Sunday, June 26, 2016

BWorld 66, Renewable portfolio standard and electricity prices

* This is my article in BusinessWorld last June 21, 2016.


The key to cheaper prices and/or good services is more competition among more players, more voluntary exchange, and not more price coercion by regulators. If buyers do not like the price of seller A, they can opt out and go to sellers B, C, and so on. Seller A is then pressured to lower his price to compete with other sellers.

The key to expensive prices and/or lousy services is more government regulation and curtailing voluntary exchange. Buyers are forced to buy from expensive sellers and opting out is not allowed. This happens in government-created monopolies like tricycle routes, electric cooperatives, or government-favored sectors like producers of new renewables like solar and wind power.

The Department of Energy (DoE) along with the United States Agency for International Development (USAID) conducted a public consultation last June 16 at Shangri-La at the Fort, Bonifacio Global City about the proposed or draft Department Circular (DC) on the Renewable Portfolio Standard (RPS). The activity was hurriedly organized and was not posted on the DoE’s Web site.

But I heard about it from a friend and then I wrote to DoE’s Mario Marasigan and asked if I could attend it and he said yes. Thank you Sir Mario.

Here is a quick backgrounder of the subject.

1. Under the Renewable Energy (RE) Act of 2008 (RA 9513), RPS is defined as a “policy that requires electricity suppliers to source an agreed portion of their energy supply from eligible RE resources.”

2. Under the Implementing Rules and Regulations (IRR), Section 4, RPS, “...Annual minimum incremental percentage of electricity sold by each RPS-mandated electricity industry participant which is required to be sourced from eligible RE Resources and which shall, in no case, be less than one percent (1%) of its annual energy demand over the next ten (10) years.”

3. Under the draft DC discussed by the DoE last June 16, Section 8. “The minimum annual increment in the RPS level shall be initially set at 2.15% to be applied to the actual total supply portfolio of the Mandated Participant in each grid for the previous year.”

4. Under the Annex table, RPS Calculation, also prepared by the DoE that day, the cumulative RE capacity that will be needed from 2016 to 2030 is a glaring 30,862 MW (30.86 GW) or an average of 2.06 GW/year increase for RE alone (see Table 1).


During the open forum, I asked about many consumers’ concern about expensive electricity. What would be the implication in pricing of the proposed RPS, if they impose a 1.5% annual marginal increment (AMI)? How about at 1.75% or at 2.15% (their proposed rate)? And if they target 30% renewables in the energy mix by 2030, or 32% or 35% (their proposed target), what would be the impact on electricity prices?

The feed in tariff (FIT) without RPS was already four centavos per kilowatt-hour (kWh) last year, 12 centavos per kWh this year, so with FIT + RPS next year, will it become 20 centavos? 25 centavos?

DoE officials answered that no study on price implications has been worked out yet and that it can come out later as the current focus is the mechanisms on how RPS will be implemented, including penalties for violators or non-implementers of RPS.

So it is a weird circular because both the DoE and the National Renewable Energy Board (NREB), the multi-stakeholder body that recommends policy options for the DoE, are pushing for a policy where they admittedly do not have a clear idea on the cost of implementation to energy consumers.

One thing that can be favorable for RPS though is that distribution utilities (DUs) will have more options from among renewable technologies -- biomass, waste to energy, geothermal, run of river hydro, impounded hydro, wind, solar, ocean, hybrid systems, others -- and choose those that are least cost.

The above RPS and RE targets by 2030 are not practical and not viable because the Philippines is still way below many of its neighbors in power generation and we need to grow fast to sustain the economic momentum of recent years and create more businesses, more jobs to more people.

People who push for higher renewables in the national energy mix want to push out coal power as much or as soon as possible. This is a day-dream and illusionary goal because of the big role that coal power contributes to many industrialized and emerging Asian economies. From 2000 to 2015, Indonesia, Malaysia and Vietnam ramped up their coal power capacity from 375% to 609%. The Philippines’ 11.4 gigawatt (GW) coal capacity in 2015 was only one-half that of Vietnam’s 22 GW, only one-third that of Taiwan’s and nearly one-eighth of South Korea’s.

