ADVANCING THE REALM OF ETHICAL

TRADE EMPOWERMENT (ARET) PROJECT

A Public Policy Analysis

Conducted for
The ARET Project

Roel P. Dolaypan Jr., CPA

Senior Trade and Industry Development Specialist
Department of Trade and Industry Region 2

July 2017

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 TABLE OF CONTENTS

Page
Part I: The Policy Issue/Problem
a. Introduction 3
b. Definition of Terms 4
c. Background of the Issue or Dilemma 5
d. Cause
i. Market Failures 11
ii. Government Failures 13
e. Assessment of Past Policies 14
f. Current State of the Problem 18
g. Succinct Statement of the Issue to be Resolved 20
Part 2: Framework of Analysis
a. Overview of Current Knowledge 21
b. Underlying Assumption 22
c. Statement of Values and Ideals 22
d. Analytical Structure and Methodology 24
Part 3: Evaluation of Policy Options
a. Identification of Policy Options to Address the Policy Issue or
Problem 24
b. Identification of Costs and Benefits to be Measured 30
Part 4: Policy Recommendation 31
Part 5: Conclusion 33

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PART 1: THE POLICY ISSUE/PROBLEM

I. Introduction

The emergence of globalization, industrialization and regional integration in the

ASEAN community have catapulted the economic development in the business

environment. With this phenomenon, business interactions sprout in the market

paradigm. And whenever business arise, people intermingle to buy and sell products

or commodities. Inevitably, an entire spectrum of ethical concerns would surface.

At the inception of the supply chain, farmers or factory workers are usually given less

attention in terms of good working conditions and fair wages. These ethical issues

would be commonly observed at the manufacturing plant. This includes inhumane

treatment to workers and child labor. Issues like ecological unsustainable production,

disregard of intellectual property rights and the production of counterfeits are often

disputed. Going further along the supply chain, middlemen or traders (wholesalers or

distributors) of these products or commodities are often criticized on the issue on

equitable share on revenue creation. This is usually the case when discriminatory

sales policies and heavy handed purchasing policies are used to negotiate products.

Arising concerns on unjust treatment or relationship with business partners puts

middlemen in the center of ethical debates. Retailers, in turn, are subject to a

kaleidoscope of ethical issues like untruthful packaging, misguiding incomplete

labeling, false advertising, unethical brand positioning and cause-related marketing.

And lastly, consumers also inflict unethical behaviors. Consumers oftentimes

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 abandon their ethically sound decisions to buy counterfeits whenever the price

differences benefit them.

Because of fast proliferation of players in the supply chain and the governments goal

to grow the national economy, these ethical concerns are mostly pushed behind

without consideration of sustainability of development despite several laws enacted

for the promotion of consumer welfare.

This paper would try to analyze and recommend public policy to foster the well-being

of the community, the environment and the regional economy through the promotion

of ethical trade practices along the supply chain. The analysis would, specifically,

dwell on the problem of Proliferation of Unethical Trade Practices in the Supply

Chain and making policy recommendations on how these problems would be

addressed.

II. Definition of Terms

a. Unethical Trade Practices For purposes of this study, it means business

activities that falls outside of what is considered legally and morally acceptable

trade practices;

b. Ethical Trade Practices For purposes of this study, it means the universally

acceptable trade practices in the supply chain within the context of what is

considered legal and moral;

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 c. Supply Chain For purposes of this study, it means a group or network of

supply chain players, directly or indirectly interlinked to do business. It

comprises of producers or manufacturers, middlemen or traders, retailers and

consumers;

d. Universally Acceptable Ethical Trade Practices For purposes of this study, it

means the common or acceptable ethical trade practices in a specific sector or

player in the supply chain with emphasis on legal and moral perspective of

trading;

III. Background of the Issue or Dilemma

Despite all technological advances, global supply chains are always based on

the interaction of people. And whenever people interact, a kaleidoscope of

ethical issue emerges (Schlegelmilch and berseder, 2007). Here, each

supply chain players faces several challenges brought about these interaction,

among others: (1) ethical issues pertaining to producers, (2) ethical issues

pertaining to middlemen, (3) ethical issues pertaining to retailers, and (4) ethical

issues pertaining to consumers.

