Rejection of EU grants with conditions a historic break from the past

TO understand quickly what the issue is about the Duterte government’s move to reject European Union (EU) grants that are laden with conditions, which would allow it to interfere with our sovereignty, here’s an analogy. (Note: the rejection currently involves grants only, not loans.)

A tycoon’s philanthropic (of course tax-deductible) foundation offers you a grant of P50,000 (yes, that small, which is proportionate to the amount of EU grants to the size of our economy) which you are told you can use to renovate your house.

However, the tycoon’s bureaucrat handling the grant tells you that if you accept the money, he can come into your house anytime and lecture you how to run your household which you must accept and implement.

Would you accept the grant? I don’t think so. Unless you’re so poor P50,000 is a boon. But then you wouldn’t have a house to renovate.

In the case of EU grants, these have had provisions, which past regimes ignored: ‘The [European] Commission may suspend this financing agreement if the beneficiary breaches an obligation relating to respect for human rights, democratic principles and the rule of law, and in serious cases of corruption.”

While that may seem innocuous, Finance Secretary Carlos Dominguez to his credit interpreted this, correctly I think, to be interference in our Republic’s domestic affairs, an intrusion into our very sovereignty.

What criteria, or what body would determine, that the country has no respect for human rights? The quantity of Western media and Human RightsWatch reports alleging human rights violations? Claims by the UN special rapporteur on extra-judicial killings such as Agnes Callamard?

Would the EU one day decide that capital punishment is a violation of human rights? Would it pontificate that abortion at all stages of a fetus’ life is the human right of a woman? What criteria would it use to judge an instance as a “serious case of corruption”?

In default
“If the EU believes that the claims on human rights violations by this administration’s critics are true, then effectively, we will already be in default under the agreement,”a ranking finance department official explained. “A default on such a basis could further create unnecessary political noise and affect investor sentiment and overall confidence in our government,” he pointed out.

He added: “This EU-specific provision is unusual in our grant documentations. Other donor countries and institutions do not have such provisions in their grants.”

Duterte’s critics, and especially the Yellow Cult, would almost certainly claim this administration simply has become too defensive or sensitive over human rights criticisms in the wake of his war against illegal drugs.

Still though, the inappropriateness of such EU grant conditions could be emphasized using a different analogy. If you applied to borrow money from a bank to buy a car, would you agree to a loan condition that it is suspended if ever you’re issued a traffic ticket?

However, there is a far-reaching aspect to the Duterte administration’s junking of such EU grants, that make the 250 million euros in EU grants we will be giving up worth the cost.

From the perspective of our country’s modern history, the Duterte administration’s move to reject EU grants that are laden with conditions that interfere with our sovereignty is a historic break from our sorry past, and a strengthening our sovereignty.

Biggest ever grant
Right at the emergence of an independent Philippines was the biggest ever grant by a foreign nation to our country, which however carried one of the the worst conditions ever imposed on a sovereign republic. This was through the infamous Bell Trade Act passed by the US Congress on July 2, 1946, two days after the Americans let us be an independent state.

As a condition for the $800 million grant we needed to rehabilitate our war-ravaged economy, the US required us, using the euphemism “parity rights,” to amend our Constitution to allow US companies to own public utilities and to exploit our natural resources as well as to take in American products duty-free

While most of our pro-American elite—the same crowd who are aghast over Duterte’s move on the EU grants—still find nothing wrong with the Bell Trade Act, it opened up our young economy to powerful US monopoly capitalists that dominated our consumer industries, stunting the development of local industries and pillaging our natural resources.

A still-to-be-written economic history is the huge contribution of US mining companies to building up Fort Knox’s inventory of gold by mining and shipping out all of the gold in our country.

The Philippine elite—except for a few nationalist industrialists—profited immensely from their collaboration with US companies and as traders for US imports. The elite has managed to disseminate their justification for such American economic dominance so much so that such ideology is taken for economic rationality.

Such ideology in this day and age is called “globalization”. The long-term impact really of US “Parity Rights” is that most Filipinos have lost the sense of nationalism.

Among many other things, they have become blind to or accepting of the fact that an Indonesian magnate, Anthoni Salim, has violated our Constitution by owning the biggest public utility firms like PLDT and Meralco as well as most expressways. An Indonesian tycoon, quite amazingly, has gotten parity rights for himself, which Americans got in 1946 only with the twin bribes: our nation’s independence and $800 million. Salim offered nothing.

Underdeveloped and crisis-prone
The kind of economic structure that was the result of parity rights—in which industrialization was blocked because of the massive imports of US goods and through which capital was drained out of the country by US mining companies— kept us underdeveloped and prone to crisis.

As a result, we became addicted to loans with conditions purportedly intended to shore up our economy, mainly from the International Monetary Fund (IMF) which had conditions that intruded into our sovereignty as much as the Bell Trade Act did.

We have had 23 such IMF loans, from 1962 to 1998, the so-called standby arrangement or extended facility loans, making us one of two countries in the world with the most number of such arrangements, the other one being Haiti. By comparison, how many such facilities have Indonesia and Thailand had, the only two other countries in Asia that got that type of IMF loans? Indonesia had 11, Thailand just two.

These IMF loans had zero interest rates but had such huge conditions, such as the lowering of our tariff rates, privatization of public utilities, loosening restrictions on foreign investments, stopping subsidies for the poor. If those conditions sound good, it’s because of the elite’s brainwashing. Such unrestricted and swift opening up of the economy to advanced nations’ monopoly firms—which Japan, South Korea, or Singapore did only when they were already developed—explains much of our underdevelopment now.

The proof of the pudding is in the eating. Asian countries which didn’t have such loans with conditions that required them to open up the economy swiftly retained their sovereignty in their economic policies, and managed their economies to develop their own industries. Even Indonesia and Thailand which had availed of loans with conditions—but fewer—are now more developed than we are.

We may lose hundreds of millions of euros by rejecting EU grants. Such a move however puts us on the path of independent nationhood, which rich countries have proven to be the key to prosperity.