The Market Monitor Minding the Nation's Business
By Luis Leoncio
Is President Benigno Aquino III,prepared to endorse Charter change and risk alienating some of his most influential allies at this time when he needs their support for his candidates in the coming elections?
Indications abound that he may have to, if he wants the country to join the US-backed Transpacific Partnership Agreement (TFP), the economic component of US President Barack Obama’s Asian rebalancing policy, whose military muscle—the Philippines-US Enhanced Defense Cooperation Agreement (Edca)—is badly needed by the Philippines in its worsening maritime dispute with an increasingly aggressive China.
But observers said it maybe too late in the day for that, and whatever the decision is, it would have to be made by the coming administration.
At the recent Asia-Pacific Economic Cooperation (Apec) forum in Manila, Obama, in a dialogue with Mr. Aquino, vowed to help the Philippines become a TPP member; the President responded by saying the Philippines “would love to be part” of the agreement despite some major constitutional prohibitions, the most notable of which are those that bar foreigners from owning land in the Philippines, from owning more than 40 percent of local businesses and from exploiting the country’s natural resources.
The constitutionality of Edca is currently being questioned before the Supreme Court. The 10-year pact, forged by the two countries during Obama’s previous visit to the Philippines, allows US troops, planes, and ships to be based here. Last Tuesday, Obama, apparently as an incentive for the approval of Edca, announced the US would give the Philippines Navy two ships as part of a larger plan by Washington not only to increase assistance to Manila, but also to strengthen its presence in Southeast Asia. The Philippines promptly announced the ships would be used to patrol the disputed waters of the West Philippine Sea, or South China Sea, to China, which is now claiming large part of it.
Proponents of the TPP have argued that if the Philippines did not join the trade pact, it could lose its share of the huge US market. Already members of the TPP are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, all of which account for at least 40 percent of global gross domestic product (GDP) and 33 percent of global trade.
Heavily loaded
But critics have pointed out that the TPP is heavily loaded to favor US interest. The local think tank Ibon described it “the most intrusive economic deal in history.”
Recently released TPP details showed it would eliminate more than 18,000 taxes that members impose on US exports.
The agreement goes beyond traditional trade issues such as tariffs and import quotas and includes giveaways to powerful business lobbies, Ibon said.
For instance, in response to US pressure, TPP countries have agreed to give US drug companies about eight years of protection from cheaper competitors for biologics—ultra-expensive medicines produced in living cells. It wasn’t the 12 years’ protection the industry wanted, but critics say it’s still enough to drive the price of biologics up and beyond the reach of many people in poor countries.
The deal also allows multinational companies to challenge its member-countries’ laws in “private tribunals” on grounds they are tantamount to unfair barriers to trade, Ibon said. Critics say such tribunals give corporations a chance to overturn local laws on public health and the environment.
But TPP members say the deal includes safeguards that prevent abusive claims and make sure governments could continue to issue health, safety and environmental regulations in the public interest. TPP members can specifically ban tobacco companies from using the tribunals to challenge health regulations —to the consternation of US lawmakers from tobacco-producing states.
Chinese President Xi Jinping, pushing his country’s own Free Trade Area of the Asia-Pacific (FTAAP) said the US-backed trade deal promotes fragmentation of regional economies, but noted that China’s would significantly reduce restrictions on foreign investment.
“We will step up reforms in the foreign investors management system, substantially cut restrictions on market access for foreign investment, improve intellectual property protection, and foster an open, transparent, fair and highly efficient market environment,” Xi told the Apec CEO meeting in Manila, one of the many events of the Apec summit.
China first broached FTAAP at the Apec summit in Beijing last year.
Xi said Asia-Pacific economies must “participate fairly in and fully coordinate” free-trade arrangements to boost the integration of regional economies and improve openness and inclusiveness in the region.
Xi said China is part of the Asia-Pacific region and will continue to pursue open and inclusive regional cooperation through initiatives such as the “Belt and Road” and the Asia Infrastructure Investment Bank (AIIB), according to a transcript of his speech published by the Xinhua News Agency.
“The TPP is relatively exclusive so far and China wants a more open and inclusive Asian market,” said Xu Hongcai, director of the Economic Research Department under the China International Economic Exchanges.
Ibon said the Philippines should not immediately jump into the TPP wagon, despite the Aquino administration’s seeming eagerness to do so.
The deal removes member-countries’ sovereignty to ensure that foreign corporations operating in their national territory contribute to real national development, Ibon said.
30 chapters
It also noted that the TPP’s 30 chapters were expansive and cover virtually every possible area of economic activity. The agreement’s provisions are designed to make it as easy as possible for big foreign transnational corporations to profit from the labor forces, natural resources, and domestic markets of the members.
According to Ibon, the provisions also:
• Remove virtually all trade and investment barriers. “Trade liberalization will destroy underdeveloped domestic firms and farms. Investment liberalization will turn large parts of the economy over to big foreign corporate profit seeking. This will make utilities and social services even more expensive. The financial system will also be prevented from promoting long-term domestic development and become oriented to short-term and speculative profits.”
* Protect foreign intellectual-property monopolies. “The effect of making medicines more expensive is already well-known. However, an even more far-reaching effect is to stifle the development of domestic science and technology.”
• Promote opaque and unaccountable international dispute settlement. “This is especially dangerous, as governments will be prevented from asserting the public interest whenever doing so impinges on corporate profits. On the other hand, governments are expected to uphold investor rights even to the point of using public resources for narrow private corporate benefit.”
The Aquino administration has been pushing to join the TPP since the start of its term.
The US government has also been working to change Philippine laws, including the 1987 Constitution, to make the Philippines qualify for entry.
This is one of the main goals of the $739-million Partnership for Growth (PFG) with the US that Mr. Aquino entered into in 2011, Ibon said.
The government should acknowledge that the effects of so-called free-market globalization are already deeply felt with exclusionary growth, growing inequality, and record joblessness and poverty in the country, Ibon said.
The Philippines should not join the TPP because its provisions will prevent the country from using socioeconomic policy to develop domestic agriculture and industry, Ibon also reiterated.