The following are some studies, national level and provincial level, that would

relate to the existence of unethical trade practices in the Philippine supply

chain, as follows:

a. Perceptions and Laws on Unfair Trade Practices in the Philippines

(Gonzales and Yap, 2012)

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To determine the existing situation of unfair trade practices in the

Philippines, the Philippine Institute for Developmental Studies (PIDS)

conducted the Unfair Trade Practices study, which became part of

evidence-based policy forum of unfair trade practices in selected ASEAN

countries under the Consumer Unity and Trust (CUTS) Hanoi Resource

Center. The following were some of the key findings on the survey results,

to wit:

87% of the respondents considered misleading advertisement as the

most prevalent unfair trade practices;

70% of the respondents perceived that unfair pricing, unreasonably

high price discriminatory dealings, and abuse of intellectual property

rights as part of unfair trade practices;

72.5% of the respondents believed that unfair trade practices are not

seriously addressed or still prevailing;

14 out of 40 respondents identified the existence of monopoly as the

primary source of unfair trade practices. 15 respondents believed

that discrepancy in the bargaining power of relevant parties,

information asymmetry, and absence of relevant laws and

institutions cause unfair trade practices in the Philippines;

21 out of the 25 respondents from the business sector were not

aware of rules, regulations or laws related to unfair trade practices;

and,

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 From the Focus Group Discussion (FGD), it was emphasized that

there is no agency or department that handles unfair trade practices

of the business-to-business type (B2B).

b. Study on the Proliferation of Unethical Trade Practices along the

Supply Chain: Results of Survey and Focus Group Discussions in the

Province of Nueva Vizcaya

b.1. Perception on Unethical Trade Practices of Manila-Based Producers

(School Supply Industry)

All respondents (100%) considered the production of unsafe and/or

substandard products as the most known unethical trade practices

of producer or manufacturers of school supplies;

Poor working conditions in the production or manufacturing site

were the most seen or encountered by most of the respondents

(80%);

All respondents (100%) believed that unethical trade practices are

still prevailing or have not been properly addressed;

Almost all respondents (80%) considered weak enabling legal and

environment as the primary cause of unethical trade practices

b.2. Perception on Unethical Trade Practices of Santiago-Based Middlemen

(School Supply Industry)

More than half of the respondents (73%) recognized unjust

treatment or relationship with producers/retailers as the most

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 prevalent and most encountered unethical trade practices of

middlemen;

64% of the respondents believed that these unethical trade

practices are still prevailing or have not been addressed properly;

and,

Almost all of the respondents (86%) pointed that absence of a code

of ethics/universally acceptable trade practices as the source of

unethical trade practices of middlemen.

b.3. Perception on Unethical Trade Practices of Retailers (School Supply

Industry)

60% of the total respondents believed that false advertising as the

most prevalent unethical trade practices of retailers. 52% of the

respondents also perceived untruthful packaging and misguiding

incomplete labeling as unethical trade practices of retailers;

50% of the respondents identified false advertising as the most

encountered unethical trade practices of retailers;

92% of the respondents believed that these unethical trade

practices are still prevailing or have not been addressed properly;

and,

A little higher than the majority (58%) pointed weak enabling legal

and regulatory environment and less than the majority (48%) thinks

absence of a code of ethics/universally acceptable trade practices

as the main cause of these unethical trade practices.

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b.4. Perception of Unethical Trade Practices of Consumers (School Supply

Industry)

80% of the respondents believe that shoplifting as the most

recognized unethical trade practices of consumers. Over 50 percent

of the respondents perceived false complaints as unethical trade

practices of consumers;

More than half (65%) of the respondents encountered shoplifting

and half of the respondents experienced false complaints;

85% of them perceived that these unethical trade practices of

consumers still prevail and are not addressed properly; and,

80% of the respondents believed that the absence of code of

ethics/universally acceptable trade practices as the root cause of

these unethical trade practices. 65% of them points that the source

of these behaviors is the governments weak enabling legal and

regulatory environment.

b.5. Perception on Laws Related to Unethical Trade Practices and their

Enforcement

Fifty-five percent (55%) of the total respondents were not aware of

any rules, regulations or laws related to unethical trade practices;

