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Issue Number 23, November 2003

• George & Gloria: Two Of A Kind
  
  Current US Hegemony In Asia Pacific
  
  When Will Marcos Victims Get Justice
  
  Nestle Workers Epic Struggle
  
  The WTO And The Philippines
  
  The WTO And The Demise Of Philippine Agriculture
  
  Philippines Signs Landmark Tobacco Control Treaty
  
  Obituary: Bishop Antonio Fortich
  
  Eileen Shewan Resigns - Again
  
  The Struggle To Keep Land Out Of Foreigner's Hands
  
  Kiwi Bank Account
  
  Editorial Apology

Kapatiran Issue No. 23, November 2003

THE WTO & THE DEMISE OF PHILIPPINE AGRICULTURE
- Walden Bello


Walden Bello is Professor of Sociology and Public Administration at the University of the Philippines and Executive Director of the Bangkok-based Focus on the Global South. This article is excerpted from the recently published report "Multilateral Punishment: The Philippines in the WTO, 1995-2003”, published by Focus on the Global South and Stop the New Round! Coalition, Philippines. The full report can be downloaded as a PDF file at www.focusweb.org ) It was published in Focus On Trade, Number 89, July 2003. It was written before the collapse of the WTO talks at Cancun, Mexico, in September 2003. Ed.

For the Philippines, the Agreement on Agriculture (AOA) was the most important agreement in the World Trade Organisation (WTO). The reason was that the country's agricultural sector continued to employ nearly half of the labour force and contribute over 20% of Gross Domestic Product (GDP). However, as one paper asserts, when "all economic activities related to agro-processing and supply of non-farm agricultural inputs are included, the agricultural sector broadly defined accounts for about two-thirds of the labour force and 40% of GDP" ⁽¹⁾. Agriculture thus plays "a strategic role in the country's overall economic development through its strong growth linkage effects as a source of food and raw material supply for the rest of the economy, and as a source of demand for non-agricultural inputs and consumer goods and services" ^(2).

During the national debate on WTO ratification, the Government based its pro-WTO stance on the argument that free trade would increase the efficiency of Philippine agriculture. This was not a case of agricultural liberalisation forced on reluctant technocrats as in other developing countries. The neoliberal technocrats that began to dominate State economic agencies during the (1986-92) Aquino and (1992-98) Ramos administrations wanted to liberalise agriculture. Indeed, the two administrations pushed through a comprehensive liberalisation programme (Executive Order 470) that embraced both industry and agriculture.

Agricultural liberalisation, however, lagged behind owing to resistance from farmers big, medium, and small. Indeed, the Magna Carta for Small Farmers, passed in 1991, was seen as a far-reaching attempt to consolidate protection by providing for the banning imports that were deemed to be produced locally in sufficient quantity. In this context, subjecting the country's agricultural sector to the discipline of the WTO's Agreement on Agriculture was seen as a key instrument to destroy agricultural protectionism. Moreover, entry into the world of the Agreement on Agriculture would make Philippine agriculture more productive by promoting the cultivation of high value-added agricultural (HVA) commodities such as broccoli and cut flowers.

With HVAs regarded as the "export winners" that would increase Philippine share of world markets ⁽³⁾,agricultural technocrats saw the trade liberalisation that came with WTO membership as leading to the gradual phasing out of much rice and corn production which involved most of the rural work force. The Medium Term Agricultural Development Plan of the Fidel Ramos administration - prepared with possible entry into the WTO in mind - envisaged limiting rice and corn production to 1.9 million hectares and freeing up some 3.1 million hectares currently planted to rice and corn for raising cattle and cultivating commercial crops ⁽⁴⁾.

Glittering Promises

To secure popular support for the ratification of the General Agreement on Tariffs and Trade (GATT, the precursor of the WTO), the Government projected that the AOA regime would, among other things: create 500,000 new agricultural jobs annually; increase annual agricultural export earnings by 3.4 billion pesos annually, thus improving the balance of trade in agricultural products; and increase the annual gross value added of agriculture by P60 billion ⁽⁵⁾.

To ease transition pains, Congress appropriated P128 billion, to be released at some P32 billion annually, to improve agricultural infrastructure and create "safety nets." With ratification, the Government moved to make Philippine legislation consistent with the WTO. The Magna Carta for Small Farmers was repealed. Comprehensive legislation, Republic Act 8178, was enacted ending quotas and transforming them to tariff rate quotas (TRQs). The TRQ system covered 15 tariff lines of "sensitive" agricultural imports, including live animals, fresh and chilled beef, pork, poultry meat, goat meat, potatoes, coffee, corn, and sugar. For these commodities, the Philippines was required to provide "minimum access" at low tariffs to a volume equivalent to 3% of domestic consumption in the first year of WTO implementation to 5% on the tenth year. Beyond the quota, imports would be taxed at a much higher rate. For corn, for instance, using the agreed-upon period of 1986-88 as the basis for calculating domestic consumption, the minimum access volume (MAV) allowed to come in at a low tariff of 35% would be 65,000 metric tons in 1995, rising to 227,000 metric tons in 2004 ⁽⁶⁾. Beyond the MAV, the tariff rate rose to 65%.

