‘Benefits of Free Trade Outweigh Disadvantages’: Philippines Trade Minister
Filipinos are purchasing more processed foods, some of which come from Indonesia. The Philppines is among the region’s fastest-growing economies. (Reuters Photo/Romeo Ranoco)
Being an early adapter of liberalization, the Philippines has reaped some benefits from free-trade agreements.
“In general we think of trade agreements as a way to improve our industries. Only by introducing competition can we make them more competitive,” Philippine Trade and Industry Secretary Gregory L. Domingo told the Jakarta Globe last week.
Protecting local industries can be politically favorable, but it only leads to less efficient local firms, at a cost to the country’s consumers. In the Philippines, industries that were protected in the past — such as in the transportation, telecommunication, electronics and service sectors — were not competitive until they were liberalized, he said.
“The challenge is to find a phase to introduce competitiveness that will match the ability of your industry,” Domingo said, adding that domestic industries that mainly serviced the local market, would likely take most of the impact from any free-trade agreement.
On the other hand, free-trade agreements can benefit the country’s exports, by opening access to more market destinations, he said.
The Philippines’ biggest export is electronics, accounting for 40 percent of the country’s $44 billion total exports last year. Other Philippine exports are prefabricated housing, wires and harnesses, car transmissions, coconut oil and tropical fruits, Domingo said.
The country is also highly integrated in the global supply chain, supplying components for global industries.
“Our exports are already quite competitive,” he said.
The exposure to global markets also forces the Philippine textile industry to produce high-end products, as the country cannot compete in term of costs with cheap exports from China, Pakistan,Vietnam and Bangladesh.
Considering all the benefits, Domingo said, his country had vested interests in multilateral trade agreements such as the Doha Round — the ongoing negotiation in the World Trade Organization.
Domingo noted that Asia-Pacific Economic Cooperation member countries have made some progress to ensure progress when the WTO meets in Bali in December.
The Philippines also showed its intention to enter the Trans-Pacific Partnership, a US-oriented free-trade agreement negotiated by Australia, Brunei, Chile,Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
“The TPP is something we’re seriously looking at, it’s something that very favorable to us,” he said, adding that the agreement already includes the Philippines’ largest trading partners.
Japan accounts for 20 percent of the Philippines’ total exports, while shipments to the United States make up 13 percent.
Entering such trade agreement will open some potential new markets in South America, Domingo said, noting that the ambition of the TPP was slightly higher with regards to environmental standards, intellectual property rights and services. As such, the Philippines may not qualify for the agreement.
“It is by invitation only, so we cannot really apply for it,” Domingo said.
In the case of trade between Indonesia and the Philippines, Indonesia has benefited from the Asean-China free-trade agreement, which became effective in 2010, Domingo said.
Total trade between Indonesia and the Philippines has risen by 3.6 percent to$2.7 billion in the first seven months of this year, compared to $2.6 billion in the same period last year. During the January-July period, Indonesia posted a $1.6-billion trade surplus with the Philippines.
“It’s hard for us to export more toIndonesia,” Domingo said. “Whatever we have, you [Indonesia] have more of.”
Philippine imports from Indonesia are made up mainly of crude palm oil, metals, minerals and processed food.
The Philippines received an investment-grade rating from Moody’s Investors Service on Oct. 3, reflecting its speedy growth and political stability in past few years. That also means the country is now ranked investment grade by three of the world’s largest rating agencies.
Reference: http://thejakartaglobe.beritasatu.com/business/benefits-of-free-trade-outweigh-disadvantages-philippines-trade-minister/
