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Iloilo court to proceed with PECO-MORE Power expropriation hearings

THE ILOILO Regional Trial Court (RTC) Branch 37 has denied the motion for reconsideration filed by Panay Electric Company, Inc. (PECO) against the hearings on the expropriation case filed by More Electric and Power Corp. (MORE Power). “The court hereby resolves that the hearing shall proceed with dispatch since the case involves electricity which is a basic necessity and vested with public interest,” Iloilo RTC Judge Marie Yvette D. Go said in an order issued May 24. MORE Power, which now holds the franchise to distribute electricity in the city, filed the expropriation case on March 11 this year to acquire and take over PECO’s assets. MORE Power said it is willing and able to deposit the amount of P481,842,450, the estimated total value of PECO’s power distribution system. MORE Power President and Chief Executive Officer Roel Z. Castro, said in a statement, “This is something positive because at least we know a hearing on our application for the writ of possession can proceed.” Another case between the two companies is pending before a court in Mandaluyong City, wherein PECO is questioning the constitutionality of the provisions of MORE Power’s franchise as contained in Republic Act 11212. — Emme Rose S. Santiagudo

DoT-Davao bats for use of locally made toiletries in hotels, resorts

DEPARTMENT OF Tourism-Davao (DOT-12) Regional Director Tanya R. Tan is pushing for the use of locally-made toiletries and other products, particularly those from the communities, in the region’s hotels and resorts. “We are working with the different tourism officers of different provinces on how we can work together and connecting the different tourism establishments to the local communities who are into crafts, production of toiletries, because when we support local that is another sustainable practice,” Ms. Tan said in an interview during the recent opening of the Flavors of Mindanao event. She added that they aim to link up with the Department of Trade and Industry to bring together the small producers and the tourism establishments. “If you want to live true to our vision and mission that is inclusive growth, so help our local communities,” said Ms. Tan, noting that the DoT is geared towards sustainable and quality tourism. “We are really preparing for long term because we are here to stay. We also want to focus on quality tourism and its not about the numbers and we’ve seen it. We did it in Boracay,” she said. DoT-11 is preparing to hold a series of workshop on sustainability for the tourism sector. — Maya M. Padillo

COTELCO-PPALMA gets 25-year franchise for power distribution in Cotabato towns

PRESIDENT RODRIGO R. Duterte has signed Republic Act No. 11322, granting legislative franchise to Cotabato Electric Cooperative, Inc.-PPALMA (COTELCO-PPALMA) to disribute power supply in the municipalities of Pikit, Pigcawayan, Aleosan, Libungan, Midsayap, and Alamada (PPALMA) in the province of Cotabato. COTELCO-PPALMA, formally established in 2012, has been operating under the old franchise of COTELCO. Apart from the six Cotabato towns, the power cooperative also serves parts of Maguindanao. Some areas under PPALMA and the entire Maguindanao province are part of the Bangsamoro Autonomous Region in Muslim Mindanao. The law allows COTELCO-PPALMA “to construct, install, establish, operate and maintain for public interest, a distribution system for the conveyance of electric power to the end users” in its designated franchise areas. The franchise “shall be for a term of 25 years from the date of the effectivity of this Act, unless sooner cancelled.” COTELCO-PPALMA will also automatically lose its license if it “fails to operate continuously for two years.” The law takes effect 15 days after its publication in the Official Gazette or in a newspaper of general circulation. — Arjay L. Balinbin

BARMM transition meeting

Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) Chief Minister Murad Ebrahim meets with members of the regional Cabinet on May 27 to finalize the transition plan that will be sent to the Bangsamoro Transition Authority (BTA) Parliament for deliberation. The plan, drafted by the Coordinating Team for Transition (CT4T), serves as guideline for the shift into the new BARMM government within three years. Some of the salient points discussed during the meeting were the proposed organizational structures of the BARMM offices, gradual phasing out of personnel, and proposed seal and flag designs.

Nation at a Glance — (05/29/19)

News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.

Nation at a Glance — (05/29/19)

ING Philippines breaks new ground with its all-digital savings product

ING, which has been operating in the Philippines for nearly 30 years now, has forayed into retail banking with the launch of its pathbreaking savings product designed with digital savvy Filipino consumers in mind.

“The Philippines is primed for a savings product that’s delivered through a digital platform,” Hans B. Sicat, ING’s country manager in the Philippines. He noted that the country has a growing economy, an expanding middle class and an increasing smartphone penetration.

