Government pressed to raise trade barriers

Published by rudy Date posted on July 3, 2009

As WTO cuts trade forecast

PRESSURE on the Philippine government to raise trade barriers mounted, as the World Trade Organization (WTO) warned of rising protectionism amid the economic crisis and sharply cut its forecast for trade volumes of developed and developing economies this year.

The Fair Trade Alliance (FairTrade) called on the government to raise tariffs for agricultural and industrial products, except for raw materials used by domestic industries, up to the country’s maximum binding rates under the WTO.

The multi-sectoral group joins calls made earlier by the Federation of Philippine Industries (FPI) to raise the tariffs on critical products up to their bound rate limits to provide local industries a “reprieve” amid the global economic slowdown.

However, Trade Secretary Peter Favila had said the government would aid the country’s industries through nontariff barriers, among other WTO-compliant measures.

“While we may reduce tariffs on products not locally produced or without any local substitutes down to 1 percent or even zero, products manufactured locally that compete with imports should have their tariffs increased, not only as a source for the much-needed revenues for the government but also as protection for domestic industry and agriculture,” Wigberto Tañada, FairTrade lead convenor, said in a statement issued on Thursday.

The former senator said the Philippines can still jack up duty rates under WTO rules, as the country’s tariff binding rates are twice as much or more than the current actual most favored nation duties that average about 6 percent.

“There are flexibilities available in our trade agreements which can be used to arrest the country’s financial distress and to counter falling receipts from exports. The upward recalibration of tariffs will help preserve local jobs in these crisis periods and will also help raise the utilization of domestic production capacities,” he said.

“We want an upward recalib-ration because the tariff liberalization program undertaken in the l980s and l990s was carried out in a unilateral and accelerated manner without any consultation or coordination with industry and local agricultural producers. We lowered our tariffs unilaterally without even negotiating with our trade partners and we lowered them much lower than the maximum WTO binding rates which were already unacceptable to many countries in Asia,” he added.

Making its latest assessment of the global economic situation, the WTO observed that the sharp contraction of the global economy registered in the first quarter this year “appears to be slowing down.”

However, citing risks including rising unemployment and oil prices, the organization lowered its forecast of global trade contraction to 10.0 percent from its March forecast of a shrinkage of 9.0 percent.

Trading volumes of developed economies are now expected to shrink by 14.0 percent instead of 10.0 percent, while those of developing economies would contract 7.0 percent, rather than the earlier forecast 2.0 percent to 3.0 percent.

Amid the economic crisis, the WTO said in its report to member states that there has been a growing number of instances of protectionism.

“In the past three months, there has been further slippage towards more trade restricting and distorting policies,” it said in the report obtained by Agence France-Presse.

The WTO added that “resort to high intensity protectionist measures has been contained overall, albeit with difficulties.”

It noted that even without taking into account trade measures put in place due to the swine flu pandemic, there were more than twice as many new trade barriers introduced than new trade liberalizing measures.

It said restrictions related to the A(H1N1) flu pandemic has been “most noticeable,” listing at least 39 member states which have imposed measures such as import bans on pork products from swine flu-affected countries.

“A worsening of the A(H1N1) flu pandemic could also create further downside risk to global economic recovery,” it said.

The trade organization also raised renewed concerns over stimulus programs put in place by governments in a bid to lift economies out of the recession.

It said that there is “very limited information that is available publicly” on these programs, therefore, it is difficult to assess how these measures could distort markets and competition.

In addition, it is unclear when support or subsidies provided by the state to prop up ailing industries such as automobile or banking would be withdrawn when the problems are dealt with.

“An important consideration for the G20 countries, therefore, is to design and announce as soon as possible an exit strategy from their crisis measures that will allow world markets to return to normal again,” it said.– Ben Arnold O. De Vera Reporter, Manila Times with AFP

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