Under Annex Five of the AOA, countries were allowed to retain a quota on "a primary agricultural product that is the predominant staple in the traditional diet" ⁽⁷⁾. In the case of the Philippines, this was rice. The country was nevertheless required to increase the quota from 1% of domestic consumption on the first year to 4% on the tenth year, or from 30,000 metric tons in 1995 to 227,000 metric tons in 2004 ⁽⁸⁾.

The US As The WTO’s Enforcer

As in the case with the other agreements comprising the WTO, the US served as the Geneva-based body's local enforcer, watching with an eagle eye Philippine legislative and implementation processes. This process could be quite intrusive and went beyond the scope of the letter of the AOA. For instance, the US intervened in the issuing of licenses to importers for pork and poultry meat, accusing the Philippine government of allocating "a vast majority of import licenses to domestic producers who had no interest in importing" ⁽⁹). When the Philippines baulked, the US threatened to suspend the preferential tariffs for Philippine exports covered by the General System of Preferences (GSP). The Philippines gave in, and after a memorandum of understanding detailing its concessions was issued in 1998, according to a US Trade Representative’s (USTR) report, "the review of the Philippines' eligibility to receive preferential access under the General System of Preferences...was terminated" ⁽¹⁰⁾.

By the end of the decade, not only had the promised benefits of AOA membership failed to materialise but Philippine agriculture was in the throes of crisis ⁽¹¹⁾. Far from increasing by 500,000 a year, employment in agriculture actually dropped from 11.29 million people in 1994 to 10.85 million in 2001 ⁽¹²⁾.

Agricultural exports such as coconut products were supposed to rise with WTO membership, but the value of exports registered no significant movement, rising from $US1.9 billion in 1993 to $US2.3 billion in 1997, then declining to $US1.9 billion in 2000. On the other hand, massive importation, the big fear of GATT critics, became a reality, with the value of imports almost doubling from $US1.6 billion in 1993 to $US3.1 billion in 1997 and registering $US2.7 billion in 2000. The status of the Philippines as a net food-importing country was consolidated, with the agricultural trade balance moving from a surplus of $US292 million in 1993 to a deficit of $US764 million in 1997 and $US794 million in 2002 ⁽¹³⁾.

Key sectors of Philippine agriculture were in a pretty bad state by the end of the decade.

The Crisis Of Rice Production

Rice production in the country was in crisis owing to a number of factors, including failure of effective government support programmes. However, the Government's policy of resolving short-term "supply crises" by massive imports could not but have the effect of further discouraging increased rice production. The rice exception under Annex Five limited the Philippines to import a volume that was only 1% of domestic consumption in 1995 rising to 4% by 2005. In fact, the Government, citing necessity, imported amounts far beyond the quota, with imports shooting from 263,000 metric tons in 1995 to 2.1 million metric tons in 1998, 836,999 metric tons in 1999, and 639,000 metric tons in 2000 ⁽¹⁴⁾.

Such massive volumes kept the price of rice low, making it unattractive for farmers to increase production. Average farm-gate prices of rice from 1997 to 2001 grew at a "measly 0.89% annually" ⁽¹⁵⁾. Not surprisingly, total rice production increased marginally in the late 1990s and came to an average of 1.9% per annum for the whole decade - far below the rates registered in the Philippines' two key rice suppliers: 3% per annum in the case of Thailand and 4.5% for Vietnam ⁽¹⁶⁾. In other words, massive above-quota imports were contributing to the continuing erosion of the rice sector, in turn making rice importation more and more of a permanent fixture of the agrarian economy.

Neo-liberal technocrats, the Asian Development Bank, and the WTO took advantage of this situation to press for the elimination of the rice quota, which the Philippines could still take advantage of after 2005 under Annex Five of the AOA. At a tariff rate of 100%, which was being considered by House Bill 3339 -the so-called "Rice Safety Nets Act" - the price of imported rice would be the same as that of locally produced rice. However, it would provide little protection to local rice producers since, as one study pointed out, the rate would be "insufficient to negate the potential convenience and advantage of sourcing products from one single source abroad than incurring costs attendant to consolidating and building stocks from many [local] suppliers and farmers" ⁽¹⁷⁾. In other words, many costs and uncertainties would be eliminated by relying on one or a few foreign suppliers than on many local suppliers.

