Obsession

Nothing obsesses Donald Trump more than the hefty trade surplus China enjoys over the US.

Last Wednesday, the Trump administration initiated moves to withdraw the US from the Universal Postal Union (UPU). Now a UN agency, the UPU was established in 1874 and today includes 192 member countries.

What gets Trump’s goat is a rule adopted by the UPU setting lower postal rates for developing countries. China, despite the size of its economy, remains classified as a developing country. Trump and his protectionist ilk think this rule benefits China’s exports to the US.

The rule benefits other developing countries, the Philippines included. Should the US withdraw from the UPU, this will harm all other developing economies. Trump, of course, does not care.

Trump’s obsession with China’s trading advantage spills into the provisions of the US-Mexico-Canada Trade Agreement (USMAC) that replaces the former NAFTA. Article 32.10 of this trade agreement demands that the trading partners stop trading with “non-market economies.” This provision is understood as targeting China.

Both Canada and Mexico, by yielding to intense US pressure, might have accepted a poison pill. The US may, down the road, demand that her neighbors curtail their trade with the Asian economic superpower. Worse, the US might impose the same conditionality on other nations trading with her.

The latest trade numbers will only intensify Trump’s obsession. China’s September surplus in its trade with the US climbed to $34.13 billion, higher than what was already a record surplus in August of $31.05 billion.

To be sure, the ramping up of China’s trade surplus is due in part to anticipation of the next wave of US tariff impositions on Chinese exports. Trump wants to impose tariffs on $500 billion worth of Chinese exports.

The Chinese have retaliated by imposing tariffs on US exports. But Beijing is quickly running out of US imports to tax.

Both sides will be injured by this escalating trade war, a consequence that American protectionists cannot seem to understand. Ford’s sales in China collapsed by 43%. American companies doing business in China will feel the pain – as will soya bean farmers in America’s heartland.

The Trump administration’s aggressive posture against free trade alarms the countries in the region. The “poison pill” provision in the recently concluded USMAC was discussed with alarm during the inaugural ASEAN-IMF summit in Bali the other week. President Duterte spoke about it when he returned from this meeting.

Trump’s all-out effort to exclude China from the mainstream of global trade will surely be on the agenda when President Xi Jinping visits Manila next month. Beijing, apart from generous official development assistance, has offered to buy $9 billion in Philippine exports to close the trade gap between our two countries.

Washington should not force us to choose only one country to partner with.

Future power

The Philippines has the highest energy prices among the ASEAN countries. This should not be too surprising, however.

All the other countries in the region subsidize their power in one form or another. Our energy prices reflect actual costs.

Selling power without subsidies is the way to go. One major reason we ran into the debt crisis of the mid-eighties and early nineties were the huge subsidies paid out to keep electricity costs low and buy popularity for an aging dictatorship. To this day, our consumers continue to pay for the outstanding debts. This is reflected in our bills under the vague heading of “Universal Charges.”

There are other means to bring down our power costs without resort to subsidies. One brilliant idea is to use the power of new digital technologies to keep the power suppliers constantly bidding to sell to an open electricity market.

This can only happen, however, if there is ample supply of power available. Otherwise, if available supply is short, we will be forced to buy power at any price.

The Federation of Philippine Industries (FPI) issued a statement recently urging the DOE to take urgent steps to hasten the construction of new plants especially considering that most of our existing plants are 15 years or older. They mentioned the case of the 1,200 megawatt coal-fired power project of Atimonan One Energy Inc. that cannot begin construction because of delays in the regulatory approvals process.

At present, regulatory approvals for a power project can stretch out to 7 or 8 years and require a total of 359 signatures. Projects need to go through 74 regulatory agencies and conform to 20 different laws. A total of 43 different contracts will have to be signed.

The process not only daunts potential investors, it also increases project costs to be recovered eventually by charging consumers more. The byzantine approvals process opens too many opportunities for corruption.

A proposal is being discussed in the Senate to simplify the approvals process by way of establishing an “Energy Virtual One-Stop Shop” (EVOS). This is a worthy proposal that should find its way through legislation.

There are a host of other good ideas such as using the Malampaya Fund to pay down Napocor debts and thus eliminate “Universal Charge” from our electricity bill. A 5% cap on “systems loss” may also be implemented to discipline power suppliers rather than let them pass on inefficiency costs to consumers.

The bottom line is that we should get new power plants running as soon as possible, before the aging plants start conking out and throwing us into darkness. Only sufficient power supplies will ensure competition in the energy market.