Seventy-one percent (71%) of the respondents believed that rules,

regulations and laws relating to unethical trade practices were not

seriously implemented;

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 Forty-eight percent (48%) of the respondents expressed that

existing rules, regulations and laws are sufficient to check these

unethical trade practices;

Sixty-four percent (64%) of the respondents recommended having

a law, regulation or policy enacted specifically to check unethical

trade practices and protect them effectively; and,

93% of the respondents believed that there should be an

arrangement between agencies to address unethical trade

practices along the supply chain.

b.6. Focus Group Discussions

Discriminatory sales policies, deception or dishonesty and

production of unsafe and substandard products were identified as

unethical trade practices of producers or manufacturers of schools

supplies;

Unjust treatment or relationship with business partners and

inequitable wealth creation was recognized as unethical trade

practices of school supply middlemen;

Selling of unsafe and/or substandard products, bad customer

service and untruthful packaging were the most prevalent unethical

trade practices of school supply retailers; and,

The following were identified as the most prevalent unethical trade

practices of consumers, as follows: (a) shoplifting, (b) false

complaints, (c) abuse of sales staff and (d) dishonesty.

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 It is clear from the foregoing that seem to be proliferation of unethical trade

practices along the supply chain, both on a national level and local level. It is

therefore the objective of this public policy analysis to recommend possible

strategies in eliminating unethical trade practices in the supply chain.

Although various laws were passed to deal with adverse trade practices, it

appears that unethical trade practices still exist and continue to affect the

supply chain channel.

IV. Causes

a. Market Failures

A general principle of welfare economics theory states that when market

operate in the absence of friction, distortion and imperfections, no

government intervention is needed to achieve a Pareto Optimum. The

following were perceived market failures in the current supply chain (on a

general perspective), as follows:

Externalities

Positive Externalities

- Availability of products or commodity in the market for

a much cheaper cost; and,

- Increase in numbers of business firms in the market

due to the existence of cheaper products or

commodities for resale in the market.

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 Negative Externalities

- Increase in consumer complaints (e.g. defective

products, unsafe and substandard products);

- Increase in counterfeit products/imitations; and,

- Increase in pollution, specifically, unsustainable

production.

Information Asymmetry and Transaction Costs

- This is usually the case when one party or any party of

the supply chain is concerned about an unknown

feature or how it is made and the information is only

available to one party of the supply chain coupled with

a high transaction cost of availing this information.

- Asymmetric information also exists when consumers

cannot make a sound ethical decisions to buy products

in the market.

- Due to asymmetry of information, most of the farmers

or producers in the supply chain has a weaker or fewer

market information to make reasonable negotiation

agreements as compared to parties with vast

information grasp.

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 Inequality of Bargaining Power

- Due to asymmetry of information, a party (usually

middlemen) has a better alternative to a negotiated

agreement (BATNA) than the other parties

b. Regulation Failures

Insufficient policy on addressing unethical trade practices in the

supply chain especially business-to-business (B2B) trading and

business-to-consumer (B2C) transactions;

Absence of legislation on supply chain transparency to address

unethical trade practices in the supply chain;

Lack of cohesive approach in tackling the proliferation of unethical

trade practices along the supply chain; and,

Inadequate partnership of private associations with the public to

enforce enabling regulatory and enabling environment creating

enforcement gaps.

. Equally important to note that these market failure and government failure

may likely differ for different sectors or for different products.

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V. Assessment of Past Policies

This part of the part put emphasis on existing legal and regulatory framework

of policies which relate to unethical trade practices (where unfair trade practices

relates to unethical trade practices) being implemented in the Philippine

business environment. An assessment based on past studies conducted by the

Philippines Institute for Developmental Studies was used to determine the

current enabling legal and regulatory policies.

a. The Constitution

Based under the Philippine Constitution (as cited by Abad, Gonzales,

Rosellon and Yap, 2012), the State is mandated to regulate and

prohibit monopolies, combinations in restraint of trade and other

competition practices, for the sake of the public interest. This was

anchored from the U.S. Sherman Act.

