Spineless in Bali

/ 07:32 AM December 12, 2013

During the national debate on whether to join the World Trade Organization in 1994-95, the promoters of the move promised that joining the organization would result in a net of 500,000 jobs a year added in agriculture and the Philippines becoming a powerhouse exporter of high-value added crops like broccoli and cut flowers. In fact, over the next decade, the country was turned from a net agricultural exporter into a net agricultural importer, employment in agriculture dropped drastically in absolute numbers, and in one commodity after another, Filipino producers were driven out of business by cheap subsidized imports of grain, poultry, vegetables, and livestock.  Becoming a party to the Agreement on Agriculture in order to join the WTO, in short, was a bad move.

Carrot and stick


I was reminded of this historic exchange almost two decades ago during the negotiations over the so-called “Bali Package” that was the center of talks at the recent World Trade Organization Ministerial meeting in Bali, Indonesia, which took place Dec. 3-7. The developed countries, led by the United States and the European Union, came to Bali with two proposals. The carrot was a “Trade Facilitation” initiative that would allegedly simplify customs procedures and thus increase global trade by a “trillion dollars.” The stick was an ultimatum to developing countries in the form of a demand that they get rid of significant support programs for farmers and consumers, like food stockpiling, after four years, after which they could be charged in a WTO court for exceeding their allowable (de minimis) subsidy levels of 10 percent of gross domestic product. This was the so-called “Peace Clause Extension Proposal.”

Many developing countries were upset by the Peace Clause proposal and skeptical about the benefits for them of the Trade Facilitation deal. India was especially threatened since it had just passed an expanded program of stockpiling food to meet the food security of poor farmers and consumers. But others joined India’s protest because the motion placed the burden of rectifying imbalances in the global food trade on developing countries while avoiding any commitment on the part of the developed countries to cut their more than $200 billion worth of subsidies to their agricultural sectors. This massive subsidization has led to systematic dumping, or selling goods below cost, in developing country markets that are driving their farmers to bankruptcy.


An unbalanced deal

After nearly 20 years of pulling off one shenanigan after another at the WTO, the developed country governments were at it again. Thus, I felt compelled to have a lengthy telephone exchange with our lead negotiator in Bali, Secretary of Trade and Industry Gregory Domingo. Secretary Domingo agreed that both proposals were unbalanced in favor of the developed countries. Those countries, he informed me, were not even willing to entertain cuts in their export subsidies—a small portion of their massive subsidy programs—in return for cuts in the already relatively minute subsidies of developing countries. As for the proposed trade facilitation deal, Mr. Domingo admitted that it favored mainly big corporate players, not the small and medium enterprises of developing countries that were engaged in global agricultural commerce. In other words, the Philippine negotiating team was going to Bali with eyes wide open.

The President’s orders

Gravely worried about the pressure that would be brought against the Philippines if it chose to support India’s stand against an agricultural trade deal, I texted President Aquino. “Let me just restate my strong opposition to the Philippines’ signing on the unbalanced Bali package…I really hope we will not sacrifice the strategic interests of the Philippines and other developing countries just to achieve a Bali deal.”

I was pleasantly surprised when the President replied: “Prof, they are still negotiating and they have been instructed along the lines you have stated.”

That gave me hope. I responded, “Thanks so much, Mr. President. The future of our agriculture is really endangered if we sign on to the developed country-biased Peace Clause Deal, and the Trade Facilitation deal will mainly benefit the rich countries.”

Over the next 24 hours, momentous developments took place. India backed down from its position of opposing the deal on agriculture when the developed countries agreed to drop their push to invoke sanctions on developing countries maintaining significant food support programs after an extension of four years. However, the burden of living up to the Agreement on Agriculture was still placed on developing countries. Moreover, only their existing food support programs would be covered by the deal, meaning new programs to support their farmers or consumers would open them up to being brought to the WTO court. Most important, the developed countries, like by the United States and European Union, refused to entertain any mention of reducing their massive subsidies, which are the main factor wreaking havoc in global agricultural trade.


But as the negotiations drew to a close in the early morning of Dec. 7, I got the following message from Secretary Domingo: “Cong Bello, the Bali Package is a balanced package and while parts of it like some parts in Trade Facilitation will benefit others more, we benefit also bigtime in the more transparent processes that we will have particularly in customs. The peace clause is also of significant benefit to the Philippines as revised without a fixed term limit.”

Déjà vu all over again

This was déjà vu all over again, to borrow Yankee Manager Yogi Berra’s immortal phrase. We agreed to a deal on agriculture without the promise of any subsidy cuts on the part of the rich agricultural superpowers, which simply said that the parties would work towards a “permanent peace clause,” whatever that is. And as far as the gains from trade facilitation were concerned, we were not provided with any figures by Secretary Domingo and his team on how we would gain “big time” from the deal.  Again, the likely source of Domingo’s statement was an act of faith in the estimates of the WTO secretariat and northern think tanks like the Peterson Institute that there would be a global gain of one trillion dollars in trade.  And what happened to Secretary Domingo’s concern that it would be mainly big corporations, and not developing country small and medium enterprises, that would reap the greatest benefits from the deal?

As in 1995, Philippine negotiators allowed themselves once more to succumb to the pressures of the developed country negotiators whose marching orders from their capitals is to make no substantive concessions to the developing countries. This hardline attitude was what had forced the developing countries to form an effective defensive block since the Seattle Ministerial of the WTO in 1999. In Bali, that developing country block collapsed, under the pressure exerted by developed countries; Brazil, one of whose representatives fills the post of director general; and host country Indonesia, which wanted a deal at any cost for prestige reasons.

There is now a consensus that the Philippines on balance lost in joining the WTO nearly 20 years ago, with our agriculture and industry now on their last legs after becoming part of a global organization the main “principle” of which is trade liberalization for developing countries and continued protectionism for the developed countries. I thought we had learned from the debacle of 1995. Our negotiators have not, being steeped in the art of swallowing the rosy calculations of the WTO spinmasters and caving in at the slightest pressure from the powerful.

President Aquino and the Philippines have been ill-served by our negotiators in Bali.  As in 1995, we will live to regret joining the frightened herd and signing the Bali deal.


* Walden Bello, who represents Akbayan in the House of Representatives, is an on the World Trade Organization and global trade. This article is adapted from a privilege speech he delivered at the House on Dec. 11, 2013.

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