Free trade is fair only for big boys

If globalization is so good for developing economies, how come the Philippines is hurting from it? If free trade supposedly creates more jobs, why are Filipinos losing theirs? These questions used to be asked only by "Leftist militants." But in recent months, capitalists who can hardly find common cause with radicals are themselves demanding answers.

First to complain were cement makers. Banded under the Philippine Cement Manufacturers Corporation, they entreated Trade and Industry Sec. Mar Roxas last June to save them from Taiwanese dumpers who were driving them out of business with a price war. Builders objected, arguing that cheaper cement would spur construction that, in turn, would perk up the economy. Besides, they said, the Philippines is committed to World Trade Organization deadlines to reduce import tariffs to nominal rates by the end of the decade. For five months, cement makers could do nothing but watch their sales drop. Related businesses dipped, too. Small-scale coal miners could not sell to cement plants that had slashed outputs by half. Haulers wondered when they could roll their trucks out of garages anew. Noting that construction did not pick up as expected, Roxas slapped in November a tariff of P20.60 per imported bag of cement - but only for 200 days and subject to final affirmation by the Tariff Commission.

Next to cry out were garment firms. US importers, anticipating slow sales following the 9/11 attacks, abruptly cancelled their orders from Asia. Ships laden with shirts, pants and underwear from China and Indonesia sailed back across the Pacific and dumped their cargo on the Philippines. Local garment makers cried foul. Officials paid no heed, saying it would benefit Filipino consumers. It didn’t; consumers had no shopping money because their own industries were in distress. A dozen garment and textile firms closed shop.

Grin and bear it, economists lecture. Cement and garment makers must learn to reduce production costs if they want to stay in business. Globalization dictates that manufacturers look for efficiencies to keep their prices low and their quality high. That’s easier said than done, businessmen retort. It’s only natural for them to cut costs everywhere they can to maximize profits. But they simply can’t play in a global field where the biggies – the US and Western Europe - dictate the rules. The WTO demands all member-states to accept cheap goods from abroad, or else suffer trade sanctions. Yet it does nothing when the very proponents of free trade impose tariff barriers. To save American firms, President George W. Bush last month imposed a 30-percent tariff on US imports of steel. Exporters from Asia and Eastern Europe howled, but the WTO is silent about it. The European Union banned tuna imports from the Philippines, saying it prefers to buy only from former colonies in Africa and Central America. Again, the WTO is not citing Filipino history of 420 years under Spain.

With such unfair rules, capitalists and workers find no recourse but to band together. This week, an alliance of cement factory unions marched to Congress to protest the shabby treatment their bosses have been getting. Soliciting support from sectoral Rep. Etta Rosales, the Philippine Cement Workers Council (PCWC) noted that four importers had dumped enough Taiwanese cement to bring two of 17 local producers close to bankruptcy. Roxas’s temporary import tariff of P20.60 per bag had breathed life back to the industry, which paid P78 million in taxes in the last quarter alone. But even before the 200 days is up, the Tariff Commission already is reviewing the protective rate. How the workers wish the Commission would include them as petitioners against the dumping. Their plea was denied. Worse, word spread yesterday that it had prematurely released a decision set for Mar. 21. The Commission’s final verdict: scrap the P20.60-tariff.

Onion farmers also joined their once-hated money-lenders this week to denounce dumping from China. Mostly from Nueva Ecija, leaders of the Union of Growers and Traders begged Rep. Aurelio Umali to salvage their farms. Half-a-million members expect to harvest 168,000 tons of onion this year, 8,000 tons more than the usual local consumption of 160,000 tons. Yet, they cried, the Department of Agriculture has allowed unrestricted imports from China, the newest member of the WTO.

Umali lost no time in filing a resolution urging the agriculture office to stop issuing onion import permits. He also dispatched aides to the Bureau of Plant Industry to investigate. To their surprise, BAI personnel said the last time they issued a permit was in early January. So how come ships from Hong Kong continue to dump thousands of tons of onion to this day?

Former senator Wigberto Tañada, now head of the Philippine Rural Reconstruction Movement, heard about the onion farmers’ plight. Also an ex-Customs commissioner, Tañada immediately smelled a rat. Obviously, he said, importers were "recycling" permits that supposedly are good for only one shipment.

The observation adds another dimension to the problem. RP is not only too diligent in following WTO guidelines despite breaches by the big boys, but is also too weak in enforcing its own laws against smuggling.

Rosales noted as much in the cement fray. She pointed out that 97 low-paid workers in one cement plant alone paid more taxes (P3,216,000) than the four Taiwan importers (P951,433) in 2000. This could only have been done through technical smuggling, that is, misdeclaring the volume of cement they shipped in. Industry observers recalled that the 17 used to be called a cartel of foreign investors. What cartel would easily cave in to legal importers, they asked, if no smuggling was involved?

Sen. Manuel Villar suspects worse in the case of onions from China via Hong Kong. He said this week he would press the Customs bureau to look into tips that dumping the pungent spice was only a front for shabu smuggling. The scent can conceal the real contraband from sniffing K-9 units, he speculated.

The government, meanwhile, is itself is having second thoughts if free trade is fair at all. Citing the new 30-percent tariff on US steel imports, Bukidnon Rep. Miguel Zubiri said free trade has its limits. "Bush signalled to the world that free trade stops when injury to national interest begins," he explained. "Free trade is not higher than national survival."

Three laws are supposed to protect Filipino businessmen, workers and farmers from the ravages of globalization: the Safety Measures Act, the Anti-Dumping Law, and the Countervailing Duty Law. But government is either too slow to act, or the laws lack teeth. Besides, both the government and the laws are subject to frequent court restraining orders.

To fight onion dumpers, Villar is contemplating what is anathema to the World Bank and the WTO: farm subsidies. Whether he can pull it depends on what Zubiri calls "lovers of free trade." RP could be blacklisted from long-term, low-interest agricultural loans, and face trade sanctions at that. The prospects are horrifying for government economic managers.

Still, Roxas wondered aloud if the government must now review RP’s membership in the WTO. American and European investors, when they read the papers about Roxas’s idea, demanded to know what he’s up to. The next day, he backpedaled and said the government will only review the adequacy of safety nets against too swift globalization.

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