At a tariff rate of 50%, which some quarters at the Department of Agriculture were considering, the tariff rate would allow imported rice, at 2002 relative prices, to be priced at P11 to P12 a kilo, which would be lower than the P14 per kilo that was the lowest price of domestic rice ⁽¹⁸⁾.

Yet these considerations to eliminate the rice quota and move to tariffs were made with the current AOA in mind. The controversial "Harbinson draft" (named after its author, WTO Agricultural Negotiations Chairman, Stuart Harbinson) that serves as the negotiating paper for further agricultural liberalisation under the AOA, proposes to slash developing country tariffs above 120% by 40% and those between 20% and 120% by 33%. Tariffication of rice in conjunction with the WTO's adoption of the Harbinson proposal would definitely lead to an even graver crisis of the country's rice sector.

With very little sympathy for their plight from a neo-liberal technocracy and with tremendous pressures coming from different quarters for liberalisation, the fate of the two million farmers involved in rice production - some 20% of the agricultural work force - was highly uncertain.

Corn - In Terminal Condition?

The plight of the corn sector was equally grim. The main corn production area in the Philippines is Mindanao, and the cost of corn from Mindanao in Manila is less than the landed cost of foreign corn by two pesos per kilo ⁽¹⁹⁾. As in the case of rice, a sector that had long been neglected by Government has been opened up to international competition that it was ill-prepared to meet. Unlike rice, however, corn imports were not subject to quota restrictions. A minimum access volume (MAV) starting from 3% of domestic consumption in 1995 to 5% in 2004 would be taxed at a low tariff of 35%. Beyond that, the AOA still allowed corn to come in with no volume limitation, though the tariff rate would be increased to 100%.

How much protection these arrangements gave was open to question. An Oxfam Great Britain study in 1996 claimed that imports from the US, the world's largest corn exporter, could be available at a price 20% below the current domestic price by the end of the 1990s. It went on to note that by "the year 2004, the price gap may have widened to 39%, as tariffs are scaled down under the (1986-94) Uruguay Round agreement" ^(20).

From practically zero imports in 1993 and 1994, corn coming into the Philippines shot up to 208,000 metric tons in 1995 to 558,000 in 1996, 462,120 metric tons in 1998 and 446,430 in 2000. The Government appeared to be quite liberal in managing the MAV for corn. According to one report, a significant portion of the volume of corn that came in above the MAV of 135,000 metric tons in 1996 appeared to have come in at the 35% tariff rate rather than the 100% rate, thanks to an administrative order allowing expansion of the MAV limit during "shortages" ⁽²¹⁾. This stemmed from the growing strength of an alliance between foreign corn exporters and local end-users, such as feedmillers and livestock raisers, that had a great deal of interest in lower priced corn imports.

Among the factors depressing the price of corn was cheap corn from the United States coming in under the PL 480 programme of the United States, which sought external markets for US corn by giving foreign governments long-term low interest export credits to import US agricultural commodities, including soybean, rice, and corn. PL 480 was one of several dumping devices that were legitimate under the AOA. An average of $US20 million of US agricultural commodities has arrived under the programme since 1997, with the figure rising to $US40 million in 2001 ⁽²²⁾. In 2002, $US2 million worth of corn was brought in under the programme ⁽²³⁾, causing local growers to protest that PL 480 yellow corn imports were particularly harmful, in terms of depressing local prices, if they arrived during the corn harvest ⁽²⁴⁾.

Not surprisingly, Mindanao was being ravaged by the new import-biased agro-trade regime. Already, the limited trade liberalisation of the late 1980s was plunging corn production into crisis prior to the AOA. As Kevin Watkins of Oxfam noted after a field trip to Mindanao, "increasing imports of corn have been associated with a marked decrease in domestic corn production, and in the area planted. In South Cotabato, where most of Mindanao's corn is produced, there was a 15% decrease in production last year" ^(25).

The trend appears to have accelerated after the country's adherence to the AOA. After a trip to Bukidnon in 1996, Charmaine Ramos, an analyst with MODE, reported: "I found out that the southern part of the province is steadily being converted from corn to sugar" ⁽²⁶⁾. Several years later, Focus on the Global South analyst Aileen Kwa claimed that, corn farmers in "Mindanao... have been wiped out. It is not an uncommon sight to see farmers there leaving their corn to rot in the fields as the domestic corn prices have dropped to levels [at which] they have not been able to compete" ⁽²⁷⁾. This observation was supported by macro data. While production remained stagnant, land devoted to corn across the country contracted sharply from 3,149,300 hectares in 1993 to 2,510,300 hectares in 2000 ⁽²⁸⁾.

