WELCOME MESSAGE OF SECRETARY RAMON M. LOPEZ
ONE COUNTRY, ONE VOICE FORUM
4 December 2019, New World Hotel, Makati City
As delivered
Pleasant morning to everyone!
Thank you for joining us – joining the DTI in this initiative. This is really an effort to have this – a close consultation with the various sectors helping us in trade establishing and strengthening the trade development part of the DTI.
We have a chart here. Usec. Perry helped me with this chart which basically shows the framework on how we pursue the international trade negotiations. This campaign of One Country, One Voice. This was launched in May 4, 2011 under Secretary Greg Domingo.
And what the three pillars in the DTI signify the approach to trade strategy – One Voice which is basically this making sure that we are align with our position, with our strategies as we pursue trade development we have to have that first pillar of One Voice.
And then One Network, a network of academic institutions led by the Philippine Institute for Development Studies, the APEC Study Center Network that provide analytical support in Philippine Negotiating Positions.
And also One Team, this is the inter-agency in the government that is built around the Tariff and Related Matters Committee of the NEDA board that undertakes trade negotiations under the coordination and leadership of the Department of Trade and Industry. So, DTI is the one sharing that committee and this is where all other agencies that represent the various sectors in our economy would be consulted and there would be corresponding domestic consultations also to their respective constituents.
Of course, if you really look at it as one—One Voice, One Network and One Team which is the organization it is like being part of the Asean Games “We win as One”. And we work as one and we really pursue our trade negotiation as one. So equally important underpinning the entire framework is our industry competitiveness.
So apart from the advocacy communication on making sure that we talk as one so that we can win as one. Industry competitiveness is really the basic foundation that should be the basis of all our trade negotiation because if we go to the second chart, the main statement is our Industry Policy determines Trade Strategy.
Essentially, the objective is to develop and strengthen our industries that will generate local employment. And this is where before we pursue our respective positions when it comes to trade negotiation it has to be connected and aligned with our plan and strategies in terms of industry development.
What industry do we think will be strategic? What industry should be developed? Where do we have comparative advantage? Where do we have the very good comparative advantage index? This is where we will put our minds, our support and our development support program.
Behind all these industries which we will be promoting and therefore we’ll have to be reflected as well as we prepare our position on whether to liberalize the sector or protect the sector in a way.
And you know the Philippines has undergone a very aggressive tariff liberalization program before our times. The tariff rates used to be at the 50% to 100% I remember in the 60’s. Everybody, all countries basically would have that huge tariff most countries strategies there where import substitution if you recall that in our younger years.
But essentially what we are saying is that the period of import substitution has shifted to a general tariff liberalization, tariff reform program for many countries so that’s been the trend.
And essentially the tariff liberalization in a way were anchored on of course the industry strategies that a country should have. Essentially, we were seeing and until now unfortunately some countries still tend to be protective of so many sectors most especially agriculture.
In the Philippines has been very liberalized when it comes to industrial good its always agriculture that’s been protected. And only recently as you all know the rice has been very very sensitive sector as now we’ve open up last February or March of this year under The Rice Tariffication Law signed by President Duterte.
So slowly hopefully we can open up more sectors that we believed should be put to test encourage more competitiveness so that the downstream industries especially if we talk later on maybe of sugar the downstream industries can benefit from.
Unfortunately, in other countries they still continue to protect those sensitive agriculture industries but hopefully down the road we follow this basic fair principle in globalization that globalization will have to be inclusive.
Organizationally, within DTI a structural initiative was undertaken to strengthen trade-related policymaking and to more clearly integrate it with the pursuit of industry and sectoral competitiveness.
In September 2011, Department Order No. 11-47 was issued to among others, create an Industry Development and Trade Policy Group (IDTPG). So, this is the group headed by Usec. Perry. It integrates basically Industry Development and the Trade Policy so that again connecting Industry Development Strategies with the Trade Policy Development.
Essentially, it is meant that the Bureau of International Trade Relations by the way we should thanked them for putting up and organizing this event. The BITR which leads, and coordinates trade negotiations is under one Functional Group along with the Board of Investments which is leading the Industrial Development & Promotion function and also with the Bureau of Import Services which is the lead agency for Trade Remedies applications.
We also launched in January of 2012, the program for the conduct of Industry Development Roadmaps, culminating in a National Comprehensive Industry Strategy. The process has been one that is private sector-driven that was private sector takes the lead in both crafting and driving the action with the DTI serving as a catalyst, facilitator and an enabler. And of course, we would normally refer to the Queen of Roadmaps that is Dr. Fita Aldaba who I was told was pirated from PIDS during that time.
Currently, these Roadmaps are being integrated into the I3S so the Industry Development Strategy is now summed up into the Inclusive, Innovation-driven Industrialization Strategy (I3S).
