Global Policy Forum

by Dave L. Llorito

In the Apec Economic Leaders' Declaration at the end of the meeting, the participants spelled out twin goals: Promoting economic growth through freer trade while fighting terrorism. On the surface, growth and anti-terrorism appear to get equal bil­ling. But a closer look reveals that the anti-terrorism aspect is given more weight than crucial trade reforms needed to spur the economies of poor countries.

On terrorism, the declaration states: "We adopted the Los Cabos statement on figh­ting terrorism and promoting growth, in which we commit to taking a series of steps that will protect and make more efficient the flows of trade, finance, and information."

Those steps are:

1. Securing the flow of goods and people through measures that protect cargo, ships engaged in international voyages, international aviation, and people in transit.

2. Suppressing terrorist financing through the full implementation of United Nations and other international instruments and promoting better monitoring of alternative remittance systems and non-profit organizations, and enhancing law enforcement and regulatory capabilities.

3. Promoting cyber security by enacting comprehensive cybercrime laws and deve­loping closer law enforcement communication and cooperation.

4. Capacity-building through measures like counter-terrorism training.

5. Other specific measures related to energy security, better customs procedures, and border security.

On economic growth, the APEC called for continued negotiations "that will open markets and enhance the multilateral tra­ding system, foster economic growth and po­verty reduction particularly in developing economies, promote sustainable development…".

There are specific measures to fight terrorism but there are none when it comes promoting freer trade other than "negotiations" under the framework of World Trade Organization (WTO). There are, of course, other economic initiatives like promoting transparency, reducing red tape, strengthening the efficiency of the banking systems and improving corporate governance. These are essential but peripheral issues to the more significant concern on ensuring market access of developing countries.

In effect, APEC, at the prodding of the United States, is taking a proactive or leadership role in the fight against terrorism while choosing to be lame when it comes to pushing for trade reforms crucial to the economies of its poorer members.

Putting the burden of reforming global trade on the World Trade Organization, specifically through the Doha Development Agenda (DDA), appears appropriate enough. The problem is that DDA itself has been under stress due to the recent actions by prominent members like the US and Australia that tend to destroy the credibility of the process.

The fourth ministerial meeting of the WTO in Doha, Qatar, in November 2001 provided some fresh and positive outlook for reforming global trade. It came a year after the "Battle of Seattle" in early 2000 when the WTO negotiations under Article 20 of the WTO Agriculture Agreement were swamped with violent demonstrations that highlighted "unfair trade" among rich and poor countries. In response, the ministerial meeting at Doha that came up with the DDA outlined bold commitments on greater market access for products of developing countries as well as the phase-out of export subsidies and domestic support programs among developed countries. Export subsidies and domestic support for rich country farmers have been penalizing export from poor countries, damning them to poverty and underdevelopment.

The IMF staff were ecstatic about the DDA: "The declaration [DDA] makes special and differential treatment for developing countries integral throughout the negotiations, both in countries' new commitments and in relevant new or revised rules and disciplines. …The outcome should be effective in practice and should enable developing countries meet their needs, in particular in food security and rural development."

But on May 13, just about four months after the start of DDA, and five months before the APEC summit at Los Cabos, President George W. Bush signed into law a new US Farm Bill seeking to increase subsidies to its farmers by 80 percent to the tune of $82 billion over the next 10 years. This will raise the total US agricultural subsidies to its farm sector to $180 billion over the said period.

The new US farm policy immediately drew flak from all corners of the world. The European Union as well as the Mercusor countries of Argentina, Brazil, Paraguay, and Uruguay have threatened to challenge it in the WTO. The World Bank which has been advocating for freer global trade called May 13 a "sad day for farmers," according to Bridges, a weekly online trade news digest.

Bridges also quoted Argentina President Eduardo Duhaldeas saying: "The United States preaches free trade but then is the most obscene protectionist."

"The farm bill may not have killed the new round of trade negotiations, but has made even less credible the claims about a ‘development agenda' at Doha," says one trade expert.

Australia also expressed disappointment, saying it would jeopardize international efforts to reform global trade.

Looking at the new US farm law from a global context, it looms as just another pile of trade-distorting subsidies to rich-country farmers and additional trade barriers against farmers in the poorer parts of the world. For instance, the producer support estimate (PSE) or the monetary value of the agricultural support given by the Organization for Economic Cooperation and Development (OECD) to their farmers have reached $230.744 billion in 2001. The top five in terms of providing the highest PSE are the European Union ($93.083 billion), United States ($49.001 billion), Japan ($47.242), Korea ($16.838), and Mexico ($6.537 billion). Producer subsidies and support programs in these countries are among the major reasons why exporters in developing countries could sell their goods in developed-country markets.

Besides production and export subsidies, developing country exports are also facing protectionist barriers including tariff peaks and tariff escalation, anti-dumping measures, and unreasonable sanitary and phytosanitary regulations affecting developing country exports including agricultural products and manufactures like textile.

The repercussions of these trade barriers are being felt in the Philippines, with Australia prohibiting the entry of Philippine bananas, pineapples and other fruits, and vegetables.

"Many trade barriers … keep poor countries' agricultural products out of rich country markets," says Hans Peter Lankes, an economist at the International Monetary Fund (IMF), in a September 2002 paper entitled Market Access for Developing Countries. "The subsidization of agriculture in the OECD countries depresses world prices of commodities and increases price volatility, which hurts poor countries and their poorest citizens."

No doubt, APEC's measures on terrorism are highly relevant to the Philippines, given the recent bombings in Mindanao and Metro Manila. But it could have done some more to make the envisioned twin goal of economic recovery and fighting terrorism more credible.

Two points need to be stressed: First, APEC has entrusted its greater-growth-through-trade vision to the WTO which is in itself going through a severe credibility problem. The implication of this is that this vision could hardly be realized given the recent actions of its most powerful members.

APEC could have adopted bolder trade reform measures by setting clearer or definite policy goals regarding protectionist barriers that have been keeping many poor economies moribund. In the process, it could also restore credibility in the DDA process, thereby enhancing multilateralism.

Second: APEC has failed to take serious initiative in the realm of trade reform that are necessary to boost the economies of poor members. Given the link between poverty and terrorism, this is a serious mistake. In effect, APEC members will be fighting with one hand tied down.