Investments News Analysis Trade

The baggage of political madness

Who is Michael B. Froman? Well, most Filipinos will never have heard of him, yet his reckless, off-hand decision-making could cost the Philippines US$100 million a year in new export earnings and threaten inward investment for the creation of some 75,000 new jobs between now and 2020, by which time half a billion trade dollars will have been lost.

And to add insult to injury, those earnings and jobs will now end up in countries that don’t have the capacity, or the infrastructure, or the know-how to make the very products which Filipino manufacturers have been shipping to the US for years. This isn’t trade policy; it’s politically driven madness.

Froman’s diktat involves the country-zoning of preferential duty-free access to America’s US$5 billion travel-goods market for products ranging from suitcases to wallets; handbags to backpacks. Previously, this category wasn’t included for tax-exemption under the Generalized System of Preferences (GSP). It was added in the GSP Update Act which came into being in June. And that was when the Philippines travel-goods trade first learned – via a Froman press release – that their goods would not be benefitting.

This is bad news for the manufacturers – including US brand names that have set up in the Philippines and were hoping to expand – but it’s also another blow to the country’s apparel and accessories sector, of which travel goods is a part. Its shipments last year declined by 42.7%, contributing to the 13.1% decline in total exports.

And while half a billion dollars over the next five years might not seem a big deal to a career bureaucrat in Washington – we can find no evidence of him ever setting foot in the Philippines – to the local companies which need all the work they can get right now, and 75,000 prospective job seekers, it is.

All and any foreign direct investment is important to the Philippines, and particularly right now as the government tackles what really amounts to a programme of national reconstruction. Infrastructure, agriculture, telecommunications, transport and manufacturing are crying out for investment, as too are health and social services and education.

The new GSP beneficiaries, meanwhile, are mostly countries in Sub-Saharan Africa – the likes of Rwanda, Ghana, and Lesotho; countries that don’t have any meaningful travel-goods manufacturing capacity whatsoever. Exports of travel goods to the US, from the entire African continent, amount to one hundredth of one percent of market share.

So who is Michael B. Froman? He is the US Trade Representative and his office is responsible for US trade development. A former Citigroup investment manager, he is also an autocrat who seems to believe that he owes no one an explanation for a decision which he arrived at, seemingly, in consultation with himself – though it has all the political hallmarks of President Barack Obama’s White House which appointed him as its policies craftsman.

Despite repeated requests over the past two months, he has declined to elaborate on this decision. It was fashioned in secrecy and presented as a fait accompli. And as far as Froman is concerned that’s the end of the matter. Nothing more to be said on the matter!

But then that’s his style. His draughting of trade deals for the Trans Pacific Partnership (TPP) – Obama’s legacy-flagship trade pact – have been heavily criticised for the secrecy in which they were carried out; not least for the benevolence extended to pals in Wall Street and Big Business. He, of course, called them: “the most transparent trade negotiation in history”. Class dismissed!

Nor is this the first time he’s shunned the Philippines on trade. Recently, he rejected appeals for duty-free status from Philippine garment makers in areas devastated by typhoons to assist them in rebuilding their businesses.

What then is this really all about? In a phrase, political window-dressing. Defending Froman’s decision, the White House explained that he wanted to make “a powerful contribution to lifting people out of poverty and supporting growth in some of the poorest countries in the world, while also reducing costs to American consumers and businesses” – though in reality it will achieve neither. In other words, it’s a token gesture to show poor African countries that avuncular America cares.

So, in a more macro sense what have we got? The US wants to keep troops on Philippine soil for the next 10 years (as agreed under the 2014 Enhanced Defense Cooperation Agreement)

– the geopolitical optics of this are good for Washington. It also wants to boost US trade with the region through the TPP and its Pivot to Asia policy. In return, it will penalise the Philippines, a close treaty ally (though not a TPP signatory), on an important trade issue in favour of a continent, Africa, where it has no intention of pivoting to – apart from for its humanitarian optics and, apparently, to source handbags and wallets which are never going to arrive.

If that’s not madness, it will do until madness comes along.

