An Assessment of Smuggling on Selected Agricultural Commodities in the Philippines Project
Background
It has long been recognized that smuggling or informal trading in whatever mode results in a negative net effect to the society as a whole. First and foremost, smuggling reduces the revenue that the government can generate, which could be used to provide the basic services for the citizens of the country. Entry of cheaper-priced smuggled goods decreases the competitive advantage of local producers. Consequently, the capacity of the domestic economy to generate more employment is negatively affected and the livelihood of small farmers is also imperiled due to the undue advantage of smuggled goods.
Studies in the late 1980’s have shown that the estimated extent of smuggling has totalled to about US$ 6 billion. In more recent research findings, the calculations estimated the value of smuggling to be about US$10 billion. This massive volume of illegal trade, no doubt, has adversely affected the country’s economic position. Hence, it is crucial to examine the nature, extent and channels of these illegal trade transactions. Furthermore, the study will also serve as a benchmark to the conditions of the World Trade Organization (WTO), as well as to the country’s commitments in regional and bilateral free trade agreements, including the prescription that the Philippines will implement zero tariffs on selected agricultural commodities.
Objectives
In general, the study aims to examine the dynamics of smuggling in the Philippines. Specifically, the study will address the following objectives:
- Determine the nature and the extent of smuggling in the country;
- Assess the effectiveness of existing policies to address smuggling;
- Track the channels of smuggling in selected agricultural commodities; and
- Draw policy implications to mitigate the problem of smuggling.
Methods
The assessment will employ both quantitative and qualitative assessments. The determination of the extent of illegal trading and the effectiveness of existing trade policies, including sanctions and penalties for illegal trading, will be done using econometric models applied to secondary data from various sources.
On the other hand, the determination of the nature and tracking of the channels of informal trade will be performed using qualitative analytical techniques. This will make use of the widely employed Rapid Area Appraisal (RAA) technique. The sensitive nature of the data required in the determination of the nature of illegal trade as well as the information needed to track the illegal trade channels would require this methodology. Spatial analysis will be used to determine the factors that influence the flow of informally-traded agricultural commodities.
Furthermore, the study can draw lessons from the experiences of stakeholders from the regulatory agencies of the government as well as of traders and producers. Hence, a series of roundtable discussions that will be held in the following selected strategic areas in the country: Batangas City and Subic in Luzon; Cebu City in the Visayas; and Cagayan de Oro and Davao Cities in Mindanao.
