December 1994 in protest against the Senate’s ratification of the Marrakesh treaty.

The point here is globalization is that will always be there with or out the WTO ministers producing the best written declaration. The services sector is doing well so far, but how about the farm sector? And what are our policy makers doing about it? Congress crafted the Agricultural Modernization Act a few years after WTO’s entry into force in January 1995, but it seems this law has been totally forgotten. Where now is the program on the so-called “strategic agricultural and fisheries development zones”? How was the money for “agricultural modernization” used? These are the more important questions that we need to ponder upon.

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