Traditional corn and rice farmers, the Government admitted during the GATT-WTO ratification debate, would be among the losers during under the AOA regime, with some 45,000 corn farmers among those displaced annually. They would be among the 350,000 agricultural producers that were estimated to be displaced annually, according to Department of Agriculture estimates ⁽²⁹⁾. However, the growth of employment in selected and export and high value added crops that was supposed to be a fallout of the WTO would translate into a net gain of 500,000 a year. But these estimates were highly questionable. According to the Secretary of Agriculture at the time of the WTO ratification debate, the 45,000 corn farmers slated for displacement would be absorbed by the silage growing industry that would service the cattle-growing industry stimulated by the WTO regime ⁽³⁰⁾. Yet cattle raising turned out to be a very disappointing industry in the next few years, stunted by a very liberal beef and "carabeef"* import regime put in place to comply with the AOA itself. Cattle production barely moved, registering 213,000 metric tons in 1995 and 261,000 in 2001 ⁽³¹⁾. *Carabeef = carabao (buffalo) meat for human consumption. Ed.

The depressing reality for corn farmers was underlined by Charmaine Ramos: "Only farmers with relatively bigger farm lots are able to shift easily. Small farmers are forced to lease their lands simply because they have no means to finance the capital requirements of shifting to high value crops" ⁽³²⁾.

An explanation for this trend was offered by Kevin Watkins: "The argument that displaced food staple producers will simply shift to the production of commercial crops has a somewhat surreal quality. The high capital costs of entry into commercial food markets and the importance of infrastructure, which is non-existent in the more marginal areas from which people will be displaced, means most of the benefits from commercial agriculture will accrue to more prosperous producers" ⁽³³⁾.

The "more realistic scenario" for corn producers under the AOA regime was "more intensive poverty, displacement, and migration to urban centres" ⁽³⁴⁾. Indeed, during the hearing on the WTO conducted by the House of Representatives' Special Committee on Globalization, the one sector that the Department of Agriculture was willing to recognise as having suffered from entry into the AOA was corn ⁽³⁵⁾.

The Assault On The Meat, Poultry, And Vegetable Industries

The negative impact of trade liberalisation under the WTO regime went beyond traditional crops like rice, corn, and sugar to encompass higher value-added products like pork, poultry, and vegetables.

Massive importation of chicken parts, especially from the United States, nearly killed the industry after pressure from Washington resulted in liberal issuing of import licences, with chicken parts imports rising by 101% in 1998 and 2,021% in 1999. The import price of chicken in early 2000 came to P25.83 per kilogramme, which was 50% lower than the average farmgate price of P53.17 per kilogramme price of local chicken ⁽³⁶⁾.

Adding to the woes of local industry was liberalisation of the importation of frozen beef, which was seen by consumers as a substitute for both chicken and pork. Imports of cheap beef and "carabeef" were reported to have grown fivefold between 1993 and 1998, a trend that threatened to accelerate when an executive order withdrew beef imports from coverage under MAV ⁽³⁷⁾.

Cheap imports as well as other factors stemming from the Asian financial crisis led to the shutting down of two of the country's big poultry integrators, some 30 commercial farms, each producing 100,000 head of cattle, and five cooperatives in 1997 ⁽³⁸⁾. Poultry growers were joined in 2003 by hog producers in their threat to "mount a food blockade through their refusal to sell their poultry and livestock" ⁽³⁹⁾. The hog raisers claimed that looser food imports under the AOA regime brought a yearly reduction of P5 to P10 per kilo in the farmgate price for pork, a figure which shut up to P14 to P17 in 2002. This translated to a 50% decline in price in just one year ⁽⁴⁰⁾. Data supported the claims of local producers of a sudden and massive surge in imports owing to trade liberalisation. Pork imports rose from less than 1,000 metric tons in 1993 to 7,000 metric tons in 1997 to 15,790 metric tons in 2000 ⁽⁴¹⁾. In 2002, imports were expected to hit almost 47 million kilos, up 43% from the 2001 figure of 33 million kilos ⁽⁴²).

Vegetable producers were supposed to be among the gainers from AOA-led trade liberalisation. Indeed, the AOA was expected to shift producers from cultivating rice and corn to producing high-value added crops such as broccoli, lettuce, carrots, and cauliflower. Trade liberalisation, in fact, hit a growing industry and hit it hard. From only 10,000 kilogrammes in 1999, the volume of imported fresh vegetables rose to 1.1 million kg in 2000 and two million kg in 2002 ⁽⁴³⁾. Combined with smuggled fresh vegetables, the influx resulted in imported lettuce, for instance, selling at only P90 per kilogramme compared to local lettuce, which was retailing at P200 per kilogramme ⁽⁴⁴⁾.