For Table 2, definition of the following terms:

a. 1 terawatt (TW) = 1,000 gigawatt (GW) = 1,000,000 megawatt (MW)

b. MTOE = Million tons of oil equivalent

c. 1 MTOE = produces about 4.4 terawatt-hour (TWh) of electricity in a modern power station.




The share of wind and solar in total electricity production in the Philippines is small, only about 0.8% of the total in 2015, despite their installed power share of around 2.5%-3% of total installed capacity. The explanation for this is the low capacity factor of these new renewables.

Some people insist that there is already “grid parity” by the new renewables with coal and natural gas, that “solar is cheaper than coal” now. If this is true, then why are they asking for another round of energy coercion through high RPS, on top of existing coercions on FIT (guaranteed price for 20 years) + priority dispatch to the grid + fiscal incentives?

A developing country like the Philippines should be given more leeway in building up cheaper and stable energy sources.

Energy poverty and expensive electricity result in lack of jobs because energy-intensive industries and companies would avoid the Philippines and go to energy-stable and competitively-priced economies like Malaysia, Indonesia, Vietnam and Thailand.

The DoE should either implement the minimum 1% of AMI in RPS, or further delay RPS implementation until the price implications are studied and the consumers are not further burdened with higher prices and unstable electricity supply.

Bienvenido S. Oplas, Jr. is a Fellow of SEANET and Stratbase-ADRi, and heads a free market think tank, Minimal Government Thinkers.
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Thursday, June 23, 2016

Climate Tricks 54, Forcing the linkage between climate change and dengue

A friend from UP, Oggie Arcenas, wrote this discussion note at the UPSE website. In  his concluding notes, he  wrote,

"La Niña phenomenon is positively (and significantly) associated with dengue cases. La Niña, as widely known, is “cooling” of surface water temperature, inducing an abnormal cycle and intensity of dryness and wetness in different parts of the world. Although La Niña does happen naturally, its increasing frequency is attributed to general global warming."

Some brief comments here.

1. "La Niña, as widely known, is “cooling” of surface water temperature" Vague. La Nina (and El Nino) is cooling (and warming) of Pacific Ocean's Nino Region 3.4 only. Nino Regions 1, 2 not included, Atlantic Ocean or Arctic or Indian Oceans not included. So it is not just any "surface water temp."


2. "La Nina... increasing frequency", Wrong. La Nina and El Nino happen in cycles, each occur every 5-6 years on average.


3. "general global warming." If you mean "unprecedented, unequivocal warming", Wrong. Global warming-global cooling happen in cycles, natural climate cycles, with or without humanity's SUVs or bicycles. The medieval warm period, Roman warm period, Minoan warm period, produced a planet that was much warmer than the modern (or past century's) warm period.


4. "government action, in this regard, would have to be in the form of climate change-proofing the country." ????
Government, the UN, environmentalists, etc. can prevent or control less rain or no rain or more rain? They can control and fight less flood, no flood or more flood, that happen naturally in cycles since millions or even that past 4.6 billion years ago? weird.


A good reminder but many militant environmentalists and planet saviors oppose until now. From WUWT, Zika and Climate

"A good start to controlling mosquito borne diseases, might be to remove the pointless bureaucratic obstacles to spraying DDT, one of the most effective anti-mosquito chemicals ever developed.

Use of DDT was almost outlawed after vigorous scare campaigns by green groups, but this much maligned chemical is harmless to humans. Professor Kenneth Mellanby, who campaigned for the use of DDT in the 1940s, used to eat a substantial pinch of concentrated DDT as part of his demonstration. Mellanby did not suffer any health problems from his massive consumption of DDT – he died in 1993, at the age of 85 years." 