According to Abad et.al (2012), our current Constitution does not

clearly define what would constitute unlawful monopolies or unfair

trade practices. In which, it was seen that a separate Competition

Policy for our country was needed to redefine the prevailing unfair

trade practices in our country.

b. Criminal Law

Under Act No. 3815 (1930) as amended, otherwise known as the

Revised Penal Code, shed some light to what anti-competitive

behavior as an unfair trade practices that is deemed criminal in

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 nature. Added to it, Art. 186 and Art. 187 define and impose penalties

in violation of this Law.

This law has put basic foundation on the term illegal monopolies

that can be used by business players in pursuing their rights against

these unfair trade practices.

c. Civil Law

Republic Act No. 386 (1949) as amended or otherwise known as the

Civil Code of the Philippines, permits collection of damages arising

from unfair competition in agriculture, commercial, or industrial

enterprise or in labor.

However, the provision of this law did not clearly define as to what

unfair competition in a business environment. Vaguely, it merely

provided a list of acts in which unfair competition is done (i.e. force,

intimidation, deceit, machination, or any other unjust, oppressive or

highhanded method).

d. The Consumer Act of the Philippines or R.A. 7394 (1992)

This law embodies the state policy of consumer protection in the

country which distinguishes standards of conduct for business and

industry.

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The Act aims to protect the interest of the consumer, promote his

general welfare and establish standards of conduct for business and

industry by following the measures identified the provisions in the

said law, to wit:

protection against hazards to health and safety;

protection against deceptive, unfair and unconscionable acts

and practices;

provision of information and education to facilitate sound

choice and the proper exercise of rights by the consumer;

provision of adequate rights and means of redress; and

involvement of consumer representatives in the formulation of

social and economic policies.

The Consumer Act includes consumer product quality and safety

standards, what constitute adulterated foods and other products,

deceptive sales act or practice, unfair or unconscionable sales acts

or practices, prohibition to some sales acts, labeling and fair

packaging and protection to adverse marketing schemes. According

to Abad et.al (2012), this Act can be a direct reference to unfair trade

practices as defined by Philippine law. However, still Abad et. al

emphasized the lacked to clear definition of unfair trade practices

in the context of Philippine jurisdiction.

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e. The Price Act or Republic Act No. 7851 (1992)

Republic Act No. 7851 or the Price Act of the Philippines defines and

identifies illegal acts of price manipulation i.e. hoarding, profiteering

and cartels. It provides control mechanism thru price controls and

mandatory ceiling mechanisms to stabilize prices of basic

commodities. This Act prescribes measures against abusive prices

increased during abrupt or emergency situations for certain sectors

of the market.

The downside of this Act is that, while it allows countermeasures

such as price ceiling mechanisms, the law does not specifically

define or identify what illegal acts (Illegal acts of price manipulation)

is in case of hoarding, profiteering and cartels, rendering it

almost impossible to enforce (Abad et. al 2012).

f. The Philippines Competition Act

This Act is milestone policy in the Philippines that curbs (1) anti-

competitive agreements, and (2) abuse of dominant position. Under

this act it is hoped that it will address unfair trade practices in the

supply chain. However, the question of strong legal enforcement

would arise.

Based on report entitled Study on the Legal Framework covering

Business-to-Business Unfair Trading Practices in the Retail Supply

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 Chain (European Commission, DG Internal Market 2012), In theory

the more uniform yet limited protection is provided by competition law

rules against unilateral conducts including abuse of dominant

position: however, in practice most UTPs rest outside of the

boundaries of these provisions since competition law requires the

existence of a dominant position and evidence of the practices

impact on the market, and in particular on consumer welfare: If one

or both requirements are not met, when for example the practice

translates in lower prices for consumers, competition law cannot be

applied unless a more acrobatic theory of consumer harm (e.g. loss

of product variety in the medium to long-term) is relied upon.

VI. Current State of the Problem

The previous section has highlighted the Philippine fragmented national

legal framework that relate to policies tackling unethical or unfair trade

practices. These fragmented policies, however, do not completely

addressed the proliferation of unethical trade practices along the supply

but it does limit some unfair trade practices.

