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Impact of Trade Liberalization in Philippine Agriculture and Fisheries Sector

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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

2
Presentation 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

3
I. 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

4
I. 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

5
I. 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.)

6
II. 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

7
II. 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
8
II. 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

9
II. 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

10
II. 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.

11
III. 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

12
III. 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

13
III. 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

14
III. 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

15
IV. 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.

16
IV. 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

17
IV. 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

18
IV. 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

19
V. 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.

20
V. 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

21
V. 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.
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