18 May 2004

A Fatal Combination That Can Kill A Nation

Recently, I had this running argument on globalization with a fellow named Mitch over at Sassy's weblog. I encourage you to view the whole exchange here before reading this. I presume Mitch is an American and his homelinks ranged from intellectual (click here) to friendly (click here).

Mitch wants and promotes globalization. Sassy and I are really not kosher with the idea.

Globalization in the Philippines began years before 1994, when our Philippine Senate ratified the General Agreement on Tariffs and Trade (GATT); its leading proponent was then Sen. Gloria Macapagal-Arroyo, who became president in 2001 through a people-power uprising. Even during the Cory Aquino administration, economic policies that are now formally aligned with globalization were established: quotas were already removed on the entry of imported goods, debt subsidies were abolished as part of finance liberalization, and a series of tariff reductions were enacted, such that from 41% in 1981, tariffs had gone down to only 8% by 2000.

The 1990s was a decade in which the industries of telecommunications, oil, water transport, banking and shipping, airlines, and retail trade were wholly opened up to foreign investors, without regard to the ability of local enterprises to compete. Since 1991, 100% foreign ownership of enterprises has been allowed in almost all sectors of the economy, except for defense, small-scale mining, cooperatives, mass media, and a few others. Since 1995 when the Philippines joined the WTO, the entire economic policy of the Philippines has had to conform to WTO standards, which now favor the free entry of investments from developed countries into the developing world. In short, it is free trade and globalization galore courtesy of our previous and present leaders. Future economic plans even include abolishing tariffs altogether by 2010.

Globalization is based primarily on competition. The best products with the best prices usually emerge as winners. Competition, in turn, is based on the ability to compete, meaning one must be at optimal level in order to join in the contest. My premise is that my country can NOT join a competition where we cannot expect to win. We must first develop ourselves to "competition-level" before joining in.

I fully agree with the fact that every successful example of economic development this past century--every case of a poor nation that worked its way up to a more or less decent, or at least dramatically better, standard of living--has taken place via globalization; that is, by producing for the world market rather than trying for self-sufficiency. Japan and South Korea and many others are examples. But before Mitch labels me again as "self-contradictory," let me first point out that my country cannot compete without first achieving a state of competitiveness.

Sad as it may be, the truth really hurts. We are nowhere near competitive level. Our chief product at the moment? Our people. Does Mitch know that 2,700 Filipinos leave the country each day to work overseas? If globalization was sooo good, why are so many of my countrymen leaving my country? Not few, not several, but in droves!

Does Mitch know that due to the uneven competition between developing and developed countries under the framework of globalization, Philippine imports have grown faster than exports? Based on government data, the country's agricultural trade surplus of $257.6 million per year from 1990-94 descended into an average trade deficit of $756 million per year from 1995.

For purposes of brevity, I'm going to give one local example: Fruits and vegetables grown in the mountains of northern Luzon are purchased by farm traders and distributors who in turn sell the crops south to the Philippine city capital, which is Manila. Filipino farmers used to take pride when they haul their loads of broccoli, onions, carrots, beets and strawberries to market. These farmers work hard for a modest income, knowing they provide valuable products. They supply the rest of the Philippines, which is mainly tropical, with vegetables that grow in a cooler climate. But demand for their crops is dwindling. Fruit and vegetable produce from China, Australia, and yes, the US, are instead making a killing in local markets everywhere. Why? They're cheaper and better.

And that's just the tip of the iceberg.

Globalization has resulted in shutdowns or slowdowns of companies and consequent losses of jobs, particularly in the manufacturing sector. Nearly 500,000 workers in the manufacturing sector lost their jobs from 1985-2000 --- equivalent to 59% of all workers who lost their jobs within the said period. In non-agricultural establishments with 20 or more employees, a total of 768,862 workers were laid off from 1985 to 2000. In 2002 alone, there were ten small- and medium-scale enterprises that had to close shop or reduce employment everyday, which meant a loss of 212 jobs daily. Reports also show that more than a million agricultural jobs were lost since 1995.

Does Mitch know that the current unemployment rate of 12% is the highest recorded in this country since 1957?

I say globalization is good for those who can compete. Has Mitch ever wondered why the Philippines never dominates in the Olympics? Same answer and same principle operates. But hey, we win gold medals in local Asian events. I think globalization should be segmented. Developed countries should compete with developed countries. Developing ones should compete with fellow developing nations, and so on and so forth. You get my drift.

If I played golf with Tiger Woods, does Mitch expect me to win? Or would I have better chances if I played with my buddies?

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