Contributing to this massive differential was the application of a 7% tariff on imported vegetables in accordance with Executive Order 470, a much lower rate than the 40% tariff that the Philippines committed under the WTO. Even with a 40% rate, however, imported produce would still enjoy a price advantage over local produce. If Mindanao, the country's corn bowl, was threatened by maize imports, the country's salad bowl, Benguet, was endangered by the foreign vegetable invasion. According to one report, "...vegetable producers in Benguet have lost P2 billion in failed transactions between July and August 2002 because of the dumping of at least a million kilogrammes of vegetables from China, Australia, New Zealand, (emphasis added. Ed.) and The Netherlands. The deluge of kilogrammes of imported vegetables (whether smuggled or not) in the markets of Benguet, Mountain Province, the Cordilleras, Pangasinan, Central and Northern Luzon, and Metro Manila pose considerable risk and bring gross disadvantage to the nation's small vegetable growers" ⁽⁴⁵⁾.

The report went on to warn that P6 billion would be lost yearly and "ten of thousands of growers will be displaced if the unabated influx of foreign vegetables continues" ⁽⁴⁶⁾.

Keeping Out Philippine Tuna And Bananas

In becoming a member of the WTO, the Philippines entered the worst of all possible worlds: even as it opened up its agricultural markets to foreign products, key foreign markets continued to remain closed to Philippine exports.

The US, for instance, brazenly kept up its double standards game. Administrative Order No. 25, which required importers of meats to obtain additional safety certification, was put on hold in 2002, a year after it was issued, after the US threatened to file a complaint with the WTO ⁽⁴⁷⁾. Meantime, the US itself issued a new directive requiring certification by a Philippine government agency that certain beef and pork products meet certain processing standards ⁽⁴⁸⁾.

Particularly disturbing were new market access restrictions imposed by the agricultural superpowers in defiance of WTO rules. The tuna industry was threatened with severe dislocation when the US and the European Union imposed high tariffs on tuna imports. While allowing duty free imports of tuna from the Andean countries (in South America), the US slapped tariffs ranging from 6.5 to 30% on Philippine tuna imports. The European Union (EU) allowed preferential tariffs for its former colonies (the so-called Africa Caribbean Pacific countries, or ACP) while slapping a 24% duty on Philippine tuna. Export earnings from canned tuna fell precipitously from $US130 million in 1998 to $US64 million in 2001 ⁽⁴⁹⁾.

With the US accounting for 38% of its tuna exports and the EU for 15%, these brazen protectionist moves posed a serious threat to the viability of the Philippine tuna industry. Possible losses from the discriminatory treatment in the US market alone were estimated at $US50 million a year by the Department of Trade and Industry ⁽⁵⁰⁾. An EU decision to lower the tariff on Philippine canned tuna exports was hailed as a victory by the Government. But it was hardly significant once one read the fine print. As the Philippines daily paper, Business World, reported, "the 12% levy applies only to a specific amount of tuna imports called the tariff rate quota (TRQ). This TRQ will be shared by the Philippines, Thailand, and Indonesia. Of the quota, the Philippines will get 9,000 metric tons (MT) while Thailand will account for 13,000 MT, and Indonesia will get 2,750 MT" ⁽⁵¹⁾. Even Australia, an ally of the Philippines in the Cairns Group, a grouping of developed and developing agro-exporting countries, beat up on the Philippines by invoking sanitary and phytosanitary standards (SPS), a standard Washington tactic. In mid-2002, after years of being petitioned to admit Philippine Cavendish bananas, the Australian government decided against the import. The ostensible reason was the risk of the Philippine banana carrying pests and diseases that could ruin the Australian banana industry. Yet the Philippine bananas had been shipped since the 1960s to countries with high quarantine standards, including Japan and New Zealand (emphasis added. Ed.).

The real reason was a strong lobby from the Australian banana industry. The Australian industry produced 20 tons of bananas per hectare, compared to the Philippines, which turned out 50 tons per hectare, a difference that led to a marked disparity in price: 60 US cents for each kilo of Australian bananas compared to 20 US cents per kilo for Philippine bananas ⁽⁵²⁾.

The Abdication Of The State

Eight years after entering the WTO, there is now widespread acknowledgment that the Philippines' agricultural sector was unprepared for adherence to the Agreement on Agriculture. Indeed, few would now dispute the contention of critics that trade liberalisation combined with government neglect of agricultural development has proved to be a deadly formula.

