Opening Statement of
Undersecretary Ceferino Rodolfo
Philippine Head of Delegation
Philippines 5th Trade Policy Review in the WTO
As delivered 26 March 2018
Introduction
Let me begin my remarks by expressing my sincere appreciation, in behalf of Philippine Trade Minister Ramon M. Lopez, for the introduction made by the Chairperson of the Trade Policy Review Body, Ambassador Juan Carlos Gonzalez and to all delegations, especially those present today, for their contributions so far in order to make this review thoroughly productive. Secondly, I am most grateful to the distinguished Permanent Representative of Canada, Ambassador Stephen C. De Boer, for serving as a discussant in this review. Thirdly, on behalf of the Philippine Government, let me extend my gratitude to the Secretariat for the tremendous work they have done in preparing and delivering a full report on the Philippines. This is the Philippines’ fifth trade policy review in the WTO. We highly value the TRP as a mechanism to better understand each Members’ trade and economic policies; and openly discuss and share our respective successes and challenges.
It is an honor to share the Philippines’ progress and plans in economic and trade policies on behalf of a distinguished delegation from Manila. As a testament of the importance of the TPR Mechanism, our delegation is composed of high-level officials representing the different ministries that lead in the Philippines’ participation in the multilateral trading system and in implementing our commitments to the WTO with the support of our Philippine Mission.
For the next 10 minutes, I will share with you that the Philippines has been steadfast in implementing reforms—involving amendment of decades old legislations. Amidst a sluggish global economy, our economy has grown and has become more resilient. Moving forward, the Philippines will not only continue but will further accelerate and deepen policy reforms.
Economy and Trade
Six years ago during the fourth TPR of the Philippines, we presented a picture of the country which was at the verge of sustained growth. I am pleased to share with you that thus far, after a change in Administration that not only continued reforms of the past but—more importantly—have been pursuing these with greater resolve, the promise of sustained growth has held so very true. We have recorded a 6.6% six-year average GDP growth from 2012 to 2017. It is the Philippines’ highest six-year expansion in more than 40 years. The latest edition of the World Bank’s Global Economic Prospects ranked us as the world’s 10th fastest growing economy in 2017.
As indicated in both the Secretariat and the Government Reports, during the period of review, the government undertook a wide range of economic and trade-related policy reforms. Thus, amidst the challenges posed by the slug global economy, including that of a weak trading environment, we were able to demonstrate not only resilience but equally importantly, strength, and kept a steady, non-inflationary growth.
While services still continued to be a strong driver, it has now been complemented by the resurgence of Manufacturing—which broadened our production base, diversified sources of growth, and immensely improved the economy’s degree of resilience. In 2017, for example, Manufacturing’s growth of 7.2% outpaced that of services at 6.6%.
By 2017, the Philippines’ total trade amounted to 142 billion US dollars, up by 10% from 129 billion US dollars in 2016; or 35% if reckoned from 2012. Trade rose steadily during the period of review.
On the expenditure side, growth came both from strong private and public spending, supported by the increase in employment, the steady inflow of remittances from overseas Filipinos, low and stable prices and the government’s thrust to deliver public services and social protection programs, including public scholarship programs, health expenditure programs and assistance to victims of very destructive typhoons which hit the Philippines recurrently during the period of review.
All these positive numbers will be meaningless, however, if they do not impact on the people. During the Philippines’ Third Trade Policy Review in 2005, our poverty incidence was at about 26%. In 2012, it declined slightly to about 25%. By 2015, it had been reduced to 21.6%–giving us greater resolve to continue reforms until we have lifted all Filipinos out of poverty.
Allow me now to highlight some of the critical reforms and programs in the areas of trade and investment policy that were pursued during the review period.