An economics study on malaria, Average Household Size and the Eradication of Malaria by  Lena Huldén, Ross McKitrick and Larry Huldén, Journal of the Royal Statistical Society Series A, October 2013. 

The paper's findings can apply to dengue, other mosquito-borne diseases. With 4 charts and 2 tables.

I can understand the "climate leaning" of studies from UP and many other colleges and universities. These are mostly USAID, UN, ADB, WHO-funded research projects and all of these institutions peddle the "man-made" CC only. Do not insist the natural or cyclical nature of CC, the "nature-made"CC, there is zero funding from these institutions. So peer-review process will be very limited.

I do not blame Oggie or many other UP economists. The mother of all corruption in the planet is the UN, at least on the climate and energy policies. The corruption and political science aka as UN climate science permeates down to all multilateral and foreign aid agencies, from the WB and IMF down to ADB and regional banks; from UNEP and FCCC to WHO, UNDP, etc.

Paano ba naman, sabihin nila, no nature-made CC, only man-made CC. No global cooling, only global warming. Since it is "man-made" problem, then there are lots of "man-made solutions", doon na papasok sila UN with their global ecological central planning.

Everything in this planet is about natural cycles: day-night cycle, wet-dry cycle, El Nino-La Nina cycle, winter-spring-summer-fall cycle, hydrologic cycle, carbon cycle, nitrogen cycle, solar cycle, lunar cycle,... Tapos walang climate cycle, only "unprecedented, unequivocal man-made warming", 100% political science na.
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Brexit debate and the EU bureaucracy

As of this writing (almost 11 pm in Manila), UK voters are deciding in a referendum whether their country should remain or exit the European Union (EU). I did not follow closely the Brexit vs Remain debate, but since my advocacy is less government (local, national or regional/international/multilateral), my leaning will be towards the Brexit. Am not a UK voter anyway, just expressing a short opinion about the issue.

Meanwhile, two articles I read today from capx.co further cement my leaning towards the Brexit. Copy-pasting only a few paragraphs. Nice one from Matt Ridley especially.

The two images here I got from the web, ie, not my artwork. Also, they are not part of these two articles, I just added them here.
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(1) In the name of science, Britain must leave the EU -- by Matt Ridley

We have clamped down on Indian scientists because we cannot clamp down on Romanian fruit pickers.  The same is true for students. The least qualified Spanish student has more right to subsidized fees than the most qualified Argentinian student.

The European Molecular Biology Organisation, the European Space Agency, EUMETSAT – these are pan-European, not EU projects with many member countries outside the EU. The League of European Research Universities included non-EU members. The particle accelerator at CERN actually crosses (beneath) a border between an EU and a non-EU country. The Higgs bosons do not have to show their passports or pay tariffs as they pass. CERN gets less than 2% of its budget from the EU.

Let’s run through a list of Brussels’s greatest hits affecting science:

– There was the clinical trials directive, which destroyed clinical trials in this country and according to Morris Brown of Cambridge University “threatened patients’ lives”. We used to have 12% of world clinical trials, but we now have 1%.

– There was the data protection directive, which made many kinds of research much harder here than on other continents.

– There was the deliberate release directive, which has killed off this country’s leading role in agricultural biotech. True, the home grown green fanatics started it, led by lords in white boiler suits, but ask scientists what’s holding it back now and they say the EU approval process for releasing GM crops or GM insects is so cumbersome, so uncertain and so unscientific that most scientists have given up even applying....

(2) The EU is about tocrucify the UK’s thriving ports -- by Daniel Mahoney 

The UK’s port industry is mostly privatised and under a self-regulatory system. 75% of the UK’s largest ports are under private ownership. This is in stark contrast to continental Europe, where around 80% of ports are operated by state or local authorities. These comparatively inefficient ports require vast subsidies – expansions at Rotterdam and Hamburg ports, for example, were constructed with subsidy assistance of 1.1 billion Euros and 788 million euros respectively. However, their counterparts in the UK – ports such as Felixstowe and Southampton – have expanded without a penny of taxpayer subsidy.

