His Excellency Benigno S. Aquino III
President of the Philippines
At the APEC Economic Leaders Meeting Retreat, Session 2
[November 14, 2010, Yokohama, Japan]
Thank you, Your Excellency. It is truly a privilege to be a part of the APEC Economic Leaders Meeting for the first time.
The Philippines is committed in principle to the Bogor goals, as other developing economies. We believe that more open trade, better business facilitation, greater economic and technical cooperation will eventually lead to more development.
Our openness to trade and investment is evidenced by our deeper commitment to ASEAN economic integration, including through free trade agreements with our neighbors, such as ASEAN+3 and ASEAN+6. We are also seriously considering participation in the Trans-Pacific Strategic Economic Partnership Agreement (TPP). We see these undertakings as possible building blocks for the creation of a Free Trade Area of the Asia Pacific (FTAAP).
To demonstrate our commitment, we have reduced bound tariffs in line with World Trade Organization requirements. The simple average applied tariff on goods is 6.31% in 2010, much lower than before.
However, stumbling blocks remain. Capacities of developing economies to implement these rules need to be improved. We need more time to develop our capabilities and to enhance work programs on technical cooperation. Developing countries need assistance in building their institutional and human resource capacities in order to maximize the benefits and minimize the risks of freer trade. Therefore, we should strengthen our commitment to the Manila Framework on Economic and Technical Cooperation which calls on industrialized economies to provide more resources for capacity building for developing economies.
Another impediment to progress on free trade is the contentious issue of agriculture subsidies. We need to resolve issues on agriculture before we can achieve substantive success on these goals in time for the 2020 deadline. Progress on these fronts will make the benefits of economic integration more widely felt, making it easier to sell to our domestic constituencies, which over the years has become more skeptical about its benefits in light of widening income gaps in some economies.
These cooperative efforts must also be complemented by domestic policies that ease the burden on the poor.
The Philippine economy has been an example of inequitable growth. We have had a decade of uninterrupted growth but we have not seen a commensurate improvement in poverty reduction.
What my government is doing is to make direct interventions, both long and short term.
In the short term, we are engaging in Conditional Cash Transfers. This provides incentives for keeping students in school, and increases the number of people covered by basic health care insurance.
Over the short and long term, job creation is another strategy we are pursuing, including providing jobs in labor-intensive public works projects.
Over the long term, we are making significant investments in education and in health care, which needs to be sustained.
But simply increasing spending on social services is not enough. Public funds have to be spent wisely. Confidence-building measures such as these are vital to attracting investments and mobilizing private capital.
Thus, it is my hope that economies that have been effective in reducing poverty and corruption be encouraged to all share effective policies and best practices. Each of us here has committed to improving tax collection, fighting corruption, and to fostering a level playing field. Each of us has had successes and failures in this regard.
We propose enhanced cooperation in sharing best practices and in pooling resources to stimulate our respective ability to succeed and to improve the capacities of our governments to maintain the momentum of growth. We are encouraged by the United States approving a US$434-Millenium Challenge Account which will support anti-corruption, tax-streamlining, rural development and infrastructure initiatives.
In summary, I believe a combination of regional efforts to enhance capacities in developing economies and domestic interventions aimed at enhancing equitable growth would make it easier in the long run to sell the idea of economic integration to a sometimes skeptical developing world.
Perhaps an area that deserves some attention, in this time of great optimism, are the risks brought about by large capital inflows that might provide a challenge to the stability of emerging economies. Significant cross-country differences in the extent of exchange rate flexibility and policy responses could stir some currency tensions globally, and consensus must be found to preserve orderly conditions in the global foreign exchange market, while also taking into account the “new normal” environment in which weak growth in advanced economies is expected to persist.
At the bottom line is the need for stability in order to sustain growth, and the realization that the community of nations needs to unite and work together in order to achieve stability. My country supports a multilateral solution to the sometimes aggressive currency devaluations among economies. Practices that invite volatility might ultimately lead to a sharp depreciation in the dollar, destabilizing global markets and pulling away assets from fundamentals, which will eventually hurt businesses and households worldwide.
The entire globe realizes this danger, and the G-20 has taken steps to signify its thrust toward the exercise of greater vigilance over national economic policies. It has recognized the need to “move towards more market-determined exchange-rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies”.
We understand the APEC to stand for the same philosophy behind G-20’s statement: our economies are all unquestionably, intricately intertwined. Any effort by an economy to gain individual advantage, while opening avenues to unnecessary communal risk, sets back gains toward solidarity—gains that took generations of effort.
Ultimately, the best way to achieve economic integration is to show that it does not merely lead to higher growth, but a growth that is more inclusive across the Asia-Pacific region.