Philippine Competition Law is still insufficient in tackling the problem of

proliferation of unethical trade practices along the supply chain. In order

to make use of this pertinent policy, it must meet preconditions wherein

one party with commercial relationship holds a dominant position in

product and geographical position the burden of proof would arise.

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 Traceability mechanism to identify unethical trade practices along the

supply chain is still lacking. This would put enforcing agencies the

burden to proving the existence of unfair or unethical trade practices.

A. Stakeholders Mapping and Analysis

In order to analyze the issue the following stakeholder map is prepared,

displaying all stakeholders involved in the proposed policy in the promotion

of ethical trade practices.

Relative
Stakeholders Potential Importance Influence
Interest Importance
Group Impact of Group of Group
of Interest
Key Stakeholders
Promotion of
Ethical Business
DTI Region 2 Practices and High High High High
Protection of
Consumer
Competitiveness
of Business
Environment,
Business
Transparency,
Provincial
Protection of
Government of High High High High
Novo
Nueva Vizcaya
Vizcayanos on
unethical
practices and
protection of its
environment
Compliance to
Legal and
Producers or Ethical Business
Manufacturers Practices (e.g.
High High High High
(which includes production of
farmers) quality products,
environmental
sustainability)
Compliance to
Middlemen Legal and High High High Low
Ethical Business

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 Practices, Equal
Wealth Creation
and
Reasonable
agreements
Compliance to
Legal and
Retailers High High High High
Ethical Business
Practices
Ethical
Consumption
Consumers and value for High High High High
their purchasing
power
Primary and Secondary Stakeholders
Education on
Academes High High High Medium
Business Ethics
Competitiveness
Philippine
ranking of
Chamber of
business High High High High
Commerce, Inc.
environment in
(PCCI)
the region
Financial loan or
Financial
capital to ethical High High High Low
Institutions
companies
Other
Related to
Government - - - -
mandate
Institutions

B. Statement of the Policy Issue or Problem to be Resolved

What would the most cohesive approach (either by strategic action agenda

or policy recommendations) in addressing problem on proliferation of

unethical trade practices along the supply chain?

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Part 2: Framework of Analysis

I. Overview of Current Knowledge

From study entitled Local and Regional Authorities Promoting Fair

Trade (European Union Committee on Regions 2015), it has been the

objective of the said European Union (EU) to have a more cohesive

policy that runs across economic and development spectrum in

embracing fair trade, sustainable development, ethical consideration

and international development. It was emphasized by the EU Committee

of the Regions that their institutional framework has a very fragmented

landscape of the legislation and private regulation to address unfair

trade practices. Hence, a more cohesive and clear policy is being

studied on a sectoral approach.

In the Philippine setting, there seem to lack of policy direction in

addressing unfair trade practices. As mentioned in policy research of

Abad et.al (2012), the government should coordinate more closely with

consumer organizations in implementing existing laws against UTPs.

The government should also prioritize UTPs more highly. Both the

government and consumer organizations should make an effort to reach

out to business firms and engage the latter in efforts to counter UTPs.

However, private firms have to develop a deeper sense of a culture of

competition.

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 II. Underlying Assumption

Causes
- Insufficient policy
approach Effects
(cohesive) in - Unethical Trade
addressing Practices of
unethical/unfair Producers;
trade practices - Unethical Trade
along the supply Practices of
chain; Middlemen;
- Lack of - Unethical Trade
transparency of Policy Problem/Issue
Practices of
supply chain Proliferation of
Retailers;
process or Unethical Trade
- Unethical Trade
absence of a Practices along the
Practices of
traceability Supply Chain
Consumers;
mechanism; - Gaps in the
- Absence of a more Enforcement
defined unethical, Mechanism; and,
as well as ethical, - Weak Enabling
trade practices Legal and
within the legal Regulatory
infrastructure of the Framework.
Philippines; and
- Gaps in
enforcement
mechanism.
The above diagram depicts the underlying conceptual assumptions on the sought policy

problem or issue.