Globalization is not supposed to kill industries. It is supposed to spur industries to become more competitive. This is really the strategy being put forward by our President Duterte whenever he attends the International Forum. So, we push for inclusive globalization where in principle big countries should be helping the smaller countries so that we can spread the gains of development across the world.
So big countries should be helping smaller countries. In terms of first, technical assistance and many of our partner countries here definitely are really advanced in terms of providing support. Philippines for example in terms of technical assistance, capacity building and many more initiatives and support from our partner especially the big developed countries.
Once capability has been formed and competitiveness is gain by a smaller countries that’s where big countries again should be at the forefront of opening up the markets and really providing the necessary market to further develop the industries of the smaller countries. So that is what the message for inclusive globalization as we move forward by this administration.
For this reason, there are legitimate instruments that could be invoked to provide reasonable time-bound protection to industries experiencing for example import surge and for industries that are subjected to unfair competition from imports – imports either that are being dumped, given low price by the source country or being subsidized. So, there would be countervailing duties.
These trade remedies are part of the WTO rules. So, these are all within the context of established rules and procedures. We started to move to be more sensitive to the realities of trade liberalization.
As we open up the market especially for example cement. You know that cement already has zero tariff. Zero tariff for an industry that deploys thousands of Filipinos and yet are open up really to free market, free competition. So that industry which is also capital intensive has zero protection.
And so, what do you expect from almost zero percent share of imports in the industry, cement imports there gradually increased to about 10% of industry. So huge. And it has really injured the industry and established after the temporary safeguard duty imposed by the DTI and was advised by the Tariff Commission and came up with the ruling that supported the imposition of safeguard duty for cement.
Of course, you will realize as well that duty being imposed is nowhere near high 10% nor 20%. The equivalent duty is just about 4% so it’s practically nothing also. And yet there’s of course tremendous media criticism and all that and pressures from many cement users and developers. Pressures that we all faced but DTI has to stand its ground. We said that do you want us to just continue to import? Yes, we encourage imports. Imports are not being banned. Imports of cement are still allowed but we are simply putting a little safeguard and that’s just equivalent to 4%. And yes, import continue to come in.
In fact, if you look at the import data of cement there’s still positive growth I think close to 10% so importation continues. So, the market is very contestable as Usec. Perry would normally termed it. There’s still competition and that’s the more important thing to our friends in PCC for example we always tell them that as long as the market is contestable and there is competition we should appreciate that. We should balance it also with industry development. We need to create larger economy scales for companies here so that we will able to face competition. And the kind of protection we’re giving again is just 4%. Again, its nothing.
Tariff rates in other countries if you can just hear the reports would still be in the 10% to 20% in some even higher than that. So, if competition is there then you can be assured that consumers will always be protected and part of the condition when we imposed that safeguard duty is that these cement companies will have to observe prices. And prices have not change even if we impose the safeguard duty which is very important that we see have these tools that can in a way provide little breathing space for companies because otherwise many of them are already leaving the country.
And whenever players do leave the country you can imagine the contraction in the domestic capacity. So, what will now lead to? We will end up importing everything so that’s the main problem here. And then you will blame DTI for increasing trade deficit.
And therefore, for us to solve the perennial problem trade deficit we really have to put our minds together how can we build a very robust industrial sector and increase that domestic capacity so that whenever there is growth in the domestic economy we will rely less on imports because there is domestic capacity. Any shortage in capacity? No choice you have to import to support the domestic growth. And right now, we have a very strong domestic growth. GDP is 6.2%. Construction is 16.3% growth. Double digit. So where are we going to source it? Hopefully, local supply but it cannot supply all that’s why imports do come in. So, we just have to I guess balance all this so despite pressures from users and developers we still push through with their plans. I just argue with them don’t worry by the prices and also its just 4% so they stop arguing. There are also issues on dumping and all that.
While all these things are happening in the tariff reform and all that we, Philippines we are decent trading partners. We follow the rules. We reduced all these tariff rates and all that. And we expect partners to also treat us fairly. Otherwise, we will have no choice but to retaliate—but again, still following the rules and procedures for retaliation.
Number three, I guess I mentioned in a way that we maintain contestability of markets. FTA commitments of course have led to removing or accelerating the reduction of special tariff rates for products traded within that FTA arrangement if it’s a regional or if it’s a bilateral
And there are legitimate trade remedies providing reasonable, time-bound protection against import surge or unfair competition. So, safeguard is one. And the point is that we will not restrict the flow of imports.
Some industries especially those that need huge, lump investments, economies of scale, need big players to compete with the big players of Asean and its partners.
So again, we should really allow and promote the growth of local industries whether they are small or even if they grow big we should not be worried as long as there’s competition.