“At ING, our purpose is to empower our customers to achieve their ambitions and dreams, whether grand or modest. And of course, the first step is to help promote a savings mindset among Filipinos for their own growth,” Mr. Sicat said.

Hans B. Sicat, ING’s country manager in the Philippines, speak at the launch of ING’s all-digital savings product in Taguig City last May 21

ING has created a savings product that offers an attractive interest rate of 2.5% per annum for available daily balance of less than or equal to P10 million, which is substantially more than what other similar products offer. What’s more, it doesn’t require a minimum balance and there is no lock-in period. These incentives will hopefully encourage account owners to save up and achieve their financial goals.

And there are more reasons to love this new ING offering. According to Mohamed Keraine, head of retail at ING Philippines, it is the first bank savings product that allows transactions to be conducted solely on ING’s mobile app.

Creating an account is free. You only have to download the ING app and make sure you meet a number of requirements, including being at least 18 years of age and owning a government-issued ID.

ING is the first bank to be authorized by the BangkoSentral ng Pilipinas (BSP) to perform electronic onboarding of customers via mobile phone using the latest in facial recognition technology. Deposits can be done through fund transfers from other banks that are on the PESONet or Instapay platforms.

“We are pushing the boundaries of how customers can deposit, anytime, anywhere,” Mr. Keraine said.

He emphasized one particularly nifty feature of the app: You can deposit money to your account simply by taking a picture of check issued by a Philippine-based bank.

“This game-changing feature is the first ever approved by the Philippine Clearing House Corporation. Customers can transfer funds free of charge to any bank in the Philippines in just a few clicks via the ING app,” he said.

ChuchiFonacier, deputy governor of the financial supervision sector at BSP, called the new ING savings product “a milestone in the Philippine financial system” and said it will open massive opportunities for financial inclusion and digital innovation in the country.

“We welcome ING’s full use of its universal banking license with the roll-out of its retail banking service in an all-digital platform. We support ING’s use of groundbreaking technology that will enhance customer experience and encourage [a] shift to more cashless transactions,” Ms. Fonacier said.

She continued, “ING is one of the first few banks to adopt PESONet, and now, they are also connected to the Instapay platform. Both are initiatives by the BSP to promote digital fund transfers. We are happy to work with ING to move a step closer to our goal of increasing cashless transactions in the Philippines.”

An accomplished yet humble-hearted man

Remembering David L. Balangue

Accounting and auditing veteran David “Dave” L. Balangue’s life ended last April 29 after he succumbed to a lingering illness at 67. But he will always be remembered as a humble and low-profile person despite being a top-notch and an accomplished leader.

Born on Oct. 18, 1951, Mr. Balangue was a certified achiever even in his early years. He graduated with a Bachelor of Science in Commerce major in Accounting degree, magna cum laude, from Manuel L. Quezon University in 1971, and placed second highest in the 1972 Philippine Certified Public Accountant Board Examinations.

He earned a Master of Management degree, with distinction, from the Kellogg School of Management of Northwestern University in Evanston, Illinois in United States, where he received a distinguished scholar award and elected to the Beta Gamma Sigma, an exclusive business honor society.

Mr. Balangue spent most of his professional career at SyCip Gorres Velayo & Co. (SGV), the largest professional services firm in the country. Since he entered the firm in 1982, Mr. Balangue rose through the ranks and became the chairman and managing partner in 2004.

With his long and vast experience in the field, Mr. Balangue became the “go-to-guy” in SGV in either legal or ethical issues. He retired in 2009, with a total of 38 years working in the firm.

In 2012, Mr. Balangue held a government post after former President Benigno S. C. Aquino III appointed him as a commissioner of the Securities and Exchange Commission (SEC) to replace Raul Palabrica who retired in March of the same year. He was the first non-lawyer commissioner of the SEC back then.

The SEC is known as one of the powerful agencies in the government charged with supervision over the corporate sector, the capital market participants, and the securities and investment instruments market, and the protection of the investing public.

“Dave was an SGV lifer and was one of the most intelligent and hardest working colleague I worked with at SGV. He is the only Filipino I am aware of who attained a 4.0 GPA at Kellogg Graduate School of Management. He was humble, down to earth, funny and witty. He rose from very humble beginnings to the top of his profession. He was a very loyal friend.”

Mr. Balangue also sat on the board of different listed companies. He was previously an independent director of Roxas Holdings, Inc.; Phinma Energy Corp.; Holcim Philippines, Inc.; Manulife Financial Plans, Inc.; and Philippine Bank of Communications.