III. Statement of Values and Ideals

i. Supply Chain Transparency

Supply chain players (i.e. producers, middlemen, retailers and

consumers) have to openly provide or share information in its business

dealing, financial information, management policies, business code of

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 practices, marketing schemes, employment, products and other (as may

be required);

ii. Sustainable and Equitable Trading Relationships

Developing and maintaining ethical trade relationship with trade

partners. It should enable a fair negotiated agreement among parties.

iii. Capacity Building and Empowerment

Assist supply chain players in prevailing market situations, trends and

develop skills on ethically sustaining a business enterprise.

iv. Consumer Awareness Raising and Awareness

This is where the supply chain stakeholders are informed in consonance

to ethical purchasing and consumption.

v. Promotion of Ethical Trade Practices

The main objective of this policy is to promote ethical trade practices

along the supply chain.

There is no perceived conflict of values because all of them comprises ethical

principles by which the supply chain policy is directed.

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 IV. Analytical Structure & Methodology

This policy paper, being prescriptive in nature, aims to come up with policy to

will address the problems on proliferation of unethical trade practices along the

supply chain. Hence, the promotion of ethical trade practices.

For purposes of this policy paper, qualitative analysis and deductive reasoning

was used to derive at a more appropriate strategy in addressing the burning

issues.

Part 3: Evaluation of Policy Options

I. Identification of Policy Options to Address the Policy Issue or Problem

a. Existing Policy: Status Quo

The existing mechanism to address unethical trade practices along the

supply chain is anchored from the Consumer Act of the Philippines

wherein consumer empowerment is the principle objective of these

interventions. Although there are some initiatives that were brought out

recently in addressing business ethical practices, it is somehow lacking

in strategic interventions geared towards the promotional of sectoral

ethical trade practices.

The one-size-fits-all approach in addressing unethical trade practices

is commonly used in all interventions under the current policy. This

means that a structured set of programs and services are being

implemented across business sectors. The following are some

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 interventions/services that relates to curbing unethical trade practices in

business environment, as follows: (1) Consumer Education and

Information, (2) Bagwis Awards given to companies that complies with

set of criteria, (3) Consumer Media Campaign/Promotion, (4) Annual

Consumer Month Celebration, (5) Monitoring and Enforcement of Trade

Laws, and (6) Consumer Complaint Resolution.

b. Option 2: Functional Supply Chain Policy on Ethical Trade (Provincial

Government Level)

i. Supply Chain Stakeholders

Research Initiative/Behavioral Study along the Supply Chain

In truly identifying unethical trade practices along the supply chain, it is

much better to identify first the policy problem(s) or issue(s) to better

understand the sectoral situations. This activity is essential in

strategizing or coming up with more functional interventions within a

specific sector or specific industry cluster. This may include survey

research and focus group discussions.

Capacity Building on per sectoral approach within a specific

industry

It is recommended that interventions should be geared toward an

adoption of a supply chain approach that looks at the effects of the

practices on the entire supply chain rather than on a segment of the

supply chain. The active involvement and participation of the four

sectors in the supply chain is encourage.

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 Determination on Universally Acceptable Ethical Trade Practices

per sector

It is recommended to compare and contrast common ethical trade

practices and adopt it as a universal acceptable ethical trade practices

to eliminate unethical trade misconception.

Formulation and Adoption of Policies and Code of Ethics per

sector

It is recommended that each sector would come up with their respective

code of ethical trade responsibilities or practices

Drawing of Enabling Agreement between and among the Four

Sectors on the Adoption and Recognition of the Respective Code

of Ethics

It is recommended that an agreement should be crafted inculcating

ethical trade responsibilities. This approach would include self-

regulated mechanism within the sector or policing within their ranks.

ii. Legal and Infrastructure

Implementation of Purposive Advocacy Programs and Projects

It is recommended that an ethical supply chain practices advocacy

programs and project be developed and implemented on a per sectoral

and per industry basis.

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 Massive Information Dissemination and Education in the

Communities

It is recommended that a massive information dissemination and

education be conducted especially in in far flung areas.

Engagement of LGUs in Partnership with Accredited Consumer

Organizations to Improve the Business Climate through Ethical

Trade Practices

It is recommended that LGU initiative in partnership with accredited

consumer organizations on promoting ethical trade practices.

