Title: Impact of Trade Liberalization in Philippine Agriculture and Fisheries Sector
1 Impact of Trade Liberalization in Philippine
Agriculture and Fisheries Sector
- by Naty Bernardino, IGTN-Asia
- Presentation at the South Center Panel on Making
Trade Support Development Global Problems and
Viable Alternatives, WTO Public Symposium, April
21, 2005, Geneva
2Presentation Outline
- I. Brief Historical Background
- II. Trade Liberalization in Phil. Agriculture
- A. Basic features of Phil. Agriculture
- B. GATT-UR Commitments
- C. Impact of Trade Liberalization
- Trade Liberalization in Fisheries Sector
- A. Basic features of the Sector
- B. Trade Liberalization Policies
- C. Impact of Trade Liberalization
- July Framework Issues and Implications on
Agriculture and Fisheries - Conclusions and Recommendations
3I. Brief Historical Background
- Post-Independence era of the 50s -60s
- - continuation of colonial trade relations
mainly with the US Philippines provided raw
material and semi-processed raw material exports
to US industries (Parity Rights, Bell Trade Act,
etc.) - Export-Oriented Industrialization era of the 70s
- - supply-driven petro-dollar loans from IFIs
financed low value-added and labor-intensive
exports manufacturing of electronic parts and
garments
4I. Brief Historical Background
- Debt crisis of the 80s and SAPs
- - shift towards all-out trade, investment and
finance liberalization policies together with
cuts on public spending and privatization/
deregulation of public services to arrest
negative balance of payments from fixed to
floating dollar-peso exchange rate (SAPs) - - unilateral tariff reduction programs started
- (TRP I, II, III) together with lifting of import
restrictions on key products reduction/withdrawal
of domestic support for agriculture
5I. Brief Historical Background
- 1990s
- - conclusion of the GATT-UR
- - ASEAN Free Trade Area (target 0-5 tariff
level by 2003) - - post-Asian financial crisis (foreign mergers
and buy-outs of key industries liberalization of
banking and finance, retail trade, foreign lease
on land, mining exploration, etc.) -
-
6II. Trade Liberation in Philippine Agriculture
- A. Basic Characteristics of Philippine
Agriculture - - small-scale peasant economy with a few
capitalist-run TNC plantations in the South - - employs 50 of Philippine labor force
- - contributes 30-40 of GDP
- - traditional exports (copra oil, bananas,
sugar, pineapple, etc.) faced prolonged decline
in world prices in the last 4 decades attempts
at new export winners failed
7II. Trade Liberation in Philippine Agriculture
- B. GATT-UR Commitments
- Tariff Binding and Tariff Reduction
Binding Coverage Average Bound Rate Average Applied Tariffs in 2002
Agricultural Products 99.4 (783 tariff lines) 34.6 9.2
Non-Agricultural Products 61.8 (2,998 tariff lines) 23.4 5.2
Philippines (Total) 66.8 (5,640 tariff lines) 25.6 5.7
8II. Trade Liberation in Philippine Agriculture
- B. GATT-UR Commitments
- - Philippine domestic support is way below de
minimis level of 10 - - QR for rice was maintained tariff quota was
set at 50 for a gradually increasing minimum
access volume (224,000 mt at 50 tariff in 2004)
but actual import volume since the late 90s rose
to an average of 1,000,000 mt
9II. Trade Liberation in Philippine Agriculture
- C. Current State of Phil. Agriculture and Impact
of Trade Liberalization - growing trade deficits in agriculture trade since
late 90s - tariff cuts led to revenue losses contributing to
countrys fiscal crisis - stagnant agricultural production growth rates
that could not cope with increasing population - import dumping (world prices of rice and maize
are only 1/2 and 1/3 of local prices,
respectively) thanks to US subsidies that is
equivalent to 76 of the cost of producing its
own rice, obscenely making US the third largest
rice exporter -
10II. Trade Liberation in Philippine Agriculture
- C. Current State of Phil. Agriculture and Impact
of Trade Liberalization - countrys import dependency ratio on rice, its
staple food, rose from 3 in the 80s to 12 in
2003 - domestic support for agriculture has been
decreasing due to governments fiscal
constraints complicated by other governance
issues like smuggling, corruption, etc.
