Philippine-U.S. FTA: A Skewed Deal in the Making

The country cannot hope for a “mutually-beneficial” relationship with the U.S. through a free trade agreement founded on the U.S. neocolonial agenda.

By Sonny Africa and Joseph Yu

IBON Features

Posted by Bulatlat

President Gloria Arroyo recently put negotiations for a Philippines-U.S. free trade agreement on the front burner, ordering the Department of Trade and Industry to start talks with the United States. This is the latest development in the deepening of economic relations between the Philippines and the U.S., which was sparked by renewed military relations due to Arroyo’s support for the US-led War on Terror.

But the U.S.’s pursuit of closer economic relations is not limited to the Philippines. In fact, it is promoting its trade and liberalization agenda globally on multilateral, bilateral and regional fronts. But the breakdown of the World Trade Organization (WTO) ministerial meetings in Seattle and Cancun has apparently led to the U.S. government’s impatience in pushing trade liberalization through multilateral mechanisms, prompting an intensification of its campaign to forge regional and bilateral trade agreements without waiting for the WTO process.

Thus in the last three years, the U.S. has concluded some 15 regional and bilateral trade agreements and negotiations for at least a dozen more are currently ongoing, including one with the Philippines.

Reasserting economic dominance

The U.S. has been the country’s most important economic partner since colonial times and even after achieving political independence. It continues to maintain this position even to the present day. From 1990 to 2004, U.S. equity investments accounted for more than 22 percent of total equity investments. In 2004, exports to the U.S. made up 17 percent of total Philippine exports while U.S. imports accounted for 16 percent of the total. U.S.-based corporations continue to have dominant positions in the domestic economy.

This dominance is the result of the country’s continuing neocolonial relationship with America. The Philippines is heavily dependent on the U.S. as a market for its exports. At the same time, the lack of a genuine local industrial base means the domestic economy relies on imported raw materials and intermediate goods. U.S. presence is also very much felt by Filipino consumers, not only in manufactured products but also in services. Thus, the U.S. is the central force in the local economy that determines the flow of trade and consequently, overall economic expansion.

The U.S. secured this favored position through blatantly inequitable bilateral trade agreements such as the Laurel-Langley Agreement of 1954 and the Bell Trade Act of 1946. To recall, these agreements opened the country to American manufactured exports while giving American citizens equal economic rights to Filipinos.

But with the expiration of Laurel-Langley in 1974, U.S. dominance has steadily eroded since the 1970s, while the influence of Japan over the Philippine economy has grown. Although Japan has not displaced the U.S.’s dominant position, it has meant that the superpower has lost key sectors in terms of exports to the Philippines such as motor vehicles, meat, and poultry.

To defend and maintain its supremacy, the U.S. wants the Philippine government to sustain its advanced position in implementing the liberalization, deregulation and privatization of the national economy. This is why the U.S. wants an FTA with the country.

Willing collaborators

The Arroyo administration’s development program is attuned with the U.S. neocolonial agenda. In fact, her Medium-Term Development Program interlocks with U.S. business goals and concerns. The enactment of the Electric Power Industry Reform Act (EPIRA), for example, creates new opportunities for U.S. firms to invest in the power industry.

But Arroyo’s economic policies have been such failures that the lives of millions of Filipinos are worse off today than when she took office in 2001. To illustrate, the numbers of unemployed and underemployed (those looking for more work) have reached record numbers. Water and electricity rates have skyrocketed but wages have remained stagnant.

Despite the widespread rejection of Arroyo’s economic policies, as shown by her intense unpopularity among the public, government is still willing to make “sacrifices” and implement further neoliberal reforms. These reforms include more incentives for foreign investors, continuing implementation of power sector privatization, opening of the mining industry to foreign investors and agri-business promotion instead of genuine agrarian reform. Government is effectively creating further opportunities for U.S. transnational corporations to make mega-profits by exploiting the country’s workers and resources while bringing more suffering to Filipinos.

But the most wide-reaching reform being pursued by Arroyo is the revision of the Constitution to remove economic provisions giving protection to the domestic economy. These include restrictions on foreign ownership of land and limitations on foreign investment in vital economic sectors such as media and telecommunications. The U.S. has long been lobbying for the removal of these provisions, calling them barriers to increased trade and investment. But the removal of these Constitutional restrictions would strip away whatever little protections the charter offers to the local economy, paving the way for the US to cement its economic domination.

U.S. colonial agenda

Defenders of a Philippines-U.S. FTA say that free trade would boost the Philippine economy. A bilateral FTA would mean the free flow of goods, services, persons and capital with the U.S., with the elimination of tariffs for various farm and industrial products.

But “free trade” in the context of the country’s neocolonial relationship with America, may result in growth due to increased economic activity, but the benefits of these would mainly be limited to U.S.-based industrial, agribusiness and service corporations and their local partners.

An FTA with the U.S. would clearly not be based on the “level playing field” necessary for free trade to benefit both parties. Instead, the U.S. will exploit its monopoly advantages of its corporations to completely overwhelm Filipino farms and businesses and capture as much of the local market as it can.

This is why the local farm sector is the most vehement against an FTA. They are reportedly concerned over the possible influx of low-priced U.S. farm goods such as corn once a free trade agreement is in place. Corn is considered the main crop of farmers in Mindanao but it is also a major U.S. produce. U.S. farmers also receive large subsidies from the government while Filipino farmers do not.

A healthy and mutually beneficial Philippine-U.S. relationship can never be realized as long as the framework for “cooperation” between the two countries is founded on the U.S.’s neocolonial agenda. IBON Features / Posted by Bulatlat 

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