Consistent and Regular Application of Policies, Enforcement and

Monitoring Activities

It is recommended that consistent and regular application of policies,

enforcement and monitoring activities to all sectoral players within an

industry

Incorporation of Ethical Trade Practices in the Business Permit

and Licensing Systems of LGUs

It is recommended that, as part of business permit and licensing

requirements, a business firm should develop its code of ethical trade

practices and attend ethical trade capability buildings to educate and

empower thru ethical trade practices.

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 Establishment of an LGU Awards and Incentives System for Firms

or Companies Practicing Ethical Trade

As a mechanism that encourages the promotion of ethical trade

practices, an LGU awards and incentives system be given to ethical

compliant businesses.

c. Option 3: Supply Chain Traceability and Transparency Policy on

Ethical Trade (Regional Level)

Policy Dissemination and Business Dialogue

It is recommended that under this policy every business owner doing

business in Region 2 is encourage to disclose its supply chain

purchasing agreements, its current labor force, open to site inspection

to its working or production area(s), financial statements and others to

ensure unethical trade practices are eliminated. Policy dissemination

and business dialogue would be in place before its actual

implementation.

Consultations

In order to facilitate this policy, a series of consultations would be in

place to build consensus within society and to minimize tensions during

the implementation.

A more detailed Information as Regards the Unfair Nature of

Certain Trading Practices

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 This would mean that a list of unethical trade practices would be

identified in which it is recommended that it should be excluded in

arriving at a negotiated agreement. It will also provide a list of best

recommended ethical trade practices.

Sharing of Ethical Trade Practices

Municipal ethical best practices would be featured and benchmark

destinations of business firms. This would promote ethical trade

practices within the business community.

Consumer Awareness and Public Education

It is recommended that ethical trade practices are included in the

consumer awareness and public education activities within the business

community.

Providing Capability and Workshop Assistance

With a shift to a more transparent supply chain policy, companies are

given capability trainings and workshop on ethical trade practice.

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II. Identification of Costs and Benefits to be Measured

To analyze alternative policy options that will address the policy issue

or problem, the parameters with which costs and benefits shall be

measured, even though qualitative analysis were used, shall be (1)

social costs in the promotion of ethical trade practices along the

supply chain; (2) higher consumer surplus; and, (3) externalities

(spillover effects) that would produce significant impacts;

The status quo or the existing policy is excluded from the analysis

since this policy paper aims to pursue alternative policy options from

the current one;

Evaluation of Policy Options: Applicable of Commonly Used Criteria

Policy Option 2
Policy Option 1 Supply Chain
Aspects Functional Supply Chain Traceability and
Policy on Ethical Trade Transparency Policy on
Ethical Trade
More than sufficient to Sufficient to achieve the
achieve the promotion of promotion of ethical
Effectiveness
ethical trade practices trade practices along the
along the supply chain supply chain
Expected to incur minimal Expected to incur a
Efficiency cost but will result in a minimal cost but will also
higher benefits yield a higher benefits
Only a selected
Most likely that all
Social Equity stakeholders would
stakeholders will benefit
benefit
Has legal basis, will not Has legal basis, will not
Legal and
require much require much
Administrative
administrative administrative
Feasibility, and
requirements, and requirements, and
Political
political acceptability is political acceptability is
Acceptability
considered high considered high

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 Comparative Analysis
Policy Option 2
Policy Option 1
Supply Chain Traceability and
Functional Supply Chain Policy on
Transparency Policy on Ethical
Ethical Trade
Trade
- Empowers all the sector players in - Empowers some sector players
the supply chain (i.e. producers, within the supply chain
middlemen, retailers and
consumers)
- More holistic approach in tackling - Limited approach in tackling
unethical trade practices unethical trade practices
- Generate a higher consumer or - Lesser consumer or social
social welfare welfare generated as
compared to option 1
- Higher cost because it will involve - Lesser cost because it will only
all sectoral players within the involve a concentrated
supply chain business players

Part 4: Policy Recommendation

After careful analysis of qualitative alternative options, the most preferred option is

Option 1 (Functional Supply Chain Policy on Ethical Trade) which relates to the

adaption of a supply chain approach that looks at the effects of the practices on the

entire supply chain and how these practices affect the business environment.

