Trade in the real world

Since this column was written over a decade ago, many other issues have entrapped countries all over the world. Terrorism was the Bush-Blair governments' main concern. Trade took a back seat to political maneuverings, not only in the United States but also in Latin American countries, some of which are--until today, as in Nicaragua--electing leaders hostile, not to global trade (we hope!), but to global dominance by Washington.

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Editorial Page column, The Evening Paper

Issue of 1 August 1995

Trade is not a one-way street, let me make it clear, nor should local exporters want it that way. To demand that the poor, developing nations of the world must be given preferential treatment in developed markets over everybody else is to live in an ideal world.

In the real world, competition is the engine of trade. And competitors do not always play fair, or the word "protectionism" would never have come about. While all players may demand level playing fields and swear their allegiance to borderless economies till kingdom come, trying to put one over others is the culture of the trade game.

Each player is in the game, if not to win big, then at least to come home with a share of the winnings. Which is still better than sulking and staying home because one is not in shape to compete. As facile expressions go--no pain, no gain; no guts, no glory.

When rich nations talk about countries like the Philippines as "emerging markets," do not think the phrase means they will only buy from us. More accurately, they will sell to us.

United States Commerce Secretary Ron Brown, at a two-day conference of 500 American business executives last week at Georgetown University, did not soften the definition any when he listed 18 countries as "big emerging markets ... These are the markets of tomorrow," Brown said.

"The opportunities are incredible. Our conservative estimates suggest that between 1990 and 2010, exports to the 10 biggest emerging markets will grow perhaps a trillion dollars, perhaps more if we focus on them intensely."

Brown's words ring the bell of truth, which every country in the big list should know. The United States sees all markets, before anything else, as needing to buy a lot of what US businesses can produce over the next decade.

Only afterwards will the Americans agree that we can sell to the US market a lot of what we ourselves produce. After all, it is also true that the emerging economies, however large and promising, cannot buy US products unless they have money. Thus, the complex workings of loans, aid, and investments.

Within that vicious relationship is the virtuous cycle of global trade. The required virtues are, however, extremely challenging: industry, efficiency, creativity, innovation, competitiveness, discipline (especially among local consumers), and trade acumen. Can the Philippines join the game?

By the way, the countries making up the 18 in the US list of "big emerging markets" are Argentina, Brazil, China, Taiwan, Hong Kong, India, Mexico, Poland, South Africa, South Korea, Turkey, and the seven member-countries of the Association of Southeast Asian Nations.

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Even as the United States has enshrined a list of priority markets, it is also moving fast within its host hemisphere. A hemispheric free trade area by 2005 is the US goal in the Americas. The goal was adopted by presidents and prime ministers of countries located in the hemisphere--from Alaska to Tierra del Fuego on the tip of South America--at a December 1994 meeting in Miami.

The nitty-gritty of the master plan, bold but still vague, for open markets all throughout the Americas was the subject of an earlier meeting in Denver of the commerce and trade chiefs from all 34 countries. The plan will include tying up bilateral as well as regional trade agreements, particularly NAFTA and Mercosur, into one giant accord covering a market of roughly 700 million consumers.

The task is not an easy one, given the frenzy in the US Congress over the Mexican experience and existing bilateral-trade problems between hemisphere countries, such as the Brazil-Argentina row over car-import quotas. Thus, the 10-year timetable for realizing the hemisphere-wide agreement.

What is more telling, though, is a steadily growing sentiment among Latin American countries. Brazil, the region's largest economy, has bolstered the sentiment into policy. Rejecting any uni-directional agreements, Brazil's president, Fernando Henrique Cardoso, has said: "We want no closed doors."

Chile is ready to adopt the Brazilian creed. Latin America's only economy with an investment-grade credit rating, Chile has sent its trade negotiators to all directions, ready to lock in any markets they can pick up along the country's route to export prominence. Chile is already a member of the Asia-Pacific Economic Cooperation (APEC), is due to join South America's Mercosur bloc, is talking to the European Union for a trade pact, and is negotiating with the United States, Canada, and Mexico for membership in NAFTA.

Such aggressiveness grew out of versatility. Chile feels it can dictate its own terms for entry into NAFTA because it refused to put all its eggs into one basket.

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An agreement to open up financial services worldwide, experimentally to cover the next three years, has been brokered by the World Trade Organization, with only the United States opting out of a deal that will allow banks, insurance companies, and securities firms to operate globally.