11III. Trade Liberalization in the Fisheries Sector
- Basic Features of the Fisheries Sector
- - small-scale underdeveloped fishing industry
- - employs1.6 million labor force, mainly
subsistence artisanal fishers approximately 6
million of household population depend on fishing
for their livelihood - - poverty incidence of 53 among fishing
population is higher than the national average of
30 - - contributes 5 of GDP
- - declining growth rates in production (from 2
in the 80s to 1.5 in recent years) indicative
of depleted resource base
12III. Trade Liberalization in the Fisheries Sector
- Basic Features of the Fisheries Sector
- - fishery exports is 6 of total production
(main exports are tuna, shrimp and seaweed) - - import volume in 2002 accdg. to govt figures
was 66,000 mt, mainly sardines, tuna and
mackerel but smuggled Taiwanese and Chinese fish
imports may bring actual import volume to around
174,000 mt - - fish imports still relatively small due to
domestic regulation, i.e. Fisheries Code of 1998
allowing imports only for canneries and
processing prohibits selling in wet markets - - net-importer in volume but net-exporter in
value terms -
13III. Trade Liberalization in the Fisheries Sector
- B. Trade Liberalization Policies
- - tariff reduction was done mainly through AFTA
with applied tariff rates ranging from 10-15 in
2001 twice these rates as per NAMA formula would
bind tariffs at only 20-30 - - open access regime combined with push for
aquaculture farming has caused serious depletion
of marine and coastal resources, displacing
communities and affecting livelihood of
small-scale fishers - - lack of serious resource management program
combined with lax enforcement of law to prevent
encroachment of foreign commercial fishing
vessels into the countrys territorial waters
14III. Trade Liberalization in the Fisheries Sector
- C. Impact of Trade Liberalization
- - declining growth rate in value of exports from
8 in the 80s to only 2.7 in the 90s to the
present due to failure to compete with
highly-subsidized imports from China and Taiwan - - existing import restrictions have cushioned
impact of dumping present volume of imports have
no observable drastic effect on local prices yet
but if NAMA is put in place, what happened to the
agricultural sector may be repeated in fisheries - - a critical problem is unsustainable resource
utilization resulting from intensified export
production (aquaculture and commercial fishing)
and lack of resource management programs
15IV. July Framework Agreement Implications and
Issues
- Annex A Framework of Modalities in AoA
- - Expansion of Blue Box exemptions and effect
on US and EU subsidies - - no deadline for export subsidy elimination
- - SDT lip service blank modalities on SP and
SSM - - contentious issues on tariffication, i.e.
AVEs, tariff peaks, etc.
16IV. July Framework Agreement Implications and
Issues
- Annex B on NAMA Modalities
- - 100 tariff binding coverage
- - loss of flexibility by sovereign countries to
use tariff adjustment as a strategy for
industrial development NAMA is a recipe for
deindustrialization - - simplified formula of 2 x 2001 applied tariff
rates is unfair to developing countries which
implemented earlier unilateral tariff reduction - - Philippines 2001 non-agricultural applied
tariff rate averaged only 4.3 multiply this by
2 would bind tariffs at only 8.6 on the average
17IV. July Framework Agreement Implications and
Issues
- Fisheries Inclusion in NAMA
-
- - tariff reduction to displace 90 of worlds
fishers who are mainly small-scale artisanal
fishers in developing and least developed
countries - - countrys 2001 applied tariff rates in
fisheries ranged from 10-15 twice these rates
would bind tariffs at 20-30, not enough
protection for a sector with threatened resource
base - - even if defined as environmental good,
protection of small-scale fishers and resource
management/conservation should be the priority
concern instead of tariff reduction - - developed country subsidies for their
commercial fishing activities in
cross-territorial waters should be abolished
while domestic subsidies for small-scale fishers
in developing countries should be protected and
increased in the framework of SDT -
18IV. July Framework Agreement Implications and
Issues
- Fisheries Inclusion in NAMA
- - tariffs should be recalibrated to incorporate
social and environmental costs and maintain
flexibility on tariff application to take into
account seasonality of fishery products - - precautionary principle and SDT should
generally guide and therefore restrict trade of
fisheries as an environmental good
19V. Conclusions and Recommendations
- Ten years of the WTO have not made trade
supportive of development. Gross imbalances
remain. The Doha Development Round, despite its
rhetoric on development, retains the fixation on
further liberalization especially if the July
framework agreement is not drastically altered.
- Trade justice and protection for the South should
be the overarching framework if trade is to
support development. Current NAMA modalities are
a recipe for deindustrialization. AoA modalities
on domestic support is a reversal of the original
GATT-UR. The rhetoric on SDT should be given
flesh.
20V. Conclusions and Recommendations
- 3. Guided by the above framework, substantive
reforms in the Doha Round negotiations
(particularly in agriculture and NAMA) should be
pursued - - SP and SSM modalities as proposed by G33
- - G20 position to add more disciplines/criteria
to the blue box and green box including
product-specific caps - - G20 position of 5-yeardeadline on export
subsidies - - Option of non-concurrence by developing
countries to NAMA or adoption of higher
multiplier rate and a more realistic base year in
the formula for tariff reduction and binding - - Exemption of fisheries from NAMA
21V. Conclusions and Recommendations
- 4. National governments of the South should also
be made accountable for their WTO plus and
previous unilateral policies on trade
liberalization. Maximum policy flexibility
should be used in the national capitals to
reverse these past policies. Full caution should
be exercised in the face of bilateral trade deals
that are being clinched parallel to WTO.