He also served in several private or unlisted companies, including Maybank ATR Kim Eng Capital Partners, Inc.; ATR Asset Management, Inc.; The Manufacturers Life Insurance Co., (Phils.), Inc.; OmniPay, Inc.; Unistar Credit and Finance Corporation; TransAsia Power Generation Co.; and One Subic Power Generation Co.

Mr. Balangue actively participated in different industry associations. He joined Makati Business Club (MBC) and became a member of the board of trustees and treasurer. He represented MBC and chaired the Coalition Against Corruption, an alliance of groups representing the business sector, academe, civil society, and the Church that aimed to strengthen public participation in governance and to ensure the proper use of public funds.

Among others, he served as president of Management Association of the Philippines, Philippine Institute of Certified Public Accountants, Financial Executives Institute of the Philippines, and Manila Polo Club, Inc.

Moreover, Mr. Balangue became the chairman of Standing Interpretations Committee, Accounting Standards Council; president of Halcyon TCMers, Inc.; chairman of Philippines-Korea Economic Council; chairman and president of the SGV Foundation; chairman of MAP Research and Development Foundation; trustee of Philippine Business for Social Progress; chairman of the Philippine Interpretations Committee of the Philippine Financial Reporting Standards Council; chairman of FINEX Foundation; president of the Capital Markets Development Council; chairman and president of the Makati Commercial Estate Association, Inc.; chairman of the Philippine Financial Reporting Standards Council; president of the Makati Parking Authority, Inc.; chairman of the Philippine Council for Population and Development; and chairman of the National Citizens’ Movement for Free Elections (NAMFREL).

In a social media post, former Finance Secretary Cesar Antonio V. Purisima described how great Mr. Balangue as a person was.

“Dave was an SGV lifer and was one of the most intelligent and hardest working colleague I worked with at SGV. He is the only Filipino I am aware of who attained a 4.0 GPA at Kellogg Graduate School of Management. He was humble, down to earth, funny and witty. He rose from very humble beginnings to the top of his profession. He was a very loyal friend,” Mr. Purisima wrote. — Mark Louis F. Ferrolino

An advocate for a better, brighter Philippines

As the former chairman and managing partner of accounting giant SGV & Co., David L. Balangue’s work as an accounting and auditing veteran was unparalleled, bolstered by his 38-year experience with the company. He was commemorated by former Finance Secretary Cesar Antonio V. Purisima, who served as Mr. Balangue’s predecessor at SGV, as “one of the most intelligent and hardest working” among their peers.

As former commissioner of the Securities and Exchange Commission, Mr. Balangue also played a role in building and sustaining the momentum that has fueled the economic development that the country is currently enjoying. To the Philippine business community, the loss of one of its best leaders is implacable.

But outside his career, Mr. Balangue also served as an advocate for a better, brighter future for the Philippines. The National Citizens’ Movement for Free Elections (NAMFREL) National Council once elected him to serve as their chairman, playing a key role in the organization’s objectives of steering engagement in the 2016 national and local elections.

NAMFREL focused on poll watch, voters’ education, electoral reform, campaign finance, logistics tracking, and random manual audit in the 2010 elections. Until the automation of the elections, it was primarily engaged in parallel vote count or otherwise known as Operation Quick Count.

Aside from using his experience to ensure fair and honest elections in the country, Mr. Balangue was also an active proponent in the fight against government corruption, serving as the vice-chairman of the Coalition Against Corruption (CAC), an alliance of the private sector, nongovernmental organizations, and the Church aiming to strengthen public participation in governance and to ensure the proper use of public funds.

In his role, he helped launch a fund campaign to counter misfits in the government. The campaign, called “Catching the Big Fish” project, was backed by a governance investment fund for transparency to help sustain its anti-corruption initiatives.

“We believe it is time to raise our targets while continuing to lay the groundwork for building a culture of antipathy for corruption in the local communities. We may or may not reel in the big fish in the next two years because of existing conditions but when those conditions allow, it will be much easier to finally land one,” Mr. Balangue had said, calling on those who possess reliable information on corrupt practices to cooperate with lawyers who will preserve evidence that may be used at the appropriate time.

In the course of his career, Mr. Balangue had assumed many roles, serving as an independent director on the board of several companies, including Roxas Holdings, Inc., Phinma Energy Corp., Holcim Philippines, Inc., Manulife Financial Plans, Inc., and Philippine Bank of Communications. He was also the past president of the Philippine Institute of CPAs, Management Association of the Philippines, Financial Executives Institute and The Manila Polo Club, Inc.In doing so, he had garnered significant influence and goodwill in the country’s business community.

