One big step for free trade (again) with the US
Manila Times
Editorial
26 May 2005
One big step for free trade (again) with the US
THE long-standing close relationship between the Philippines and the United States may lead us to think that a free-trade agreement between the two countries should come naturally.
Free trade after all is nothing new to both countries, which are embarking on some form of free-flowing exchange of goods after Washington’s formal grant of independence to Manila at the close of the Second World War.
That free-trade arrangement had seen Philippine raw materials - prominently sugar - shipped to the US in exchange for finished goods, including consumer goods like Snickers and other sweet chocolates.
A succession of global trading deals has redefined that arrangement into what has come to be known as the US General System of Preferences, under which Washington allows certain types of Philippine goods to enter the US at limited amounts but at reduced tariffs or import duties.
The GSP, however, has benefited more than just the Philippines to include other US trading partners.
Only recently a global system of providing preferential access to textile products - including Philippine-made items - was terminated. The Philippines’ garments industry is expected to suffer from the end of this textile quota, from which Manila used to benefit in terms of a secure niche in the US and other developed country markets.
A multilateral trading arrangement under the auspices of the World Trade Organization had trumpeted the eventual demise of special trading deals between and among countries. But that had been before the Seattle impasse, which saw the WTO’s clarion call reduced to a nervous whisper mainly because of the refusal of the developed countries to open their markets to the farm products and services of the developing countries.
Since the WTO lost its wind, bilateral as well as regional trading arrangements have sprouted around the world. In Southeast Asia we have been witness to an alphabet soup of trading deals including the AFTA, the Asean Plus Three, to name a few.
Alongside these regional arrangements have been the bilateral deals between either the US and Japan, on the one hand, or some developing country on the other.
The Philippines has jumped on this bandwagon of two-way trade, expecting to sign a deal with Japan this year. Which leads us to the question why no such deal has been forged with our long-time ally, the US.
Philippine government officials have been quoted as saying that the local business community hasn’t been as vocal about forging similar trade ties with Washington, ergo the absence of a sense of urgency on the part of Manila.
It has taken a vocal US trade official to awaken interest in the matter.
Manila and Washington have since agreed to form their panels to study the feasibility of forging a free-trade agreement between the two nations.
The cynics among us may say that this is but part of Washington’s attempt to reinsert itself into a region that has managed to prosper in spite of the US’ economic difficulties; that Washington’s agenda is geared more toward checking the advance of a rising China, which incidentally forged an FTA with Asean.
However Washington regards its renewed interest in a bilateral trade deal with Manila, the Philippine government should look at it from the vantage point of its own interests.
Various studies have shown that the Philippines stands to gain from stronger trade ties with Japan and the US, they being Manila’s two biggest trading partners. Lower tariffs and preferential terms, which form part of an FTA package, would only mean a greater amount of goods shipped to and from the participating nations to an FTA.
For several years since Seattle, the issue of developed countries’ (including the US) restrictions against developing countries’ (including the Philippines) farm products and services has stalled the progress of the WTO. An FTA with Washington therefore would put Manila ahead of other developing countries in terms of preferential access (again) to the US market.