"The harsh truth is that the United States currently has the worst school-to-work system in the industrialized world," according to a report that compared the record of American schools against those of European schools in preparing their students for successful integration into the workforce.

Meanwhile, Beijing is into an interesting experiment to transform China's credit cooperatives into commercial banks.

Let's talk about all these next time.

-- NBT

Competitiveness

Editorial Page column, The Evening Paper
Issue of 3 August 1995

An exciting experiment is about to take place in China and should be in full force before the end of the year. My interest here is anchored not only on the nature of the experiment but also on its motivation.

The experiment will take credit cooperatives in 35 major Chinese cities, group them into "collective city cooperative banks," and give them the authority to operate as commercial banks. They will be made to adopt standard commercial management and compete head-on with the big commercial banks.

A vice governor of the central People's Bank of China, who presented the country's new Commercial Bank Law, paid tribute to credit cooperatives. He said they have"worked quite well providing loans to collectives, private businesses, and other small ventures that are seen by the major banks as too risky." In their evolution into commercial banks, the credit cooperatives will continue to play the same role: that of servicing small and medium-size companies, which often complain they cannot get credit from China's huge and indifferent state banks. Allowing competition to flourish within a sector is admirable enough. Tasking the cooperatives to service a clientele that often does not get any attention from those in mainstream banking is even more commendable.

Our small and medium-size enterprises also need all the help they can get in terms of additional capital. Most of them already possess the enthusiasm, the technology, the drive. What they need is the added boost of capital. As Taiwan and South Korea have adequately proven, small and medium-size firms, especially those supporting export industries, are indispensable to a globally competitive economy.

This should convince skeptics in our finance sector who, only over two months ago, scathingly rejected the idea of a local Grameen-style bank. Not only the World Bank, it now appears, is convinced about the viability of "banking on the poor."

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Another huge market goes global. Almost a hundred countries have now committed themselves to an agreement, brokered by the World Trade Organization, opening up their financial services markets for the next three years. What this means, theoretically, is that it is now open market--to a set level in the 95 countries that signed up for the accord--for banks and securities and insurance companies.

Again, for businesses all over the world operating in this market, competitiveness is the prime requirement. The 95 countries that signified agreement with the accord will eventually see "more foreign banks, more foreign securities, and more foreign insurance companies." The WTO claims the result would be increased security for investors and more investment in the developing world.

Between the time the agreement is enforced and the time WTO's vision comes true, however, things could go wrong--and badly. The Philippines is already seeing more foreign banks coming in this year. More foreign securities and foreign insurance companies to follow comprise a threat frightening enough to freeze many a local businessman's blood.

Charges of unfair competition are bound to be brought up again, ad infinitum. That's one way of looking at the new setup. The other way is looking at our local banks, local securities, and local insurance companies moving out, perhaps trailing our monster OFW communities abroad and profiting from the ready-made clientele.

And that's aside from the foreign business that our financial services companies may be able to catch once they establish their presence in thriving markets.

Fear of open markets and liberalized trade is understandable. But the time has come for Filipino businessmen to be proactive, to rise with alacrity to the challenge of global competitiveness. Successful Filipino managers in multinational firms here and abroad have reaped plaudits, or at the very least, learned to keep up with the exacting pace of global business. Most of them find, if they have to work again for local ventures, a slower pace frustrating, at the very least. Areas of production where local businesses are often found wanting, aside from speed, are quality, R&D, technology, and innovation.

It is time all local ventures initiated a thorough study and inventory of their processes, whether they be in manufacturing, agriculture and agri-based industries, or services. The time to reengineer, for all Filipino-owned ventures, is now.

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"The United States currently has the worst school-to-work system in the industrialized world," said a statement that accompanied the release of a study conducted by the American Federation of Teachers. The federation represents some 875,000 US public-school teachers and other education workers.

The report admits the US has the largest number of university graduates in the world, but it raises concerns about the education given the 75 percent of US students who do not graduate from college. US schools are concentrating too much on preparing youngsters for college and ignoring high school students who will be seeking jobs in business and industry.

"There is no systematic mechanism for moving young people into the workforce," the federation said.

Would the record of Philippine high schools be any better than their American counterparts? Do Philippine schools prepare our children for job competition in a global economy?

-- NBT