Neo-classical specialists in Philippine agriculture have been caught between an ideological propensity for liberalisation and a recognition - though grudging - that protectionism is not the main problem of Philippine agriculture. In fact, economist Ramon Clarete, one of the prime intellectual managers of the Philippines' entry into the AOA, admitted, prior to entry into the WTO, that the agricultural sector had "the lowest effective tariff protection in the economy," with food items having an even lower effective protection than the rest of agriculture ⁽⁵³⁾. Effective protection for agriculture the 1970s and much of the 1980s for agricultural products ranged from 5% to 9%, while effective rates of protection for the manufacturing sector ranged from 44% to 79% ⁽⁵⁴⁾. Effective rates of protection for manufacturing and agriculture tended to even out by the mid-1990s owing to tariff reforms, but this was largely owing to bringing manufacturing tariffs being brought down.

Not agricultural protectionism but problems relating to "a weak technology base, price distortions, weak property rights structure, constraints on land market operations, insufficient public support services, and poor governance," were identified by a team of neoclassical economists as the main bottlenecks to greater agricultural productivity ⁽⁵⁵⁾. Though they could not spell out the problem owing to the anti-State bias of their ideology, what these economists were, in effect, saying was that it was lack of effective, comprehensive, and coordinated Government intervention in agriculture that lay at the root of the anaemic state of Philippine agriculture.

The virtual abdication of Government from agriculture is indicated by the fact that while most of the work force was employed in agriculture and the sector contributed about 21.5% of gross value added, the budget allocation for agriculture in 2001 was only P12.8 billion or 3.4% of Government spending ⁽⁵⁶⁾. Of the annual budgetary appropriations, less than 40% "have been historically allocated for productivity-enhancing expenditures such as irrigation, research and development, fishery extension, and other support services" ⁽⁵⁷⁾. Research and development expenditures, at 0.27% of gross valued added by agriculture, was far below the 1% benchmark ⁽⁵⁸⁾.

Not surprisingly, only 1.34 million hectares out of 4.66 million hectares of irrigable land was actually irrigated. Only 17% of the Philippine road network was paved, compared to 82% in Thailand and 75% in Malaysia. Crop yield across the board was anaemic, with the average yield in rice of 2.87 metric tons per hectare way below average yields in China, Vietnam, and Thailand ⁽⁵⁹⁾.

Confronted with governments that played an aggressive, activist role in protecting and promoting their agriculture not only in the US and European Union but in neighboring Asian countries as well, the Philippines was ill-equipped to enter the AOA.

To prevent the agricultural sector from becoming a roadblock to the ratification of the WTO Agreement, the 1992-98 Fidel Ramos administration promised to appropriate and release funds for agricultural modernisation and safety nets. The fund promised - called the Department of Agriculture Action Plan - totalled P128 billion, to be released at the rate of P32 billion annually ⁽⁶⁰⁾. The figure included "P27 billion for the improvement of irrigation facilities, P8 billion for the construction of farm-to-market roads, P762 million for the improvement of post-harvest facilities, and P64 million for the installation of grain centres" ⁽⁶¹⁾.

However, according to one agricultural expert, only 44% of the P32 billion promised for 1995 was appropriated. Of this amount, funding for new projects - that is projects begun after ratification of the WTO Agreement - amounted to the exceedingly small sum of P2.8 billion. In 1996, the proposed P32 billion was reduced to P14.6 billion, of which the funding for new projects was, at P2.2 billion, even lower than the 1995 figure ⁽⁶²⁾. Seven years later, the Department of Agriculture admitted that only 50% of the proposed Department of Agriculture Action Plan had been released ⁽⁶³⁾.

The failure of the safety net programme was supposed to be addressed by the Agriculture and Fisheries Modernization Act (AFMA) passed in 1998 which provided for comprehensive Government assistance covering such areas as irrigation, post-harvest facilities, credit and financing, and research and development. But, as one report noted, "despite having a legislated annual budgetary allocation, AFMA was not able to take off the ground as Government could not even meet the annual budgetary needs of the Department of Agriculture" ⁽⁶⁴⁾.

During the ratification debate, pro-WTO advocates promoted the vision that the AOA would create a situation where the Philippines would fill production niches in which it would have the "comparative advantage," such as the cultivation of high value-added export crops such as cut flowers, asparagus, broccoli, and snow peas. These advocates, such as then Secretary of Agriculture Roberto Sebastian, did not do their homework.

For farmers to shift to "high value non-traditional export crops" (NTAEs) requires investment that is simply not within the reach of small producers. For instance, the case of cut flowers, data from Ecuador reveals an average initial capital investment of $US200,000 per hectare. Annual input costs are also high, with the costs of agro-chemicals alone coming to over $US18,900 per hectare ⁽⁶⁵⁾. In the case of snow peas, broccoli, and cauliflower respectively, annual production costs, according to data from Guatemala, comes to $US3,145, $US1,096, and $US971 per hectare respectively, compared to $US219 per hectare for corn ⁽⁶⁶⁾.