Customs and Trade Facilitation
Foremost is the passage of the Customs Modernization and Tariff Act in May 2016, amending a law that was first introduced in 1957. The new legislation modernizes customs rules and procedures for faster trade, reduces opportunities for corruption, improves customs service delivery and improves supply chain connectivity. This domestic legislation complements the entry into force of the WTO Trade Facilitation Agreement and has allowed us to submit our notification on Categories A, B and C of our TFA commitments; and to initiate concrete steps for establishing the National Committee on Trade Facilitation which will be composed of customs and trade officials and private stakeholders.
Competition Policy
As mentioned by the Chair earlier, after 24 years of being advocated, the Philippine Competition Act was signed in July 2015 and created the Philippine Competition Commission (PCC). The PCC is an independent, quasi-judicial body that aims to promote and maintain market competition and economic efficiency by regulating anti-competitive behaviour.
Liberalization of key sectors (Transportation, Banking, Public Utilities, Domestic Regulations, among Others)
To help ensure continued competition and to lower business transaction costs in the maritime services sector, a provision of the 1957 Tariff and Customs Code dealing with Cabotage Principle was amended in 2015 through the Foreign Ships Co-Loading Act. The law lifts long-standing cabotage restrictions imposed on foreign operators by allowing foreign vessels to transport and co-load foreign cargoes for domestic transshipment.
Also, the full entry of foreign banks was also allowed in 2013, through Republic Act 10641 which amended provisions of a 1994 law on foreign bank operations. This further opened up the banking sector to offshore players and has since seen the entry of banks from Japan, South Korea, Chinese Taipei and Singapore.
Intellectual Property Rights
Amendments to the Intellectual Property (IP) Code also took effect in March 2013 which primarily created the Bureau of Copyrights within the Intellectual Property Office of the Philippines. The amendments also strengthened the institution’s enforcement powers with regard to visits to businesses engaging in IP violations and introduced a provision on a secondary liability for persons who benefit from copyright infringements. The Customs Modernization and Tariff Act of 2016, as mentioned earlier, also strengthened IPR protection with the prohibition of importation or exportation of infringing goods.
On Tariff Duties
Equally important, during the review period, we have also issued Executive Orders that lowered MFN duties on information Technology-related products, on goods that lead to positive impact on the environment, and on capital equipment.
Moreover, then anticipating expiry of the Philippines’ WTO Waiver on the Special Treatment for Rice (in June 2017), the President issued Executive Order No 23 in April 2017 to extend the reduced MFN rates on rice and other agricultural products for another three years. These rates will apply until 30 June 2020 or until such time that the law amending certain provisions of our Republic Act No 8178 or the Agricultural Tariffication Act is passed, whichever comes first. The passage of the bill amending agricultural tariffs is a priority of the Philippines.
On Ease of Doing Business
These policy reforms are complemented by strong efforts to eliminate laws that place a heavy regulatory burden on businesses and to cut red tape through the “Project Repeal,” which was launched in March 2016 and the first Repeal Day held in June 2016. Through the collaboration of 88 government agencies, an aggregate of 4,837 policy issuances were reviewed with a view to repealing outdated rules and therefore reducing the cost of business.
Next Steps
Now moving forward, to deepen policy reform and accelerate its pace, let me share parallel initiatives being pursued at the Executive & Administrative level, at the Legislative front, and by initiating the review process for changing the Constitution.
At the Executive Level, President Rodrigo Duterte issued Memorandum Order No 16 in November 2017 directing government agencies to take immediate steps to lift or ease existing restrictions on foreign participation in eight areas or activities, mainly on the following:
1. Private recruitment, whether for local or overseas employment;
2. Practice of particular professions;
3. Contracts for the construction and repair of locally-funded public works;
4. Public services, except activities and systems that are recognized as public utilities;
5. Culture, production, milling, processing, and trading except retailing, of rice and corn and acquiring by barter, purchase or otherwise, rice and corn and its by-products;
6. Teaching at higher education levels;
7. Retail trade enterprises; and
8. Domestic market enterprises.
At the Legislative front, our Congress has placed utmost priority in amending Commonwealth Act No 146 otherwise known as the Public Service Act which is a law which was enacted in 1936 – or more than 80 years ago. This is very important as it can open critical areas of Public Utilities (covering Electricity, Water, Transportation, and Communication to up to 100% foreign ownership.