This policy will use a four-pronged approach anchored on the four ethical issues,

centering on the empowerment of supply chain players.

The policy will proactively involve all sectoral players and suggest a wide variety of

interventions depending on the sector, the degree of market concentration and

internalization of supply chains.

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 To reiterate, using the previous analytical tools, it is considered that option 1

(Functional Supply Chain Policy on Ethical Trade) is preferred action because of the

following reasons:

o While option 1 is mostly costly, it is expected to deliver better results in terms

of promoting ethical trade practices as compared to policy option 2 in the

sense that it only target a concentrated group of business firms (Medium

and Large Enterprises);

o Option 1 benefits a wider range of stakeholders within the supply chain in

such that all sectoral players are involved in the policy implementation;

o Policy option 1 proactively empower sectoral players within the supply chain

to eliminate unethical trade practices .

Furthermore, aside from being actionable, the selected policy is considered

sustainable in addressing unethical trade practices as a matter of fairness and as a

matter of efficiency, and implicitly promote a long-term consumer welfare.

Next Steps: Implementation Requirements and Feasibility

Supply Chain Stakeholders

1. Organization and accreditation of the four sectors into a policy

making body

2. Annual celebration of Ethical Trade Day or Week

3. Continuous learning and intervention for the pursuit of ethical trade

4. Formulation and adoption of a traceability mechanism by each

sector on the origin and utilization of goods or products

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 5. Adoption of a criteria for the accreditation and evaluation of the

players in the supply chain

Legal and Infrastructure

1. Formulation of a systemic mechanism among concerned agencies

for the strict enforcement of appropriate regulations

2. Ethical trade practices to be recommended as an element of the

DTIs Bagwis Awards

3. Intensification of DTIs role in the enforcement of ethical trade as

a strategy not only for Consumer protection but for all its major

final outputs

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Part 5: Conclusion

The policy paper must be viewed with significance and urgency as it will serve as

an initial attempt to address century-debated ethical issues in the supply chain. It is

imperative for the government to adopt a four-pronged approach to ensure optimum

consumer protection and fairness within the supply chain. Further, this policy will

empower supply chain players as well as assist the most vulnerable industry(ies)

The Functional Supply Chain Policy on Ethical Trade aims to foster the well-being

of the community, the environment and the regional economy through the promotion

of ethical trade practices along the supply chain. It will specifically create and raises

the consciousness and awareness of the people in the community on the

advantages and benefits of ethical trade practices as a relevant factor towards

improving the stakeholders quality of life; establish acceptable ethical trade

practices among the supply chain players (i.e. producers, middlemen, retailers and

consumers); engage fully the government administrative system in the promotion

and enforcement of ethical trade practices for the empowerment and enhancement

of competitiveness of the business community; and, establish socially responsible

business practices in partnership with the community in pursuit of sustainable

development.

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Abad, Anthony A., Gonzales, Kathrina G., Rosellon, Maureen Ane D. and Yap, Josef T.
(2012). Unfair Trade Practices in the Philippines. Philippine Institute for
Developmental Studies, Discussion Paper. Series No. 2012-39 pp 1-60. Retrieved
from https://dirp4.pids.gov.ph/ris/dps/pidsdps1239.pdf
European Commission, DG Internal Market (2012). Study on the Legal Framework
covering Business-to-Business Unfair Trading Practices in the Retail Supply Chain.
pp 114-123. Retrieved from
http://www.europarl.europa.eu/meetdocs/2014_2019/documents/imco/dv/com-
140711-study-utp-legal-framework_/com-140711-study-utp-legal-
framework_en.pdf.

Gonzales, G. Kathrina and Yap, T. Josef (2012). Perceptions and laws on unfair trade
practices in the Philippines. Philippine Institute for Developmental Studies, Policy
Notes. no. 2012-19, pp. 1-8. Retrieved from
https://dirp4.pids.gov.ph/ris/pn/pidspn1219.pdf.

Schkegelmilch, B. Bodo and Magdalena berseder (2007). Ethical Issues in Global

Supply Chains, Symphonya. Emerging Issues in Management. n. 2, pp. 12-23.
Retrieved from www.unimib.it/symphonya.

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