The UK’s ports are currently at liberty to determine all aspects of port services. The Commission’s proposals would change this. A new regulator would be imposed on the UK’s ports industry, which will be able to put controls on things such as price proportionality. This is likely to damage investor confidence – something the UK’s Port Association has been warning about for a long time – and could also pave the way for “regulatory creep.” Further involvement from the European Commission and adjudication from the European Court of Justice are now very real prospects....

Wednesday, June 22, 2016

BWorld 65, PH exports growth from 1960-2014

* This is my article in BusinessWorld last June 17, 2016.


The 1950s and 1960s were periods of economic nationalism as the Philippines and many other countries emerged from post-World War II damages and reconstruction. That many countries chose trade protectionism then was understandable as it was also a period of strong communist movements and anti-global capitalism in Asia, as shown by the communist transformation of China after the successful Maoist revolution in 1949. In the Philippines, early communist movement led by the Huks also championed economic nationalism.

In the 1970s, a period of some economic liberalization plus strong state intervention and dictatorships swept many East Asian economies. Former President Ferdinand Marcos for instance imposed a dictatorship that allowed him to stay in power for a total of 20 years. Huge petro dollars financed various infrastructure projects in the region that allowed some countries to develop faster than others.

The 1980s was a period of continued economic liberalization plus a dismantling of some dictatorships in Asia, including the collapse of the Marcos dictatorship in 1986. By then, the “Asian dragons” -- South Korea, Taiwan, Hong Kong, and Singapore -- were rapidly developing and emulating the industrialization path of Japan.

Mid-1990s was the golden age of globalization. The World Trade Organization was officially created in 1995 with a clear goal of promoting rules-based global free trade. Protectionism by many member-countries were tapered and reduced. As a result, high tariffs were brought down to moderate levels and non-tariff barriers (NTBs) -- such as import quotas and quantitative restrictions were converted into tariffs.

In the Philippines, it was also a period of more substantial economic liberalization -- the country became more stable after it reeled from political and economic uncertainty that was instigated by several bloody military coup attacks and naked attempts to grab state power in the late ’80s. The foreign investments act, telecom deregulation, and similar laws were enacted in that decade.

When the 21st century came, the Philippines and many countries in Asia and around the world have already developed their own momentum of liberalization and deregulation. It was just a question of taking either a path of fast or moderate trade liberalization.

For ASEAN countries, the chosen path was unilateral, fast, regional liberalization that tariffs for intra-ASEAN trade was near zero for the six older members (Brunei, Indonesia, Malaysia, Philippines, Thailand and Singapore) while the four new comers (Cambodia, Laos, Myanmar and Vietnam or CLMV) were given a longer window of zero tariff at a later date of 2015.

Here is one summary of the foreign trade performance of the Philippines over the past half-century, expressed in the exports and imports of goods and services (G&S) as share or percent of GDP, and annual trade growth (see table).


Notice the jump in the country’s exports of G&S in 1995-2000 upon joining the WTO, despite the East Asian financial crisis in late 1997 to early 1999. There was a big decline in both the exports and imports of G&S in 1998 but it was not enough to erode the 40%+ exports/GDP ratio.

Another round of trade decline was experienced in 2008-2009, a period of global financial turmoil that started in the US’ housing and credit.

The Philippines’ exports/GDP ratio went back to the 30%+ this decade.

How can this be explained?

Did the country (a) apply some brakes on trade liberalization, (b) or has the denominator, in this case, GDP size, simply risen faster than the rise in the numerator? Or (c) both?

It appears that (c) happened.

