The Philippines is in the global economic spotlight this year as host and chair of the Asia Pacific Economic Cooperation (Apec) meetings. The country’s leadership credentials have been bolstered by the fact that it has become one of the fastest-growing economies in the region, thanks in large measure to the sharply rising competitiveness of Philippine exports of goods and services.
Agreements in the World Trade Organization have helped to underpin these remarkable achievements by reducing trade barriers and providing a predictable and transparent trading environment for Philippine entrepreneurs. The WTO’s Information Technology Agreement, or ITA, has eliminated tariffs on computer products for many WTO members, and has been particularly important for the Philippines.
Earlier this month, at a workshop at WTO headquarters, one of the Philippines’ noted IT executives, Jay Chavez of Ionics EMS Inc., pointed out that the country has moved sharply up the value stream from labor subcontracting to new technologies. Today, the semiconductor and electronics industry ranks as the country’s top exporter, accounting for half of export revenues. Indeed, despite the global economic slowdown, the Philippines’ high-tech companies earned $25.8 billion last year in exports, representing a robust increase of more than 8 percent on the 2013 figure.
But high-tech executives in the Philippines know well that the rapid evolution of IT products means that standing still on trade opening can mean losing ground. Negotiations to expand the ITA to cover a wide range of new products are currently underway. At the Apec ministerial meeting in Boracay there will be a push to clear the few remaining hurdles and nail down an agreement.
The competitive position of the Philippines’ IT exporters is increasingly being matched by its services providers. The Philippines now ranks with India as one of the world’s leading outsourcing destinations, as measured by revenues and head count. Two Philippine cities, Manila and Cebu, rank in the top 10 most attractive centers for investors looking to outsource services. Furthermore, Manila has overtaken Mumbai as the world’s call-center capital. The Philippine call-center industry employs more than a million people, and revenues are projected to rise from $18 billion today to $25.5 billion by 2016.
Clearly, the country’s economic future lies in more, not less, international trade. WTO membership has brought undoubted benefits to Philippine producers and consumers. Thanks to the 2013 Trade Facilitation Agreement, for instance, moving goods across borders will be easier and cheaper. Philippine support was vital in striking the agreement, and the indefatigable efforts of Philippine Ambassador Esteban Conejos, who chairs the implementation committee, have been crucial in clearing the path to bring the agreement into force. Members must now ratify the agreement so that its benefits can be delivered.
The Philippines also participates in a number of nonmultilateral trade initiatives, such as the Trans-Pacific Partnership negotiations and the Regional Comprehensive Economic Partnership. These initiatives are welcome—trade liberalization is contagious and so regional efforts can serve as building blocks toward global agreements. For example, the roots of the WTO’s Trade Facilitation Agreement and our current negotiations to scale back barriers to trade in environmental goods can be traced back to initiatives which began within Apec. At the same time, it is important to note that there are many big issues, such as agricultural or fisheries subsidies which simply cannot be efficiently tackled outside the WTO. Therefore I think it is clear that the different types of trade agreement must work together.
The WTO’s Doha Development Agenda negotiations have probably generated fewer headlines recently than initiatives like the Trans-Pacific Partnership. But the Doha negotiations are now quickly evolving after many years of paralysis. Many ministers have expressed the desire to use our ministerial conference in Nairobi in December (the first such WTO meeting to be held in Africa) as the occasion to strike a deal that would pave the way for concluding the broader Doha Development Agenda. Such an outcome would be a vitally important boost for the still lethargic global economy and set us on a firm path toward updating the multilateral trading system. For this to happen, however, WTO members need to set the stage by agreeing in July on a framework accord that would serve as a springboard for success in Nairobi.
Since the beginning of the year members have, for the first time in many years, engaged in serious negotiations to liberalize trade in agriculture and manufactured goods and services. New proposals have come to the fore and there is a genuine commitment to finding solutions. But of course there is still a long way to go.
A strengthened global trading system offering more opportunities for growth and development would represent a significant bulwark against the rising tide of uncertainty buffeting the global economy today. An agreement is within reach, and I feel sure that the Philippines will continue to show the commitment and leadership we need to seize it.
Roberto Azevêdo is director-general of the World Trade Organization.