Moreover, competitive advantage in these crops can only be achieved through significant outlays in technological support and research and development. As many analysts have pointed out, NTAE cultivation is biased against small-scale producers because "many traditional crops require considerable technological sophistication, relative to traditional production, as they are either new to the region, require special care at harvest because of their perishability, or are being produced to meet the more demanding cosmetic quality standards of foreign consumers" ⁽⁶⁷⁾.

Without massive Government financial support, there was simply no way that the Philippines could launch significant production of high value crops, much less attain comparative advantage in producing them.

Not surprisingly, Philippine agriculture entered the worst of all worlds in the mid-1990s: massive trade liberalisation amidst a continuing lack of effective support from government. Despite their grudging recognition of the fact that the lack of comprehensive State support was the sine qua non of agriculture's survival, the neo-classical economists and technocrats who had gained control of the strategic heights of the economic bureaucracy in the 1980s and 90s supported the WTO liberalisation drive. In many cases, in fact, as in case of vegetable and meat imports, they supported deeper cuts in tariffs than was required under AOA rules. Tragically, doctrine had supplanted observation and analysis.

Notes

¹ V Bruce Tolentino, Cristina David, Arsenio Balisacan, and Ponciano Intal, Jr., "Strategic Actions to Rapidly Ensure Food Security and Rural Growth in the Philippines," draft for "Yellow Paper 2”, March 29, 2001.
² Ibid.
³ Kevin Watkins, Field Trip Report: The Philippines (Manila, Oxfam UK, 1995).
⁴ Charmaine Ramos, "Discussion Points: Trends and Prospects in the Cereals and Grains Sector of the Philippines," lecture delivered at the KSP Study Session on the Medium-Term Development Plan, St. Vincent Seminary, Quezon City, May 6, 1996.
⁵ Francisco Pascual and Arze Glipo, "WTO and Philippine Agriculture," Development Forum, No. 1, Series 2002, p5.
⁶ Department of Agriculture, Rules and Regulations for the Implementation of the Agricultural Minimum Access Volume (MAV), Manila, 1996.
⁷ World Trade Organisation, The Results of the Uruguay Round of Multilateral Trade Negotiations: the Legal Texts (WTO: Geneva, 1995), p66.
⁸ Department of Agriculture, ibid. During the Uruguay Round negotiations, the quota for rice for the first year was set at a different figure: 59,000 metric tons.
⁹ United States Trade Representative, 2000 National Trade Estimates (Washington, DC: USTR, 2000) p330.
¹⁰ Ibid. p328.
¹¹ Why was there such a contrast between the rosy predictions and the dismal outcomes? A story told by Riza Bernabe, a senior researcher of the Philippine Peasant Institute is illuminating. After recounting the promises of gains in jobs, exports, and agricultural production that would come with adherence to the AOA, she was approached at a recent conference by Dr Ramon Clarete, the Department of Agriculture consultant who was the source of these claims during the WTO ratification debate. Clarete expressed surprise that people still remembered his erroneous projections. This confirmed Bernabe and others' suspicions that in order to win the ratification debate, the projections were manufactured by Clarete, who went on to become the Chief of Party of USAID's AGILE Programme. Personal communication, June 4, 2003.
¹² Selected Agricultural Statistics, 1998 and 2002 (Quezon City: Dept. of Agriculture, 1998, 2002).
¹³ Ibid.
¹⁴ Ibid.
¹⁵ Selected Agricultural Statistics, 2002, p2.
¹⁶ Selected Agricultural Statistics, 1998 and 2002.; Rovik Obanil, "Rice Safety Nets Act: More of a Burden instead of a Shield," Farm News and Views, First Quarter, 2002, p10.
¹⁷ Riza Bernabe, "Rice Trade Liberalisation: Endangering Food Security," Farm News and Views, First Quarter 2002, p13.
¹⁸ Ibid. p13.