In January of this year, the President completed the appointments to the Constitutional Review Commission which is now deliberating on, among others, lifting remaining restrictions on participation of foreign investors in the economy.
Post-TPR Updates
Lastly, let me also take this opportunity to provide some more recent updates which took place after the submission of the Government and Secretariat reports.
Firstly, the Tax Reform for Acceleration and Inclusion or TRAIN Act was signed into law on 9 December 2017. This is the first package of the Comprehensive Tax Reform Program under the current administration. The Act will provide the needed resource boost to support President Duterte’s “Build, Build, Build” program of infrastructure spending as well as the social programs which will contribute to reducing supply bottlenecks and alleviating poverty. The TRAIN Act reduces personal income taxes for those earning below PhP 2 million. It also provides a simpler system for computing donor and estate taxes.
Secondly, the Philippine Senate ratified the Philippines- European Free Trade Association Free Trade Agreement on 5 March 2018. The instrument of notification was deposited on 22 March at the Norwegian Embassy in Manila, paving the way for its entry into force in three months.
I am also pleased to report that in January of this year, the Philippine Senate gave its concurrence to the ratification of the Philippines-EU Partnership and Cooperation Agreement which provides for the general framework of cooperation in a comprehensive range of areas, including on economic issues.
Members may note that the Philippines adopted a more deliberate approach towards free trade agreements in our bilateral and regional engagements. Last year, the Philippines was the Chair of the ASEAN where we kept the course towards openness, reforms, growth, economic security and inclusive trade. In ASEAN, we are a party to its FTA agreements with China, Korea, Australia-New Zealand, Japan and India. Last year we concluded the ASEAN-Hong Kong FTA negotiations. Pending its ratification by all parties, this will be notified to the WTO. We continue to be engaged with our partners to conclude the negotiations of the Regional Comprehensive Economic Partnership. The Philippines has ongoing discussions with Japan for the General Review of the Philippines-Japan Economic Partnership Agreement (PJEPA).
Our bilateral engagements and regional engagements complement the multilateral track and serve as building blocks to multilateral disciplines and objectives.
As a founding member of the Asia-Pacific Economic Cooperation forum in 1989 and as its Chair in 2015, we made contributions to APEC’s work to promote trade and investment liberalization in the Asia-Pacific region through an agenda on inclusive growth. On MSMEs, we put forward the Boracay Action Agenda to Globalize MSMEs and through it, planted the seeds for the discussions in the WTO. As a member of the WTO Friends of MSMEs, we will continue to make contributions for a development-centered MSME agenda in the WTO.
During the review period, we have thus hosted the APEC and Chaired the ASEAN—and have taken advantage of both instances to advocate for Inclusive Globalization.
The WTO and the Multilateral Trading System
On the WTO, the entry into force of the TFA sends a positive signal to the world. However, we need to move forward on the unfinished business of the development agenda. We attach great importance to our work to lower agricultural subsidies and eliminate agricultural export subsidies. Through continued technical engagement, the Philippines remains hopeful that solutions can be found for an accessible, simple and effective price and volume-based Special Safeguard Mechanism which will ensure food and livelihood security and rural development that will not interfere with growth in trade. We also attach equal importance on the removal of non-tariff barriers to ensure that real market access is achieved.
The Philippines is committed to contribute and to make progress wherever possible based on common efforts. The Philippines will join other members in engaging constructively in all areas of WTO, especially in addressing the challenges facing the WTO and in proving its relevance today and in the future.
The Philippines will continue to play its part in supporting the multilateral trading system and in promoting open economies. We believe that an effectively functioning WTO is the best instrument in ensuring that we achieve Inclusive Globalization, where no one is left behind.
Thank you.♦