But Mr. Balangue also understood the weight of that responsibility and played significant roles in helping steer the country towards a future in which he believed in. Without him, the country has lost one of its best advocates. — Bjorn Biel M. Beltran

DoF, DILG move to ensure local fees ‘just’

THE DEPARTMENTS of Interior and Local Government (DILG) and of Finance (DoF) are requiring local government units (LGUs) to make sure that their fees and charges are “just and reasonable” and do not impede the conduct of business.

Both departments have issued a still-unnumbered joint memorandum circular (JMC), which takes effect immediately, “for the guidance of LGUs to ensure uniform procedure in setting reasonable fees and charges, as authorized by Republic Act No. 7160, or the Local Government Code of 1991, and in order to achieve a balance between recovering cost and ensuring ease of doing business in compliance with RA 11032, or the Ease of Doing business and Efficient Government Service Delivery Act of 2018.

The circular covers all local chief executives, vice-governors, vice-mayors, sanggunian (local legislative council) members, barangay chiefs, as well as regional directors of the DILG and the DoF’s Bureau of Local Government Finance (BLGF), provincial/city/municipal/barangay treasurers and heads of LGU departments and offices.

The JMC applies to all fees and charges imposed by local governments for rendering services to the public, including business permits; barangay clearance; permit to extract sand, gravel and other quarry resources; fees for sealing and licensing of weights and measures; fishery rentals, fees and charges; fees on commercial breeding of fighting cocks, cockfighting and cockpit; fees on places of recreation that charge admission fees; fees on billboards, signboards, neon signs and outdoor advertisements; toll fees and charges; public utility charges; and service fees, among others.

The JMC provides that rates of fees and charges should be revised “at just and reasonable rates to recover cost of services” consisting of variable costs (salaries of personnel directly involved in delivering services concerned; cost of supplies and materials; as well as transport and travel expenses) and fixed costs such as cost of water, electricity and other overhead expenses comprising depreciation rates of equipment and utilities used.

The circular said the BLGF will release within 30 days a local fees and charges tool kit to guide local executives in their review.

Local governments are also required to issue executive orders within three months forming oversight committees — co-chaired by the local chief executive and the provincial/city/municipal treasurer — for such review.

The committee will, among others, review the rationale of fees and charges as well as the methodology for determination of fee rates and schedules; compute appropriate rates to recover cost; as well as submit the proposed local revenue ordinance to the local chief executive and lawmakers.

“High rates discourage investors, while low rates could compromise the revenue generation of LGUs,” Interior and Local Government Secretary Eduardo M. Año said in a press release.

“With this JMC, we are able to set the standard for the appropriate rates for the fees and charges imposed by LGUs. We encourage all LGUs to rationalize their imposed fees and charges in accordance with these guidelines, considering that the identified fees and charges must be reasonable to all concerned parties,” Mr. Año added.

“Defiant LGUs who will impose additional fees and charges not reflected in their citizen’s charters will be sanctioned.”

Sought for a comment, Philippine Chamber of Commerce and Industry Chairman George T. Barcelon welcomed the said circular, saying in a telephone interview yesterday that the Finance department “can… improve the system of payment… [of] the local government… Also ma-facilitate [payment by] the tax payers… tsaka (and) minimize some of the steps [in order] to improve efficiency.”

The World Bank’s Doing Business 2019 report — which uses Quezon City as the benchmark LGU in the Philippines — that was released in October last year placed the Philippines at 124th place out of the 190 economies tracked, down 11 places from 113th in the preceding report.

It ranked 166th (up from 173rd in the 2018 report) in terms of starting a business, 94th (up from 101st) in terms of dealing with construction permits, 29th (up from 31st) in terms of getting electricity, 116th (down from 114th) in terms of registering property, 184th (down from 142nd) in terms of getting credit, 132nd (up from 146th) in terms of protecting minority investors, 94th (up from 105th) in terms of paying taxes, 104th (down from 99th) in terms of trading across borders, 151st (down from 149th) in terms of enforcing contracts and 63rd (down from 59th) in terms of resolving insolvency. — with inputs from Vince Angelo C. Ferreras

Duterte extends mandate of tourism regulator to grant fiscal incentives

PRESIDENT Rodrigo R. Duterte has extended the authority of the Tourism Infrastructure and Enterprise Zone Authority (TIEZA) to grant incentives to tourism enterprises until Dec. 31, 2029.