23 Comments

  • This is just the beginning. You have to understand that Obama is dedicated to European socialism and a one world government. The TPP will be used to accomplish just that. Obama and Europe are so dedicated to this they will stomp on those who don’t comply and it doesn’t matter what the response is by those being targeted. Duterte is a thorn in their side because he is a politician that actually tackles problems. Most politicians around the world never try and solve problems, what they do is try and suppress side effects. It’s kind of like taking Bio-Flu. By the time you fell bad, headaches, fever, and bad stomach the flu virus is already dead. You feel bad because of your bodies reaction to the virus. So the drugs you take to feel better are targeted at the side effects not the flu virus. That’s why Duterte is so important, while others target side effects Duterte targets actual problems. The world will try and turn you away from Duterte with any and all tools they have. Don’t fall for it. Short term pain is worth the long term gain. Duterte loves this country, that is without question. That doesn’t mean he won’t make mistakes, he’s human and we all make mistakes but he will find the right roads on this journey if you stand with him and stay strong. It will get worse before it gets better but isn’t that the way with everything worth having. There are no short cuts, no magic bullet in the end there is just a people trying to do the right thing and a president doing all he can to guide you. You should have known this would happen when you elected him. The world agenda is not good because most agree with it, even people in your own media. The world agenda is actually the agenda of a few that already own 60% of the worlds wealth. The Philippines deserves good government and a safe country. God bless Duterte!

    • Thank you so much Mr.MC In tyre for trusting our president .and also for your information.but sad to say even though president duterte are doing everything to the best of his ability.to uplift this country and yet many Filipinos didn’t understand his noble vision.some of them are still critizing the president will.but knowing someone like you appreciating his good.works will boost his morale….thank.you god bless.you and your family

    • Thanks SO much Mr Mcintyre.
      We prayed hard to GOD for
      this Kind of leadership,
      which,unluckily, we
      didn’t have for a long, long
      time. Président Rodrigo Duterte is GOD’S GIFT
      to thé *Filipino PEOPLE!!!!
      We hope and pray that with
      GOD’S HELP,
      with his stern leadership,
      and with thé backing and prayers
      of all thé Filipinos
      WHO can see from here
      and beyond, We will
      be able to withstand ALL thé
      trials and difficulties
      that lie ahead for OUR
      beloved PHILIPPINES!!!!!
      We owe you for your
      nice gesture towards
      our president
      GOD BLESS!!!!!

    • He targeted the “actual problems” but he is treating only the symptoms (the killing off of the unimportant ones) and letting the disease continue to fester (mere detainment of the big names, and eventual release). If he is serious about this war, the same logic should be applied to EVERYONE involved in the drug trade. If the fingerlings get no chance to clear their names (especially if/when some of them really are innocent!), why should the big bosses be allowed leniency when they are the source?

    • By “actual problems” you mean small time criminals? Because apparently “big time” personalities somehow got away with it *coughs… peter lim *coughs…

  • If Europes’s and the US’ economy is to be made the model of TPP our future will go down. Europe is not doing well. That is why the UK exited from the EU. The US is trillions in debt, and crime rate is going higher by the day. Why believe in Obama when even in his hometown Chicago he could not do anything in improving the condition of his fellow black Americans. It is under his watch that Afro Americans are registering the highest number of unemployed, out of school youth, black on black murders. Many Americans want TPP to be scrapped. The one world government concept is what is making the UN an international bully. It is time for this body to be disbanded. It has existed for more than half a century but it has failed to unite the world and bring about world peace. China and Russia on one side and the US, UK and France on the other are not really only friendly terms. In fact they working to bring each other down. Socialism has not helped Greece and the other ailing economies of Europe. It has also radically weakened the US. Why then embrace such failing ideologies?

  • Don’t worry about TTP,it is dead, people nowadays are so discerningly clever to be fooled by neoliberals.The French president stopped the talks already and whole Europe is up in arms against this folly!

  • Yes Very well said sir… A lot of the people here are used to sugar-coating of issues that needs to be tackled and solved… Many still believe in our President Duterte and it’s overwhelming to know other people outside our country gets Duterte ❤️❤️