CURRENT TRADE CONCERNS
Elpidio V. Peria
6 October 2012
From various news reports this week, Dr. Danilo Israel of the Philippine Institute of Development Studies (PIDS) indicated that the Philippines stands to benefit with the expansion of Philippine exports of tuna to the EU if the current tariff of 24% would be lowered, if not dropped, as a result of negotiations of a free trade agreement with the EU. Given this positive scenario for the tuna industry in the Philippines, the next question to be asked is, in exchange for market access, what will the EU get in return, what industry sector will they ask the Philippines to open for them, and will it be worth the trade-off?
Aside from this, other concerns that the Philippines need to figure out is whether the expansion of tuna exports to the EU will be environmentally sustainable, like, say, for the duration of the lifetime of the free trade agreement and what are the social and environmental repercussions of increased tuna fishing effort? Will the price we pay for this market access durable and will eventually lead to higher levels of environmental protection as what classical trade and environment studies would suggest?
Based on 2010 data provided by the Bureau of International Trade Relations of the Department of Trade and Industry (DTI), yellowfin tuna (Thunnus albacores) exports to EU amounted to US$41.4 million and exports of tuna, skipjack and bonito, in airtight containers, also to EU is worth US$ 121.1 million, for a total of US$162.5million. Given that 2010 Philippine exports to EU amounted to US$ 7.393 billion, the share of tuna exports vis-à-vis all other export products of the Philippines in 2010 is just a puny 2.19%.
What sectors may the Philippines give up to get this much vaunted market entry to the EU? For now, we don’t know as there is no published offer and demand sheet for the trade negotiations, if ever the DTI will ever provide those supposedly sensitive trade negotiation information. Based on EU 2011 Trade statistics, most EU exports to the Philippines performed well for that year, with significant increases for exports of metal products (+17%), automotive products (+24%), industrial equipment (+6%) and garments and textiles (+21%) and decreases for exports of electronics (-4%), chemical products (-6%). EU agricultural exports continued to expand to record levels, although at a more moderate pace (+3%). Exports of meat (+48%), animal feeds (+5%), dairy (+22%) and alcoholic beverages (+60%) are well above pre-crisis levels. Exports of cereal products (-67%) fell however.
Perhaps in those product categories where the EU experienced decreases as a result of an emerging long-term trend is where some market openings in the Philippines may be exchanged for tunas.
Looking closely at the possible impacts of the increased market share of tuna to the EU, what could be its effects in the industry and the state of the tuna resources of the Philippines?
Based on the 2012 Philippine Tuna Industry Profile, the trend in the catch of tuna species landed in General Santos City (GSC), the tuna capital of the Philippines, is declining over-all for tuna caught through handline and purse-seine. Yellowfin tuna handline catch per unit effort (CPUE) range from 40-170kg/day and this has decreased in 2007 until 2009; the monthly CPUE of yellowfin tuna for the GSC purse seine fleet has fluctuated over the time series, ranging from 500 to nearly 3,500 kg/trip day. Catch rates for both skipjack and yellowfin tuna is on a decreasing trend since 2009. The Monthly CPUE of yellowfin tuna for the GSC ringnet fleet has fluctuated over the time series, ranging from 100 to nearly 3,000 kg/trip day. While yellowfin CPUE may vary markedly from one month to the next, the overall trend for this type of fishing gear is relatively stable.
According to the Profile, time series of nominal catch per unit effort (CPUE) can provide a broad indication of the availability of target species to respective fishing gears, and may provide some indication of relative abundance. It must also be noted that the Profile likewise identified several resource assessment efforts but it did not state categorically the current state of abundance of Philippine tuna resources, perhaps such data is not for wide public consumption.
With declining CPUE, increasing market access to the EU for Philippine tuna will inevitably drive our tuna resources to near-depletion levels, which could lead to a collapse of the stock, and recovering from such resources collapse may take years of no fishing and what complicates this is the possible impact of global warming on these resources which is only beginning to be understood. The PIDS study featured in this week’s news reports has also foreseen that more demand for fish products may exacerbate the overexploitation and abuse if left unchecked. Based on frequent availability of improperly-sized fish being sold in fish markets like in General Santos City, enforcement of fishery regulations in the Philippines actually leave much to be desired.
Another related item that the DTI needs to include in the FTA negotiations is how the various non-tariff measures (NTMs) applied to Philippine tuna exports would impact on the transaction costs of doing the actual exports, for if the costs of complying with these NTMs would blunt the gains of increased market share or export quota, what is the use of entering into these negotiations?
A PIDS study in 2007 on market access limitations of the Philippines in the EU market estimated that around seven (7) percent of agriculture exports to EU in 2005 were affected by these NTMs. One of the authors of such study, Gloria O. Pasadilla, in a separate policy note, said that estimating the costs of complying with these certification requirements for NTMs is hard given that cost varies depending on the product, destination market, and other exogenous factors like over-strictness of custom inspectors abroad. There are also other costs to be considered, like the upgrade of production facilities to pass HACCP certifications or change in formula for each country destination that eliminates possible economies of scale. Another cost which is hard to quantify are those related to ‘unhappy eventualities’ like rejection at the Customs checkpoints in the destination countries due to NTM-related reasons. These costs include the return shipping expenses or the costs of impounding rejected goods.
Indeed, increasing market access of Philippine tuna to the EU market is not a simple matter of lowering the effective tariff rates, there are other things that must be considered, to fully determine if the benefit is truly worth the effort, including a serious consideration of other trade-offs and impacts on the Philippine economy, environment and society as a whole. To the worker or businessman of a Philippine economic sector who might be sacrificed for this market access, the question is : what’s it to you?