Subsidies needed despite WTO rules

The lowly onion has sent off an odor so acrid it made high officials jump off their seats. Senate President Pro Tempore Manuel Villar last week castigated the agriculture office for allowing onion imports at a time when half a million farmers are harvesting. More so since its Bureau of Plant Industry had promised onion farmers this same time in 2002 that it will no longer issue import permits. Rep. Aurelio Umali, from whose Nueva Ecija district most of the farmers hail, also twitted the Customs office for lax inspection of documents. The BPI had last given a permit in January, good for one shipment that arrived soon afterward. Yet up to early March, ships from China were dumping tons of onions covered by "recycled" or photocopied permits. Villar suspected that the Chinese onions may even have concealed shabu. It had been done before, with cargoes of flourescent light bulbs serving as fronts that were later sold for only a third of local prices. Pungent onions, Villar noted, can better hide the scent of shabu from canine sniffers.

The unabated entry of onions in the name of free trade has put in doubt RP membership in the World Trade Organization. WTO requires all member-states to reduce import tariffs that restrict trade. RP has been very obedient, believing that free trade would give consumers cheaper but better goods, force local firms to be globally competitive, and lure in investors to create new jobs. It hasn’t paid off. Despite so-called safety nets to cushion the bumpy ride to eventual zero-tariffs, RP businesses have crumbled from the onslaught of imported goods. A dozen textile and garment firms closed shop last year due to dumping of cheap shirts and underwear from China. Cement factories almost followed, saved only by Trade Sec. Mar Roxas’s temporary tariff of P20.60 per bag of cement dumped from Taiwan. Capital and jobs were lost, instead of gained. To make matters worse, industrialized states that advocate free trade were its foremost violators. Invoking health risks from fruit flies, Australia continues to ban shipments of Guimaras mangoes. Yet the same fruits are being sold in equally fussy Japan and the US. The European Union forbids imports of RP tuna, saying it prefers fish from former colonies in Africa and Central America. Australia and Western Europe are the first to howl against stricter inspection for mad-cow disease of beef shipped to Manila. Last week Filipino onion growers got a report from scientists that the cargo from China contained high amounts of pesticide. So much for Filipino consumer benefits under WTO.

Emboldened by a rising outcry in Congress, Roxas announced that government might have to review its WTO membership. Especially since, against WTO rules but supposedly to save American jobs, US President George W. Bush recently stuck a 30-percent tariff on steel imports. But Congress leaders know from experience that a review is a slow process. Dangerous too, since WTO can slap poor RP with trade sanctions. Conceding that globalization is inevitable, Villar is thus looking at possible subsidies in the case of onion farmers. The word is a no-no for government economic planners. Subsidy can mean anything and everything, from free grants of fertilizers to concessional loans. Whatever, it could provoke scorn from another international body, the World Bank, which raises its hackles at the very sound of the s-word. The bank offers governments low-interest, long-term agricultural loans on condition that no subsidies bring prices so low that trade becomes unfair. (Taiwan subsidizes its cement makers with tax breaks, but it’s not a World Bank borrower.) Umali is looking at something that he thinks would be acceptable to both the WTO and World Bank - an Onion Research Institute. From it, onion growers can learn new techniques to increase their yield and lower their production costs. Government, too, can learn when to allow imports or not. World onion harvests usually occur right after the sunny yet cool months, from the southern hemisphere moving up to the equatorial belt and onto the northern region. That means January for New Zealand crops; February in Australia; early March in Argentina, Chile, Brazil; mid-March to April in RP; May in Taiwan; June in Japan, India and Mexico; July to September for the US, Europe, Middle East and China.

That China was able to dump onions on Manila in the first quarter, as it did in 2000, points to another facility it has but that RP direly lacks: refrigerated warehouses. Bankers who lend to onion farmers had prodded officials a decade ago to set up a branch in Nueva Ecija of the government-owned Food Terminal Inc. in Taguig, Metro Manila. With it, onion farmers, the bulk of whom are in Central and Northern Luzon, would not have to haul their wares south before shipment to Visayas-Mindanao or overseas. Government instead leased off the FTI without building a twin in the north where tomato, vegetable and fruit growers can also stockpile. Government economists always tell tycoons, workers and farmers to produce more, at low cost but high quality, if they must stay competitive. But the onion experience, as well as that of cement and garments, shows that government must do more than just lecture. It must keep its word. The BPI had vowed in March 2000 to stop issuing onion import permits, but gave out 97 new permits from late 2001 to January this year. During the recent Economic Summit, President Gloria Arroyo promised stable transport rates to keep farm and factory prices low. Soon afterwards, the Ports Authority raised its docking and other fees, its third increase in 11 months. Bulacan Rep. Willie Villarama complained that the fees pushed up the transport component to one-third the price of corn and one-half that of tuna. In developed countries, transportation accounts for no more than eight percent of the cost of goods.

Government inconsistency is not the only knot. It can’t even keep records to share from one agency to another. To this day, Customs has yet to find out how many tons of onions were dumped from China in recent weeks. It took local cement makers to show that Roxas’s 200-day tariff of P20.60 per dumped bag from Taiwan enabled them to stay in business and pay P78 million in taxes in the last quarter of 2001 alone. It took Rep. Etta Rosales to show that 97 low-salaried workers in one cement factory alone paid in 2000 more taxes (P3,216,000) than the four dumpers from Taiwan (P915,000). Even with such data, the Tariff Commission leaked Thursday its decision to lift the 200-day tariff ahead of time. A cement factory bogged down the same day. The ensuing Luzon shortage sent retailers hoarding in anticipation of an actual closure of all other cement plants from a stronger wave of dumping from Taiwan.

Since everyone must prepare for global free trade, government itself must do its bit. Philippine Airlines would have crashed two years ago. But majority owner Lucio Tan insisted that aviation authorities negotiate equal landing rights with Taiwan and Korea to enable PAL to fight a fare war. Other agencies can do the same for their assigned industry sectors. Never mind if the World Bank considers any help from government as a subsidy.

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Watch Linawin Natin tonight at 11:30 on IBC-13. Topic: Buy-Pinoy.

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