Are we ready to vie in CAFTA market?

FREE TRADE: There is this old line that if we could convince the Chinese to drink their tea with sugar and if we could get even just one percent of the ensuing sugar needs, we would have to plant half of our arable land with sugarcane to meet the demand but would then be able to balance the national budget and pay off our foreign debt.

We may not be so sure of the figures involved, but this fantastic scenario comes to mind upon hearing the news of the establishment, finally, of a China-ASEAN Free Trade Area last Jan. 1.

Without reading the fine print, one’s initial impression would be that China (population: 1.338 billion) and the 10-member Association of Southeast Asian Nations (population: 600 million) have formed a trading modus vivendi similar to that of the 27 countries in the European Union (population: 492 million), which boasts of being the world’s largest economy.

Many areas in the China-ASEAN region are rural and agricultural, but with its combined 1.9 billion population, it is an extremely attractive market — and we are an active part of it.

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COMMON GOOD: The possibilities of CAFTA — in the economic, political, cultural and other spheres — are exciting for the Philippines and ASEAN.

No wonder Beijing’s Ambassador to Manila Liu Jianchao calls CAFTA’s establishment “a blessing for all to be unfolded.” (Philippine STAR, Jan. 3, 2010)

Saying that “we have secured a solid foundation for CAFTA,” Liu noted: “Together with similar cultural tradition and history, complementarities and inter-dependence define the China-ASEAN bond, which enables us to reach consensus towards common prosperity.”

China-ASEAN cooperation in trade and economics dates back to the 1990s. Liu recalls that “when the financial crisis struck in 1997, China held out by not depreciating RMB (renminbi) yuan, which served as a strong force for the recovery of the regional economy.”

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EQUAL FOOTING: One is tantalized by images of a tidal wave of duty-free Chinese merchandise swamping ASEAN, including the Philippines, and, reciprocally, of our exports penetrating the Chinese mainland unhampered by protectionist duty barriers.

In theory, while low-priced Chinese products flood the local market to the delight of bargain-seeking Filipino consumers, Philippine products get a chance to compete on equal footing in the vast China market.

The breaking down of the great wall of China’s market, a dream of the more aggressive economies like the United States and Japan, is suddenly fact and reality to the Philippines and the other ASEAN members looking for more customers for their goods and services.

But while opportunities abound, there are also pitfalls. For one, the open market will expose the weaknesses of our producers and traders who have not bothered to condition themselves for more cunning competition overseas.

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TIMID OUTLOOK: With China and its Southeast Asian neighbors integrated into a free-trade zone, more than 7,000 zero-tariff commodities could now be traded with more efficiency, lower transaction costs and bigger volumes.

The biggest difficulty of Philippine producers and exporters is how to compete in the virtual free-for-all. This was the same problem encountered when the country was sucked into the stream of free world trade without adequate preparation.

Many Filipino businessmen do not have a global outlook, seemingly fearful of stepping out into the wild wide world and content with making a little money in the local market. Timid and insular in their thinking, they have not dreamed of offering highly competitive goods and services overseas.

Many of these Lilliputian traders may have to fall by the wayside as the big players zoom past them.

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GOV’T PRIORITY: Among the exceptions are the old-money industrialists and a few Manila-based taipans who have ventured overseas, including China, with remarkable success. Their enterprise in carrying their brands and the Philippine flag can serve as a guide for the rest.

The chambers of commerce and industry have been of great help also in initiating contacts and clinching deals for their members, and in leading the younger ones, but much more coordinated planning and execution is needed.

For its part, the government will have to overhaul its antiquated policies and system of motivating and protecting export-oriented producers and traders.

With many ASEAN neighbors already in full gallop, the incoming Congress should make global competitiveness a priority concern. –Federico D. Pascual Jr. (The Philippine Star)