Bash the European Union?

By:  Bernard Ong

Rodrigo Duterte is ill-advised – by his own followers & the ‘best and the brightest’ Cabinet. Their constant refrain has been to say “the European Union doesn’t know conditions in the Philippines. We have a Drug War to save our country. It is none of your business”.
This is not as simple as the “Huwag kayo makiaalam” message that gunmen tell bystanders while they kill their intended victim.
Let’s get the obvious out of the way:
1. EU – on its own & via its member countries – has hundreds of staff in various agencies & embassies in the Philippines. EU itself has its own embassy & ambassador. They are on the ground here. They wake up to the same news headlines – EJKs, warped justice – as you & me. They know the conditions in the Philippines.
2. Drug War – with killings & collateral damage – has been tried in many other countries before Duterte became president. It has failed elsewhere. In fact, it has been worked in Davao City for 20+ years. Also failed there. Still a lot of drug users there as evidenced by thousands of surrenders after Duterte became president.
Next, I’ll come to ‘None of your business.’
Let me count the ways:
1. EU is the Philippines third-largest export market worth €6.6B or $7.3B in 2016. This represents 12% of our total exports. In contrast, Philippines is only 38th largest market for EU worldwide – with only 0.4% share of total exports. We need them more than they need us.
2. Our imports from EU was $6.8B in 2016. This means we had a favorable $0.5B trade surplus. In contrast, our exports to China was $6.1B while our imports were $15B for a whopping $8.9B trade deficit. More banana exports from Davao won’t be enough. Mining closures will reduce one of our top exports to China.
3. EU is historically the largest source of foreign direct investment (not loans, not ‘hot money’) in the Philippines. It has a foreign direct investment stock of over $6B.
4. EU is also second-largest source of OFW remittances and fifth-largest source of tourist arrivals.
1. PH enjoys first GSP (Generalized System of Preferences) – a mechanism for help poor countries develop by providing them lower tariffs, higher quotas to developed markets.
2. The Philippines was granted GSP+ status by EU in 2014. It is the only country in ASEAN and currently 1 of only 8 countries in the world with GSP+ privileges.
3. EU GSP+ is more generous than GSP. PH can export to EU at zero-tariff, zero-quota on 6,000+ products. There are conditions attached to a country to avail of GSP+. #1 non-diversification of exports (concentrate on few items) #2 low share of EU market #3 ratification & effective implementation of 27 international conventions on human & labor rights, environment & governance principles.
4. PH wants to obtain a Free Trade Agreement – covering most, if not all products – with EU. FTA is even better than GSP+. This will also spur further investment by EU companies in the country as the ability to ship components & raw materials between EU and PH makes their supply chains more efficient.
5. EU has already completed FTA with Singapore (2014) and Vietnam (2015). It also has ongoing negotiations with Malaysia, Indonesia & Thailand. Without an EU-PH FTA, Philippines will lag farther behind its neighbors who have one.
The proposition of EU is simple. Stick to international conventions (no EKJ, respect Human Rights, no Death Penalty, protect labor, etc. , so you can keep GSP+. And maybe we can progress to FTA. European ‘conditions’ are universal conventions of civilized humanity.
What is there to dislike with the “ratification & effective implementation of 27 international conventions on human & labor rights, environment & governance”? These are universal and not just European conferences. Every country should work to adopt these.
This is a different proposition from that of China: Give us your islands-and-seas in exchange for loans-and-trains. The Chinese plan is self-serving – mainly to obtain strategic geopolitical outposts to project their power & to secure raw materials to feed their economy.
If the Philippines persists on its present path – EJKs, Death Squads, trumped-up charges, violations of due process, Death Penalty, reduced age of criminal liability, plunder – we will not get FTA and will likely lose our GSP+.
Note that the US-led Millennium Challenge Corp already deferred its decision in Dec 2016 on new funding for the Philippines after its first round of $434m ended. Our damaged reputation is a global problem, not just with EU.
You can cry to high heavens “Stop interfering in our internal affairs. We can kill whoever we want.” Sure, but then count your losses without GSP+ and FTA. That is EU’s business. Can’t tell them who to grant special economic privileges. Weep while Vietnam & Indonesia leave you in the dust & modernize like Singapore.
Less trade. Fewer investments. Fewer jobs. Fewer taxes. Fewer funds for infrastructure & social services. Weaker peso. More expensive fuel. Higher inflation. More dependence on China. Give up more islands-and-seas, so they bail us out.
It is not just the drug suspects, innocents & their families who suffer from this Drug War and its tactics, it will be all of us. Except for a few select cronies who will be middlemen for China.

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