Mr. Duterte signed Republic Act No. 11262 on April 10. Malacañang e-mailed to reporters copies of the law on Monday.

The new law amends Republic Act No. 9593, or the Tourism Act of 2009, which gives TIEZA “sole and exclusive jurisdiction”to grant incentives to tourism businesses, to extend implementation of the incentive scheme for tourism enterprises zones for another 10 years.

Under the old law, TIEZA had only until August 2019 to grant incentives.

Incentives that TIEZA grants tourism enterprises include income six-year tax holidays, a five percent preferential tax on gross income, exemption on all taxes and duties on imported capital equipment, as well as exemption of transport equipment and spare parts from tariffs and duties.

TIEZA is also authorized to give “equal preference to large investments” that have “great potential for employment generation and those of local small and medium enterprises.”

The Finance department is now pushing for reform that will cut the corporate income tax rate gradually to 20% by 2029 from 30% currently, in tandem with scrapping of tax holidays and other fiscal incentives deemed redundant that have been depriving the government an estimated P100-300 billion in foregone revenues a year.

Asked how this planned reform will affect incentives given to qualified tourism investors, Finance Assistant Secretary Antonio Joselito G. Lambino II said in a mobile phone message: “We are advocating an incentive regime that is performance-based, time-bound, transparent and targeted.”

“This means all laws that grant incentives should be consistent with these principles…,” he said, adding that the department will “need to carefully review the version [of the fiscal incentives reform] that is filed in the upcoming 18th Congress” that opens its first regular session on July 22.

RA 11262 also removes RA 9593’s provision that limits the existence of the Joint Congressional Oversight Committee to 10 years from May 12, 2009.

The new law also reads: “The Secretary (of Tourism) shall report to the oversight committee on a monthly basis the latest statistics on tourist arrivals and other relevant data.”

“He or she shall also report, on a quarterly basis, the status of implementation of this Act based on the monthly report submitted thereto by all attached agencies of the department with respect to the implementation of their respective programs.”

The Department of Tourism announced in a May 9 press release that 2,204,564 foreign tourists visited the country last quarter, 7.59% more than the 2,049,094 who arrived in last year’s first three months. — Arjay L. Balinbin

Finance department asks Senate to adopt House alcohol tax version

By Charmaine A. Tadalan
Reporter

THE DEPARTMENT of Finance (DoF) on Monday appealed to the Senate to just adopt the House of Representatives’ bill raising excise tax rates on alcohol products in a last-minute bid to bag approval in the five session days left for the 17th Congress, but leaders of the chamber were either noncommittal or cold to the idea.

The same day saw Senator Juan Edgardo M. Angara, who heads the Senate’s Ways and Means committee, submitting for plenary action the panel’s proposed increase in excise tax rate for tobacco products to P45-60 per pack by 2023 from the current P35/pack under Committee Report No. 714.

“Well, the alcohol (excise tax rate hike) was already passed in the House. All they (senators) have to do is adopt the House version, just like the House is considering adopting the Senate version for the tobacco,” Finance Secretary Carlos G. Dominguez III told reporters following a hearing of the Senate Committee on Finance that deals with budget matters.

Asked whether the chamber has decided on the Finance department’s appeal on the excise tax hike for alcohol products, Senate President Vicente C. Sotto III said in a mobile phone message: “none yet,” while Senate President Pro Tempore Ralph G. Recto said in a separate text message “that can’t be done. It must be heard by com[mittee].”

The House approved on final reading House Bill No. 8618 in December last year; while Senate Bill No. 2179, which adopted the DoF and the Department of Health’s proposal, awaits approval at the committee level in that chamber.

The 17th Congress ends its third and final regular session on June 7. All unfinished bills that fail to hurdle Congress by then will have to be refiled in the 18th Congress, which opens on July 22.

The HB 8618 proposed to increase the ad valorem tax on the net retail price (NRP) per proof for distilled spirits to 22% from 20% currently, and the specific tax rate to P30 per liter from P23.40/liter in 2019. The specific tax rate will then increase by P5 every year, until it reaches P45 in 2022, and then will rise by seven percent per year thereafter.

SB 2179, meanwhile, proposed to increase the ad valorem tax on NRP per proof for distilled spirits to 25% and the specific tax rate to P40 per proof liter in 2019. An additional P5 per liter will be imposed from 2020 to 2022 then a 10% increase every year thereafter.

The DoF said on Nov. 20 the House version is expected to generate P7.8 billion in revenues in the first year of implementation, lower than the estimated P32.3 billion revenues under SB 2179 that was authored by Senator Emmanuel D. Pacquiao.