So, if there’s one major player, one major manufacturer or two or three as long as imports do come in, there’s competition then we should not be worried at all.
We use full-range of Industry Development tools and Policy instruments. So, when all the tariffs have been brought down, the only tools that we basically used nowadays would be: 1. The investment incentives which our countries do provide 2. As mentioned, as needed would be the safeguards 3. Is to ensure that all the competing products follow standards. They should be standard compliant.
So, another thing that we are strengthening nowadays would be to include products that are critical let’s say for consumer safety, for structural reason that’s why we included steel, we included cement.
The recent earthquake in Mindanao compelled us and President Duterte himself to say that we should include also even hollow blocks. So, putting standards. Putting hollow blocks to at least mandatory standard compliance.
We are now studying glass that we issued but it was injunction thanks to the courts but we are fighting it out, so we are studying now undergoing public consultations on roof, plywood and then of course hollow blocks even tiles I think. That is essentially to again ensure that there is fair trade. No substandard materials that would of course endangered to lives of consumers at the same time serve as unfair competition to legitimate local manufacturers who are following strict standards.
Next chart that gives us result of some recent developments I was telling you about. After the DTI imposed safeguard measure to address the import surge and to level the playing field. It basically led to the the expansion in the cement industry. In other words, as companies we see a bit of firm government imposition let’s say the lead for safeguard measures, we see that government is in a way supporting the industry. And therefore, with that signal, it signals also to them that they’re comfortable in expanding their operation. So, it led to in a way to more investments and expansion of domestic capacity.
So, for the past two years with new registration in cement, modernizing the capacity equivalent to about 20 billion metric tons and that’s huge in that industry.
Of course, we are in addressing pursuit of these trade agreements where it’s very helpful that our President adapted also the policy of being a friend to all and enemy to no one. So, it allowed Philippines in recent years to pursue even non-traditional markets. Markets such as China, such as Russia, Pakistan, Middle East. So, we are pursuing this. We are improving our ties to JEC’s and many on other arrangement as we try to really increase and improve our trade relation with many more countries.
We are participant to the Regional Comprehensive Economic Partnership which is now ASEAN10+5 for now without India. We’re working also on a bilateral FTA with the Korea which we attempted to finish last November but we lack time so hopefully we can finish it early next year.
Hopefully, we can start the USA FTA as long as the USTR will get hopefully go signal from US Congress. We are now reviewing the Philippine-Japan Economic Partnership Agreement and of course we just finish the EFTA.
Hopefully, we can advance talks also on the EU I think 3 or 4 roundtable meetings. Hopefully we can move forward also in that regard especially with the new Trade Commissioner.
So, there are various range trade engagements from Joint Economic Cooperation with its new countries many of them like including China, Taiwan, of course the US EU, Indonesia, Thailand, Vietnam, India, Australia, France, Turkey, Kuwait, Iran, Egypt, Qatar, Pakistan. And then ongoing six, South Africa, Mexico, Peru, Chile, Spain, and Israel. There are more Bangladesh, Syria, Gabon, Iraq, South Korea, Switzerland, EFTA, Russian Federation, Hungary, Czech Republic, Austria, Papua New Guinea, Germany. So, we’re talking to many more countries that’s why Usec. Perry and Asec. Allan keep going out of the country.
GSP Preferences thanks to US, EU, Australia, Belarus, Canada, Japan, Kazakhstan, New Zealand, Russian Federation and Turkey. So, all these countries giving us GSP preferences. We are also promoting them. The group of Usec. Perry would do this Doing Business and FTA that was the program started by Secretary Greg with the previous administration.
And of course, we have the FTA with the ASEAN. So, we have the AFTA, ASEAN+1, the ASEAN-China, ASEAN-Japan, ASEAN-Korea, ASEAN-Australia and New Zealand, ASEAN-India. We also have the ASEAN-Hong Kong. Bilateral as mentioned with Japan and EFTA. So, from JEC to GSP to FTA. So, we’re doing a lot there.
Next chart would give us basically a pie chart that shows these countries where we have FTA basically account for bigger percentage. The share of FTA partners to total in 2001 was only 45%, in 2010 include to 55% and in 2018 already 63%. If we include Hong Kong that would be 93% and including also the GSP privileges from US and EU. So, they do help improve our trade relations.
So, I will end there and basically the next chart will tell us the DTI stakeholder engagements continue. Last December 2, there was a Philippine US FTA Workshop organized by the Carlos P. Romulo Foundation. December 3, yesterday Manufacturing Summit that focus on Industry 4.0 readiness. December 4, today One Country, One Voice International Trade. Tomorrow, Consultation on the Investment Priorities Plan and December 6 would be the Export Congress.
Once again, I just like to thank everyone in the room for really joining us fine tune and strengthen the Philippine position as we deal with the outside world.
Thank you very much.