There are two rules that governments are expected to observe with regard to their countries’ export trades. One is to give all the support that WTO (World Trade Organization) regulations allow. The other rule is to do nothing that will have the effect of reducing their exports competitiveness in the world market.
Of the two rules the first is the more obvious. If is not difficult to discern if a government is oriented toward export promotion. There will be export drives at home and abroad. The personnel of the government’s trade infrastructure—DTI (Department of Trade and Industry) and the GFI (government financial institutions) in this country—would have been given marching orders to put in place programs for export promotion and to give all-out support to business that are already in or are planning to enter the export sector. But that is not the case, and apart from establishing export processing zones and providing fiscal and other incentives to would-be exporters, the Philippine government has not been doing much export-promotion activity of the active, hand-holding kind. The result has been that Philippine merchandise export trade has been in a rut, with more or less the same products dominating the export list year after year.
Government passivity did not bring Taiwan, South Korea and Hong Kong to the economic positions that they are in today. Unless a sharp change occurs in the mindset of the makers and implementors of Philippine merchandise trade policy—from passive to active—this country cannot expect to reap the rewards of a healthy external trade. I, for one, have come to accept that reality.
What I can neither understand nor accept is the seeming inability of Philippine trade policymakers to grasp the negative implications of certain policy actions for Philippine merchandise export trade—more specifically, the competitiveness of Philippine exports.
A case in point is TRAIN (the Tax Reform and Inclusiveness Law). I’m perfectly willing to bet that TRAIN was crafted with little thought for that law’s impact on the competitiveness of Philippine exports. As things stand, many potential exports are uncompetitive in the world market, thanks to their higher market prices brought about by high costs of production inputs of all kinds. Now comes TRAIN with higher excise taxes on petroleum products, which have translated into increased manufacturing, energy and transportation charges. TRAIN’s authors and proponents steadfastly refuse to concede that the law, by pushing up the costs of manufacturing and transporting goods, have magnified the uncompetitiveness of many Philippine products in the world market.
Another case in point is the pair of interest rate increases approved by the Monetary Board—the policymaking body of BSP (Bangko Sentral ng Pilipinas)—in recent months. Higher money costs are one of the principal competitive disadvantages faced by Philippine exports. This country’s interest rates are among the highest in this part of the world. Under great pressure to help bring down the steadily rising inflation rate, the Monetary Board raised BSP’s basic rate to its highest level since 2008 without giving much thought to the negative impact of more expensive credit on the world-market standing of Philippine exports. Certainly the explanatory statements that it has issued do not indicate a strong MB concern for that impact. Yet, without a better merchandise export trade performance, the peso will continue to lose ground, exerting further upward pressure on the inflation rate.
Which bring me back to the basic premise of this column. If they will not or are unable to promote Philippine exports, this country’s economic policymakers must not adopt measures that damage the competitiveness of those exports. That’s the least that they can do.