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By Dave L. Llorito, Research Head
Editor’s Note: Part 2 of the Special Report
detailed how, as the Cancun ministerial conference approached, the
original vision of Doha as the “development round” for poor
countries like the Philippines gradually vanished into thin air.
(3rd of four parts)
THE fifth ministerial conference of the World
Trade Organization (WTO) will start today in Cancun, Mexico. To
negotiate “free trade” in agriculture, the Philippines has sent
a bunch of “protectionists,” a radical change from the old days
when the Department of Agriculture’s policy staff were crawling
with enthusiasts of liberalization.
Segfredo Serrano, undersecretary for policy and
planning of the Department of Agriculture, has allowed the
globalization forces “from the extreme Right as the Philippine
Sugar Millers Association to the extreme Left as the Philippine
Peasant Institute” to have the greater say in the drafting of the
department’s negotiating strategy.
“Our position is very clear,” says
Agriculture Secretary Luis Lorenzo. “Our interest shall not
be subservient to others.”
The way the department’s negotiation position
has evolved, “national interest” translates into preventing the
“influx of heavily subsidized imports” from rich countries. Says
Serrano: “These countries are feeding on the blood of our
people.”
The proposed policy is a “special safeguard
measure” that may allow the Philippines to bar competition from
“special products” threatened by heavily subsidized imports. The
instrument is a variable levy on top of the negotiated tariff, whose
amount would depend on the level of subsidy provided to competing
imports.
Broken promises
For many economists, such a policy is fraught
with danger. “Special products” may be interpreted to mean any
stuff the government may want to designate, depending on the
strength of its lobby. If most developing countries would do the
same thing, international trade—crucial to the growth of poor
countries—could choke, resulting in increased protectionism. Also,
determining the appropriate tariff could negotiated levels could be
a messy business prone to political pressure.
“They want to raise tariffs but can they
really enforce it?” wonders a prominent agricultural economist,
noting that the entry of cheap agricultural products has been
largely due to smuggling.
“Apparently, the tariffs on many agricultural
products, even on minimum access volumes for sensitive
products—are still so high that people still find it profitable to
smuggle them rather than pay,” he added. “If you can’t prevent
smuggling no matter how hard you try, why not just reduce it to a
level that would make it unnecessary? That way, you are still able
to collect taxes!”
The Department of Agriculture had to take the
protectionist position because it failed to deliver the “safety
nets” it promised in 1994 after the government signed the WTO
treaty in Marrakesh, Morocco.
Said Serrano: “It’s a personal thing for me
because I was one of those who had opposed the position because I
thought we were not prepared and the government did not deliver the
promised safety nets. You are exposing people who are unprepared.”
Safety nets forgotten
In 1994 the Department of Agriculture came up
with a document Action Plan for the GATT-Uruguay Round Adjustment
Measures for the Agricultural Sector. It was meant to dispel the
farmers’ fears about liberalization of trade in agriculture. The
document—also called “GATT safety nets”—became the
Senate’s basis for ratifying the WTO Agreement.
The document outlined three types of
interventions that the government must do to make the agricultural
sector more competitive. These are (a) legislative and executive
measures before the entry into force of the WTO; (b) legislative and
executive measures after the WTO ratification; and (c) the
P72.922-billion program expenditure for the medium-term agricultural
development program for 1995-98.
Among the major policy measures in support of
the first type of intervention are the passage of laws amending
Sections 301 and 401 of the Tariff and Customs Code to allow the
government to impose countervailing duties on import surges as well
as additional special safeguard duties to as high as one-third of
tariff rates.
Also part of the proposed measures is the
passage of the proposed Irrigation Crisis Act to speed up the
implementation and completion of irrigation projects within a
two-year period.
In the second type of intervention (post-WTO
ratification), crucial measures include the (a) the imposition of a
presumptive input tax on agricultural products to correct
overtaxation of farmers and agricultural processors; (b) amendment
to the Agriculture-Agrarian Reform Law to address the diversion of
credit away from the agricultural sector; and (c) harmonization of
the country’s laws with the WTO agreement on agriculture,
including the removal of quantitative restrictions on importation of
sensitive agricultural products like corn, poultry, beef, onion and
garlic.
The third type of intervention envisioned a
P72.922-billion program expenditure to boost the competitiveness of
the agricultural sector from 1995 to 1998. The expenditure is broken
down into grains production, P43.866 billion; livestock program,
P7.812 billion; commercial crops, P3.959 billion; and fisheries,
P3.029 billion.
Paper interventions
Sources at the department’s policy and
planning division revealed that after more than eight years, most of
the things that were achieved from the promised adjustment measures
concerned the harmonization of the country’s laws and rules with
the WTO agreement on agriculture.