Having brought down overall tariffs to near zero for fellow ASEAN members, the Philippines can no longer bring it down any further for its neighbors. It can only liberalize further by having multiple bilateral free trade agreements (FTAs) with other countries or bloc of countries outside of ASEAN. This is a cumbersome and bureaucratic path towards more trade liberalization. The easier, less messy path would have been unilateral liberalization the way it engaged its neighbors in the ASEAN. Singapore, Hong Kong, UAE, Chile and few other countries have adopted this policy and so far the results are more positive than negative.

The other explanation is that the Philippines’ GDP size has grown much faster, mainly because of domestic or internal factors like robust growth in household and private consumption.

Now with a 100+ million population base, it is relatively easier to sustain this momentum. More people means more producers and consumers, more workers and entrepreneurs, more sellers and buyers. Sadly, there will be more government bureaucrats, legislators, regulators and consultants too, they need lots of taxes and fees to sustain their pay, offices, travels, trainings, bonuses and pension.

So we need to take a different path of economic modernization via unilateral trade liberalization with more countries outside the region. And rejoice, not whine, at our bigger and younger population. Government interventions like bureaucratic and costly trade negotiations, implicit population control and high taxation to finance high bureaucracy and high regulations can be counter-productive over the long-term.

Bienvenido S. Oplas, Jr. is a SEANET Fellow, head of Minimal Government Thinkers, both are members of EFN Asia promoting free trade.
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Energy 72, FIT-eligible solar plants in the Philippines

The Department of Energy (DoE) has finally published the list of solar power plants that are given the feed in tariff (FIT) and guaranteed price for 20 years. Seven will get the original FIT rate of P9.68/kWh for the first 50 MW, 17 others, the 2nd batch, will get a lower rate of P8.69/kWh for the next 450 MW, total of 500 MW as cap for solar FIT-entitled installation.

Here's the news report today in BWorld,  Solar projectseligible for FiT named:

The 24 solar projects that were endorsed to receive the guaranteed feed-in-tariff (FiT) rate for 20 years were developed by 20 companies, which in all have installed 525.95 megawatts (MW) or 25.95 MW more than the department’s target of 500 MW....


Sought for comment, Ma. Theresa C. Capellan, founder of the Philippine Solar Power Alliance (PSPA), said her group of 40 developers was urging the government “to be transparent and forthright in disclosing the parameters for FiT eligibility.”

“Are these the only companies eligible to the FiT 2? Those companies not included deserve some explanation as they invested billions of pesos in providing capacity to the national grid,” she said.

(DOE Sec.) Ms. Monsada previously said that the 500-MW installation target was exceeded by around 300 MW. She said she would leave it to the next administration as to how it would resolve the rate for those that failed to make it to the DoE list.

The department originally set a target of 50 MW with a guaranteed FiT rate of P9.68 per kWh, but the allocation was revised in April 30, 2014 to 500 MW, with the Energy Regulatory Commission lowering the rate on March 15, 2015 to P8.69 per kWh, but only until March 15, 2016.... 
  
For other renewable energy technology, wind has also exceeded the first installation target of 200 MW by 49.9 MW with an approved FiT rate of P8.53 per kWh. The second 200 MW target with a FiT rate of P7.40 per kWh was not fully subscribed as only 144 MW was taken up by developers.

For hydroelectric power projects, only 26.6 MW of the 250-MW target was taken up by developers. Appetite for biomass was also low at 101.451 MW or less than half of the 250-MW allocation.

In all, of the DoE’s 1,400-MW allocation for FiT-eligible renewable energy projects, a total of 1,047.9 MW was taken up by generation companies.
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The solar lobby headed by Ms. Capellan originally lobbied that the FIT-entitled solar allocation be raised from the current 500 MW to 2,000 MW, or another 1,500 MW of solar farms to be given guaranteed price for 20 years. This old question will trail the renewables lobby: If solar, wind, etc. are indeed getting cheaper, then there should be no need for more subsidies and guaranteed price for 20 years (similar to guaranteed dictatorship ala Marcos), so why do they insist over and over to have more and continuing subsidies?

