Philippines Reaps Bitter Results of Globalization

Globalization made headway with the establishment of the WTO in the 1990s, and every successive WTO conference has had the intention of promoting further liberalization and deregulation of Third World economies, as well as the privatization of their social services. The Philippines, a developing country, can expect no less.

By Alexander Martin Remollino
Bulatlat.com

In essence, the main agendum of the Fifth Ministerial Meeting of the World Trade Organization (WTO) to be held in Cancun, Mexico this coming Sept. 10-14 would be developed countries putting more pressure on the developing world to further open their economies to the inroads of globalization. Globalization made headway with the establishment of the WTO in the 1990s, and every successive WTO conference has had the intention of promoting further liberalization and deregulation of Third World economies, as well as the privatization of their social services.

The Philippines, a developing country, can expect no less.

Actually, globalization was in action even way back in the 1980s; although it would go all-out only in the 1990s.

Globalization in the Philippines

In the Philippines, policies that are now aligned formally with globalization started in the mid-1980s. This period saw the Aquino government removing quotas on the entry of imported goods. A series of tariff reductions soon followed, so that from 41% in 1981, tariffs had gone down to only 8% by 2000. As part of finance liberalization, debt subsidies were also abolished.

The liberalization and deregulation of the Philippine economy was intensified in the 1990s. This was a decade when the industries of water transport, telecommunications, banking and shipping, airlines, oil, and retail trade were wholly opened up to foreign investors, without regard to the ability of local enterprises to compete. Since 1991, 100% foreign ownership of enterprises has been allowed in almost all sectors of the economy, except for defense, small-scale mining, cooperatives, mass media, and a few others.

In 1994, the Philippine Senate ratified the General Agreement on Tariffs and Trade; its leading proponent
was then Sen. Gloria Macapagal-Arroyo, who became president in 2001 through a people-power uprising.

The Philippines joined the WTO in 1995. Since then, the entire economic policy of the Philippines has had to conform to WTO standards, which now favor the free entry of investments from developed countries into the developing world.

The government plans to implement a single tariff rate of 5% by 2004 and abolish tariffs altogether by 2010.

Decapitalization

Inevitably, due to the uneven competition between developing and developed countries under the framework of globalization, Philippine imports have grown faster than exports. According to the Ecumenical Institute for Labor Education and Research (EILER), based on government data, the country’s agricultural trade surplus of $257.6 million per year from 1990-94 descended into an average trade deficit of $756 million per year from 1995.

This decapitalization of the Philippine economy leads the country deeper into the debt trap. The Philippines has paid a total of $69.9 billion from 1983 to 2000. But the government is forced to continue borrowing from multilateral institutions in order to remedy the trade deficit. As of 2001, the Philippines has a total foreign debt of $52.1 billion.

Impact on Philippine labor

Almost 23% of the annual national budget is devoted to debt servicing as a result. Very little is left for social services such as health, housing, and education. This adversely affects workers and their families, who usually have to live in dilapidated shanties and are unable to avail of health services or send their children through all levels of school.

The economic stagnation arising form continuous decapitalization can be seen in the distribution of gross domestic output.

EILER data show that from 1970, there has been a continuous decrease in agriculture’s share in the gross domestic output. From 33.1% in 1970, agriculture now comprises only 15.1% of the gross domestic output.

In industry, the situation is not so different. In 1970, industry comprised 39.4% of the gross domestic output. It went down to 34.3% from 1970 to 1980, but increased by 0.2% from 1980 to 1990. Since 1990, however, it continuously went down, and by 2001 made up only 31.6%.

The crisis affecting the Philippine economy has resulted in shutdowns or slowdowns of companies and consequent losses of jobs, particularly in the manufacturing sector. According to EILER, nearly 500,000 workers in the  manufacturing sector lost their jobs from 1985-2000—equivalent to 59% of all workers who lost their jobs within the said period.

In non-agricultural establishments with 20 or more employees, a total of 768,862 workers were laid off from 1985 to 2000. In 2002 alone, according to Ibon Foundation, there were ten small- and medium-scale enterprises that had to close shop or reduce employment everyday, which meant a loss of 212 jobs daily. Reports also show that more than a million agricultural jobs were lost since 1995.

It is reported that the current unemployment rate of 12% is the highest recorded since 1957.

Trims and the new round

Among the existing agreements under the WTO is the Agreement on Trade-related Investment Measures (Trims), which as yet has to be fully implemented. It is an agreement that seeks to abolish all restrictions to the entry of foreign investors. Under it, WTO member countries are prohibited from imposing restrictions and requisites on foreign investment.

In the coming Cancun meet, included in the agenda for talks are issues related to an investment agreement, a “proposed” competition policy, which seeks to formulate a uniform competition policy for all WTO member countries; and trade facilitation, which intends to establish a uniform trade policy for all WTO members.

Critics have asserted that giving way to such policies would result in greater disadvantage for the Third World countries. The Manila-based Institute of Political Economy said that an investment agreement would give more power and privilege to foreign investors at the expense of local industries and economies. Since the developed countries are the influential ones in the WTO, critics say, these might force competition policies not suitable to developing countries. Meanwhile, according to WTO opponents, trade facilitation is likely to result in an iniquitous policy because of the gap between the First World and the Third World.

If under the present extent of globalization so many of our workers have lost their jobs, we can only imagine what the situation will be if globalization should be left to unleash its full force. The government would really do well to consider the call of the militant group Bagong Alyansang Makabayan and the independent think tank Ibon Foundation to junk the WTO. Bulatlat.com

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