Congress had also passed the amendments to the
Tariff and Customs Code, thus allowing the country to impose
antidumping and special safeguards duties. However, efforts to
reform the Agriculture-Agrarian Reform Law, which supposedly
allocates 20 percent of the commercial banks’ deposits to
agriculture and agrarian reform, never took off.
It turned out later that Congress was only good
at passing laws but could not deliver the promised P72.922-billion
hard cash for the Department of Agriculture’s programs.
Department officials said that amount should
have translated into a P24- billion-a-year hard cash for three years
on top of the usual P10-12-billion allocation it receives from the
General Appropriations Act each year.
But sources at the department’s accounting
office said the actual money released to the department from 1995 to
1998 amounted to about P12 billion each year on average.
“In effect, what we got were just paper
interventions,” said a department technical staffer handling WTO
concerns.
Modernization on the cheap
“During the discussion on the proposed
Irrigation Crisis Act, legislators thought that it would be better
for them to pass a law modernizing Philippine agriculture,” says
the department source. “So on December 22, 1997, Congress passed
Republic Act 8435, or the Agriculture and Fisheries Modernization
Act of 1997 (AFMA).”
The law aims to “modernize the agriculture and
fisheries sectors by transforming them from a resource-based to a
technology-based industry.”
To modernize agriculture, AFMA identifies the
strategic agricultural and fisheries development zones, the
formulation of agricultural modernization plans at the local level,
and the provisions of funding for a host of support services
including irrigation, postharvest facilities, rural infrastructure,
credit, research, marketing and information, training.
“It’s some sort of bible for agricultural
modernization,” noted the economist consultant, who helped the
department conceptualize the strategic agricultural and fisheries
development zone (SAFDZ). “Everything that you need to modernize
Philippine agriculture is there. The only question is: Are there
funds to carry it out?”
Just like the “safety nets” proposal,
department officials expected the government to provide an
additional P20 billion each year on top of the department’s
regular appropriations. It turned out that the supposed money for
modernization was actually the same funds that were regularly
allocated to the Department of Agriculture for its regular programs
and projects.
From 1999 until 2002 the money actually released
by the government to the department averaged P15 billion only. About
P4 billion on average went to pay salaries and wages of department
officials and employees as well as operations and maintenance. The
remaining P11 billion on average is used for the agriculture
department’s regular programs. The difference this time is that
these expenditures are now called allocations for the AFMA.
“We thought there would be more money for the
AFMA besides our regular budget,” said a senior department
official at the accounting office. “It turned out to be untrue.”
And if one looks at the 2003 allotment in 2003,
it would appear that 35 percent of the money is earmarked for
irrigation and another 14 percent for programs like rice and corn,
livestock and high-value crops.
The rest are budget allocations for several
department projects including the Philippine Coconut Authority,
National Meat Inspection Commission, Philippine Carabao Center,
Bureau of Agricultural Research.
“In effect, the bulk of the allocation for the
department really goes to food security concerns and not for
enhancing ‘competitiveness,” a department technical staffer
admitted.
What SAFDZ?
Lacking adequate funding, the SAFDZs—the core
strategy of agricultural modernization under the AFMA—appear not
to have made a difference.
Asked if the Department of Agriculture has a
prototype of a “successful SAFDZ,” a source at the Agriculture
planning office was not so sure.
“When you ask the people at the Operations
[division], they will probably tell you there are already several
successful SAFDZs,” the source said, citing several areas in South
Cotabato and Davao provinces as possible examples. These provinces
have been successful in producing and exporting a wide range of
export-oriented or high-value crops like banana, pineapple,
asparagus, mango, rubber, okra.
“But we ourselves are not so sure whether
it’s because of our intervention,” the source added. “Maybe
it’s because these places have been very competitive from the
start.”
Supposedly, the SAFDZs are strategic areas in
the country that are ideal for production, processing, marketing of
crops, livestock and fishery products for local consumption and
export. They were chosen for having the best soil and climatic
characteristics, access to major infrastructure like ports and good
highways, and information systems.
Having the best chances to succeed, SAFDZs are
areas where government must focus on its scarce resources, thus
creating centers of excellence in regions of the country.
In 2001, however, then-agriculture secretary
Leonardo Montemayor took a new tack. He said the business of
agricultural modernization is now on the shoulders of local
government units. The Department of Agriculture would provide only
technical assistance.
“We have now turned over all the SAFDZ maps to
the local government units for their own planning activities,”
says an Agriculture official.
One thing he did not tell me was that for those
maps to be useful for planning, they should be converted into
digital formats and incorporated in a geographic information system.
That would cost a lot of money. Secretly, he must have been hoping
that the local government units would know what to do with those
maps.
(To be continued)
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