They have capitalized on climate alarmism and hope that electricity consumers will embrace more expensive electricity to "save the planet" when in reality, many solar developers jump into the sector mainly to "save their pockets."

Not blaming solar developers in particular, but the climate alarmism and renewables cronyism that is institutionalized and legalized under RA 9513.
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See also:
Energy 51, More on solar power and supply instability, December 29, 2015
Energy 60, PH solar companies, PagIBIG loan for solar, March 12, 2016 
Energy 62, Feed in tariff means more expensive electricity, April 09, 2016 

Energy 66, What companies receive FIT and by how much?, May 21, 2016

Tuesday, June 21, 2016

Gary Teves and economic legislation in the 90s

Last week, June 16, I met some old friends and officemates way back in the 90s at the PH's House of Representatives. I worked at the Congressional Planning and Budget Office (CPBO) from 1991-99, nine years.

Photo below from left: Ronald Villanueva, me, Joven Balbosa, May Santos, Janna Sheng, Glo M. Villanueva, Gary B. Teves (GBT). Shangrila Edsa Hotel lobby.


Ronald used to work at the HOR Committee on Economic Affairs (CEA) when Sir Gary/GBT was the Committee Chairman for several years. Ronald now works at Shell in Houston, Texas. Joven was the one who recruited me at the CPBO in 1991, he was a Director then. He later moved to San Miguel Corp., then  another finance firm, then WB Manila, now with ADB.

May was another officemate at CPBO, now at ADB too. Janna succeeded Ronald at CEA, she's still the Committee Secretary of CEA until now. Glo was a former officemate at CPBO, married Ronald, then moved with him as Ronald became an expat, first at Shell Singapore then Shell Houston.

When I was new at the HOR, Sir Gary would "borrow" me from my boss in CPBO and I helped him in the various technical studies about the Foreign Investments Act (FIA) of 1991. It was the law that set the "negative list" or "no go" for foreign investors because of the Constitutional restrictions, but the law also gave certain incentives and protection to foreign investors in the country. I helped Sir Gary again in succeeding years, I don't remember now on which sectors. Should include banking, shipping and airline liberalization, etc. Sir Gary was very famous then as an economic legislator. Frequently heading or a major voice in the House contingent in Bicameral meetings with the Senate on various legislations in business and economics.

In 1998, GBT's 3 terms as Congressman expired, he put up a private consulting firm, Think Tank, Inc. in Makati. I joined his firm initially as part-time staff in late 1999, then I decided it was time to leave government work and focused on this private consulting firm. I became a full time staff in 2000.

GBT was tapped by then DOF Sec. Titoy Pardo under the Erap Estrada Presidency (1998-2000) to become a consultant and provide heavy technical support to Erap's Economic Coordinating Council (ECC). Erap's style then was different, he did not like meeting a big group, he wanted a smaller group. So while all Cabinet Secretaries were still meeting regularly in Malacanang, Erap would  not be there always. Instead, he was meeting the ECC members weekly, about 7 or 8 selected Cabinet Secretaries headed by Titoy Pardo. 

Sometime in mid-2000, a weekend, I was driving at NLEX going to Pangasinan, I was already approaching Tarlac. Then I got a call from Sir GBT if I can help that night for an important ECC meeting  the next day at Tagaytay Highlands. Without any hesitation, I made a U-turn and drove back to Manila. By afternoon, a car picked us up in Makati and brought us to Highlands. Our work started late afternoon until about 4 or 5am. About 2 hours nap, by 9am we were ready for the ECC meeting and Sir Gary gave a briefing on various issues. We provided the various numbers and projections if Option A vs Option B is taken, and so on.

I was not a full-bloodied free marketer that time. Anyway, those were the days.

We all thanked Glo and Ronald for organizing that get together. Btway, I stayed at the couple's condo in 2008 or 2009 after my conference in Singapore, then I visited them and stayed in their house for a few nights in Houston after I attended a conference in Chicago in 2010.