The Finance department is pushing increases in both excise taxes in a bid to help plug a funding gap of about P400 billion for the implementation of Republic Act No. 11223, or the Universal Health Care Act (UHC).

“We hope that in these last give session days, this bill can be passed because we need the funds for the UHC program. Estimated expenditure for the next five years is P1.4 trillion, the amount that we have right now is P1 trillion, so we’re going to be short roughly P400 billion,” he also said.

Also on Monday, Mr. Angara sponsored for plenary discussion the proposed measure increasing excise tax on cigarettes to P45-60/pack by 2023 from the current P35/pack; and by five percent every year thereafter.

“We’re legislating not so much a single sweet spot, but a ladder where we hope all stakeholders involved can make a smooth transition,” Mr. Angara said in his sponsorship speech on Monday.

“In essence, we’re providing up to four years of graduated increases so that more of our tobacco farmers can shift crops; the tobacco companies can recast their financial projections; and the DoH can catch up with its underspending.”

The DoF said the Senate Bill is expected to generate P15 billion in the first year of implementation, lower than its proposal to immediately increase the tax to P60/pack, estimated to bring around P30.1 billion revenues.

Tobacco firms are already dealing with a tax hike under Republic Act No. 10963, which among others increased the excise tax rate to P32.50/pack from P30/pack in January last year and raised it further to P35/pack in July. It is scheduled to go up to P37.50/pack in January next year.

World faces ‘clear and present danger’ from trade war escalation

LONDON — It was a stark warning about the risks ahead for the global economy, even by the forthright standards of the boss of the Organization for Economic Cooperation and Development (OECD).

“The world economy is in a dangerous place,” Angel Gurria said as the OECD announced its latest, lower forecasts for growth on May 21.

The source of his worry: the mounting trade tensions between the United States and China, which could hit the rest of the world much harder than they have to date.

“Let’s avoid complacency at all costs,” Mr. Gurria said. “Clearly the biggest threat is through the escalation of trade restriction measures, and this is happening as we speak. This clear and present danger could easily have knock-on effects.”

With much of the world economy still recovering from the after-effects of the global financial crisis a decade ago, US President Donald Trump caused alarm when he raised tariffs on $200 billion worth of goods from China on May 10, prompting Beijing to say it would hit back with its own higher duties.

Trade tensions are the main reason that growth in the global economy will weaken to 3.2 percent this year, the slowest pace in three years and down from rates of about 5 percent before the financial crisis a decade ago, the OECD said.

The world economy is expected to pick up slowly next year, but only if Washington and China drop their latest tariff moves.

The impact could be a lot more severe if Mr. Trump follows through on his latest threat to hit a further $300 billion of Chinese imports with tariffs and China retaliates again.

That kind of tariff escalation, plus the associated rise in uncertainty about a broadening of the trade war, could lop about 0.7% off the world economy by 2021-2022, OECD said. That would be equivalent to about $600 billion, or the loss of the economy of Argentina.

But the knock-on effects might not stop there. A full-blown trade war, combined with an ensuing debt crisis in China and a shift away from exports to drive its economy, could cause a two percent hit to China’s economy, in turn knocking global growth further, the OECD said.

To be sure, that kind of worst-case scenario may well be averted, given the stakes for the United States and China.

Mr. Trump and Chinese President Xi Jinping are due to meet at a Group of 20 leaders summit in Japan on June 28-29.

Other G20 nations will be urging them to step back from the fight, chief among them Germany and Japan, two export power-houses which have much to lose from a long trade war.

For now, the effect of the trade tensions is being felt mostly among manufacturers.

By contrast, consumers, buoyed by low unemployment and weak inflation in many of the world’s rich economies, have shown little sign of alarm at the row between Washington and Beijing.

But over the longer term, a protracted trade war is likely to drag down the consumer economy too.

Global trade should normally grow at double the pace of the world economy but is expected to lag it in 2019, boding ill for investment by companies, the OECD said.

That investment would normally drive productivity growth, which is key for long-term prosperity and is urgently needed. Living standards for many workers in rich countries remain lower than before the financial crisis of 2008-09.

The frustration with lower living standards is widely seen as one of the main factors behind the rise of populist politics, including Trump’s presidential election victory in 2016.

“To put it bluntly, this cannot be the new normal,” said Laurence Boone, the OECD’s chief economist. “We cannot accept an economy that doesn’t raise people’s living standards.” — Reuters

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