¹⁹ Alternative Forum for Research in Mindanao (AFRIM), "Trade Liberalisation Has Meant Poverty to Mindanawans", Paper prepared for the Stop the New Round Coalition! Manila, Feb. 20, 2003.
²⁰ John Madeley, “Trade and Hunger: an Overview of Case Studies on the Impact of Trade Liberalisation” (Stockholm: forum Syd, 2000), p57.
²¹ "Fields of Woe," Farm News and Views, Vol. 10 (January-February 1996).
²² Leilani M Gallardo, "PL 480 Agreement Snagged by Debate on Use of Proceeds," Business World, May 27, 2002.
²³ Ibid.
²⁴ Cecille Yap, "Senators Say Veggie, Corn Imports Killing Local Industries," Business World, Nov. 4, 2002.
²⁵ Kevin Watkins, Field Trip Report: The Philippines (Manila: Oxfam UK, 1995).
²⁶ Charmaine Ramos, “Discussion Points: Trends and Prospects in the Cereals and Grains Sector of the Philippines”. Lecture delivered at the KSP Study Session on the Medium-Term Development Plan. St. Vincent Seminary, Quezon City, May 6, 1996.
²⁷ Aileen Kwa, "A Guide to the WTO's Doha Work Programmeme: The 'Development' Agenda Undermines Development," Focus on the Global South, Bangkok, January 2003.
²⁸ Selected Agricultural Statistics, 1998, 2002.
²⁹ This was admitted in a series of television debates by GATT-WTO proponents during the ratification debate in 1994.
³⁰ Comments at the television programme Firing Line, Channel 7 TV, Manila, Dec. 12, 1994.
³¹ Selected Agricultural Statistics, 1998, 2002.
³² Ramos.
³³ Watkins.
³⁴. Ibid.
³⁵ Statement of Noel Padre, Officer in Charge, Policy Research Service, Department of Agriculture, at Hearing of the House Special Committee on Globalization, House of Representatives, Quezon City, June 4, 2003.
³⁶ "Continued Regulation of Chicken Imports Sought," Business World, July 13, 2000.
³⁷ "Poultry Integrators Note Shake-out, More Firms Close Shop," Business World, Feb. 11, 1998.
³⁸ Ibid.
³⁹ Alyansa Agrikultura, Declaration, 2002.
⁴⁰ "DA backs Tighter Rules on Meat Imports," Business World, Nov. 5, 2002.
⁴¹ Selected Agricultural Statistics, 1998 and 2002.
⁴² "DA Backs...," Business World, Nov. 5, 2002.
⁴³ "Briefer on GATT-WTO and its Impact on the Philippine Vegetable Industry " Manila, 2002.
⁴⁴ Ibid.
⁴⁵ Ibid.
⁴⁶ Ibid.
⁴⁷ Leilani Gallardo, "DA Meat Import Policy Enforecement Put on Hold," Business World, April 16, 2002.
⁴⁸ Arnold Tenorio, "Food Processors Want RP to Launch Trade 'Offensive”, Business World, May 3-4, 2002.
⁴⁹ "Leilani Gallardo and Marites Villamor, "Tuna Producers to Lobby for Tariff Cut from EU States," Business World, Aug. 23-24, 2002.
⁵⁰ Ibid.
⁵¹ Iris Cecilia Gonzales, "EU Approves Lower Tuna for Canned Tuna Imports", Business World, June 10, 2003.
⁵² Hernani de Leon, "Banana Growers Won't Throw in Towel Just Yet", Business World, July 3, 2002.
⁵³ Ramon Clarete, "Towards a Policy Environment for Agribusiness Growth in the Philippines: A Review of Policy Developments Affecting the Sector from 1985 to 1995," Paper circulated at the Dialogue with Congress (“After GATT, What?”), Manila Hotel, Manila, July 28, 1995.
⁵⁴ V Bruce Tolentino et al.
⁵⁵ Ibid.
⁵⁶ Omi Royandoyan and the Philippine Peasant Institute Research Staff, "The AFMA/SAFDZ: Responding to the Agricultural Crisis," Farm News and Views, 3rd Quarter 2001, p9-10.
⁵⁷ Ibid.
⁵⁸ Ibid.
⁵⁹ Rovik Obanil, "Rice Safety Nets Act: More of a Burden than a Shield," Farm News and Views, 1st Quarter 2002, p10.
⁶⁰ F Gemperle, "Where are the Safety Nets?," Unpublished paper, Manila, Feb. 6, 1997.
⁶¹ Francisco Pascual and Arze Glipo, "WTO and Philippine Agriculture: Seven Years of Unbridled Trade Liberalisation and Misery for Small Farmers," Development Forum, No. 1 Series 2002, p5.
⁶². F. Gemperle, "Where are the Safety Nets?," Unpublished paper, Manila, Feb. 6, 1997.
⁶³ Pascual and Glipo, p5
⁶⁴ Ibid.
⁶⁵ L Thrupp, “Bittersweet Harvests for the Global Supermarket: Challenges in Latin America's Agricultural Export Boom” (Washington: World Resources Institute, 1995),
⁶⁶ M Conroy, D Murray, and P Rosset, “A Cautionary Tale: Failed US Development Policy in Central America” (Boulder: Lynne Reiner, 1996).
⁶⁷ Ibid.

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