Saturday, June 18, 2016

Climate Tricks 53, Paleo-climate data to help counter climate alarmism

A greenie friend posted this paper published this week from climate central, Antarctic CO2 Hit 400 PPM For First Time in 4 MillionYears. Oyy, some guys attempt to use paleo-carbon data to sustain their climate alarmism movement.

Ok, past 4M years of CO2 concentration in the atmosphere. In their literature, "more CO2 = more global warming", an urban legend formulation. Here's why, just a few paleo-climate data.

(1) Global temp 4,000 years ago. 


(3) Global temp. 5.5 M years ago,


https://wattsupwiththat.files.wordpress.com/.../five_myr...
See the warming-cooling-warming-cooling for thousand, millions years ago? When there was not even a single car, not a single bicycle, not a single coal or diesel power plant.

Someone commented that for "clarity and understanding", posted this US EPA CC data, https://www3.epa.gov/.../indi.../ghg/ghg-concentrations.html

Not "clarity and understanding" when people and governments always equate that "more CO2 = more warming". Instead, there is misclarity and misunderstanding, as shown by the 4 paleo-climate data above, just some of the many data that are publicly available.

CO2 levels go up and down too, part of the natural carbon cycle -- like hydrologic cycle, day-night cycle, wet-dry cycle, winter-spring-summer-fall cycle, El Nino-La Nina cycle, and the overall warming-cooling climate cycle.

So saying "more CO2 = more warming" is an urban legend. The 4 paleo-climate data/charts show that global warming has precedents, lots of precedents, it is not "unprecedented", even when human emission of CO2 was at low levels. There was global warming in the past when there was not even a single car or a single bicycle in the planet.

Mababaw sa climate data ang climate alarmism movement, that is why there is more alarmism and worryism injected heavily in public discourse, not real hard data. And the UN, many national governments applaud a lot that they have one huge reason to keep expanding the size of government and its multi-level, thick bureaucracies -- they are the "planet saviours." hehehe, bad joke.
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Friday, June 17, 2016

BWorld 64, The WTO and trade agreements

* This is my article in BusinessWorld last June 13, 2016.


Free trade means free individuals and a free society.

People who cannot find certain goods and services at specific quality from local producers given their limited personal or household budget may be able to find those from foreign producers. And people who cannot sell their products or services to local buyers may find those buyers abroad.

And this highlights the beauty of free trade: No trade will occur unless both parties, the buyer and seller, will benefit. There are losers and gainers in free trade of course, the same way that there are losers and gainers in no trade (autarky) or restricted trade. Overall, there are “net gains” in free trade where the advantages outnumber the disadvantages.

Global free trade is supposed to be facilitated by the World Trade Organization (WTO) when it was created in 1995. But 21 years later, this is far from happening.

Regional trade agreements (RTAs) and even trans-continental agreements were invented such as the ASEAN Free Trade Area (AFTA), Regional Comprehensive Economic Partnership (RCEP), and the Trans-Pacific Partnership (TPP).

This topic was discussed during the recently concluded big annual international conference, “Jeju Forum for Peace and Prosperity 2016,” held in Jeju, South Korea. The forum also had a panel that had the theme, “Trans-Pacific Partnership: an Assessment of its Political Economy” sponsored by the Friedrich Naumann Foundation for Freedom (FNF) and the Economic Freedom Network Asia (EFN Asia) last May 26, 2016.

The discussion moderator was Dr. John Delury, Associate Professor at the Graduate School of International Studies, Yonsei University, Seoul, South Korea. The discussants were Dr. Sethaput Suthiwart-Narueput, Executive Chairman of the Thailand Future Foundation (TFF), Kwon Tae-shin, President of the Korea Economic Research Institute (KERI) in Seoul, and Dr. Keisuke Iida, Professor at the University of Tokyo Graduate Schools for Law and Politics, Japan. The opening remarks was given by Dr. Lars-Andre Richter, Resident Representative of FNF Korea Office.

