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Liberalization, currency appreciation and industrial adjustment

One of the major policy developments in the Philippines during the
latter 1980s and early 1990s was the dismantling of trade barriers and reduction of tariffs. The percentage of total import commodity lines that were regulated dropped from 32% in 1980 and 1985 to 14.7% in 1986, 8.2% in 1990 and 2.9% in 1999 (De Dios 1997). The book tariff rates, which had 17.5% and 9.1% of all HS (harmonized system) tariff lines in tariff levels of 100% and 70%, respectively, in the late 1970s, narrowed down significantly towards the 0%-50% range by the late 1980s. Most of the tariff lines converged within the 3%-30% range by 1995 and within the 3%-10% range by 2000.

The effective rate of protection in manufacturing using book tariff rates and inclusive of the impact of duty drawback declined from 64.7% in 1983 to 45.5% in 1990 and 37.3% in 1995 (Medalla, 1998). The weighted effective rate of protection in manufacturing declined from 24.3% in 1988 to 18.2% in 1995 and 15.7% in 2000; the decline for the import substituting manufacturing industries was more drastic, from 38.4% in 1988 to 23.9% in 2000 (Medalla 1998).

The sharp drop in the incidence of non-tariff barriers and the tariff rates especially in manufacturing has transformed the Philippines from one of the more protectionist countries in the 1970s to one of the more open economies by the mid-1990s among all the East Asian countries.

Competitiveness and the Filipino worker

It may be a surprise to some of you, but the Philippines ever since had been engaged in a competitive strategy. Protectionism – the policy of protecting domestic industries in order to create a capital-intensive industrial base – was a plan implemented by the country aimed at generating continued growth, and ultimately spurring progress and development. Unfortunately, the outcome of such a policy was the opposite of what we were hoping. Trade protection (or the whole gamut of policies from import substitution to “competitive clustering” and “picking out winners”) is not based on an economics of national interest, but really formulated within a politics of special interest. Politics can sometimes produce economic policies that are in fact irrational but made to look brilliant. To see why one must go beyond the abstract concepts of gains and benefits from free trade and competition toward a specific listing of the costs and benefits of trade protection and competitiveness.

The long and winding road of the Anti-Money Laundering Act

After months of hard and frenzied work of concerned legislative
committees and technical working groups, it now seems like the
Anti-Money Laundering Act is up for amendments. The Financial Action Task Force (FATF) on Money Laundering, an international watchdog that monitors efforts in fighting money laundering, has pointed out serious flaws in the law that render it ineffective to fight the said crime.

The story of how the Anti-Money Laundering Act came to be and what has happened since its enactment is irrefutable proof of how compromised and ineffective a government that is captive to particularistic interests can be.

The politics of trade policy

At a personal level, we intuitively know that trading our labor (then
using the money wages as the means of transactions) gives us a higher standard of living than if we tried to produce everything ourselves. As individuals, we know and act on the knowledge that specialization enhances our individual incomes and wealth.

But this knowledge does not seem to hold in our perceptions of the
national economy. We know that a country will be wealthier and have a better life if the country specializes in producing those products that it is good at producing, exporting the surplus, and using the proceeds to buy imports. Yet the notion that the gains from trade should be measured by what we import, not by what we export, is difficult for many.

Terrified by tariffication?

Two bills currently under consideration in the legislature are of great
importance: House Bill (HB) 3339, filed by Speaker Jose de Venecia and Rep. Ben Cruz, and Senate Bill (SB) 1912 filed by Sen. Manuel Villar. Both bills are entitled: AN ACT TO PLACE SAFETY NETS FOR FILIPINO RICE PRODUCERS BY IMPOSING TARIFFS IN LIEU OF QUANTITATIVE RESTRICTIONS ON RICE IMPORTS, DIRECTING TARIFF COLLECTIONS FROM RICE IMPORTS TO PROJECTS AND PROGRAMS THAT ENHANCE RICE PRODUCTIVITY AND INCREASE FARMERS’ INCOMES, AND FOR OTHER PURPOSES – or in short, the “RICE SAFETY NET ACT OF 2001.”

Nationalism in the age of globalization

Globalization is perhaps the most important of the long-run forces
driving world development today. (In the 20th century it may have been the independence movements of the colonized peoples in Asia and Africa – which, by the way, is an indication of how advanced politically the Philippines was in the second half of the 19th century, when Filipinos began their agitation for national sovereignty ahead of most other countries in the region).