Panel Rapporteur was Pett Jarupaiboon, who is also the also the Program Manager of EFN Asia, based in Bangkok, Thailand. Pett shared his notes with me.

The three discussants are all liberal economists and are pro-free trade, pro-WTO, but they disagree and debate on the role of the TPP.

In particular, Mr. Kwon and Dr. Iida were critical of the WTO because of the lack of progress in global free trade. Dr. Sethaput argued that RTAs like TPP would undermine the progress of the WTO.

Here are the main arguments of the discussants.

(1) Mr. Kwon, KERI, South Korea. TPP members will enjoy an increase in exports and income from an enlarged market size, and they will also enjoy more consumer welfare due to a decrease in import prices and intensive competition. According to a recent study by the Peterson Institute for International Economics, if TPP takes effect in 2017, the GDP of TPP member countries is likely to increase by 0.5%-8.1% in 2030, compared to the GDP forecast in an event of non-adoption of TPP.

(2) Dr. Iida, Univ. of Tokyo, Japan. TPP has a rule-making function, and these rules as provided in international relations as well as who wrote them are important issues. For the US, joining TPP is part of a larger strategy of “pivoting” to Asia or rebalancing to Asia. The US was preoccupied with the wars in Afghanistan and Iraq and was not paying enough attention to Asia. Therefore, TPP was part of the toolkit to achieve this new policy for the Obama Administration. For Japan, which has to rely on the US for security, TPP meant mending the fences with the US following a series of recent frictions including the planned relocation of one of the most important marine bases in Okinawa to outside Okinawa.

He added that TPP is seen to benefit Japan, projected at 2.6% of GDP (accordingly to the Cabinet Office), a significant number considering that its potential growth rate minus TPP membership is mere 0.5%.

(3) Dr. Sethaput, TFF, Thailand. A multilateral system with non-preferential treatment covering many countries like the WTO is better than mega-regional trade regimes like TPP and RCEP. Why?

(a) TPP is subject to the usual problems of trade diversion: increased trade among members, lesser trade with non-members.

(b) TPP is not just about trade, it also includes other issues like investor and intellectual property protection, labor and environmental standards, etc.

(c) The investor-state dispute settlement (ISDS) mechanism provides international arbitration that benefits US corporates. The US Trade Representative notes on its Web site that “the United States has never lost an ISDS case.”

(d) RCEP is a better alternative, has less non-trade baggage, uses the best elements of the multilateral system, like WTO dispute settlement, TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights).

(e) Ultimate goal should be the Free Trade Area of the Asia-Pacific, which includes all the existing members of APEC including China and Russia. This can be achieved through either expanding the TPP or merging TPP and RCEP.

Personally, I believe that the best trade policy is unilateral trade liberalization. Be friends to all countries and economies who can bring in the best products and services at best qualities and at the best or most competitive prices into our shores and shops. This will bring down the cost for all local manufacturers in need of cheaper capital goods, cheaper raw materials, and intermediate products, which will result in cheaper production processes. Local consumers will also benefit for obvious reasons. And those countries will likely return the favor with zero or very low tariff for Philippine exports too.

Since this is far from happening, the second best policy is multilateral and global free trade. This is not happening too. So the third best policy is joining mega-RTAs like the TPP and RCEP. The worst policy of course is autarky or no trade, or even very restricted trade.

The Philippines and all ASEAN members are already RCEP members. The Philippines should proceed applying for TPP membership. The dreaded provision ISDS is actually important and useful. It simply protects foreign investors who come to other TPP member-countries based on TPP rules, when other member-countries will suddenly change the rules midway. The ISDS in effect will help prevent members from arbitrarily changing rules on trade, investments, IPR, competition and other policies.

Bienvenido S. Oplas, Jr. is a Fellow of SEANET, President of Minimal Government Thinkers, which is a member of EFN Asia.
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