Jobs for Filipinos and integration of local micro, small and medium enterprises (MSMEs) into the global value chain are among the promises that the world’s largest free trade bloc brings to the table following its formal creation in signing ceremonies yesterday after eight years of intense negotiations.
Secretary Ramon Lopez of the Department of Trade and Industry (DTI) joined other trade ministers in Asia-Pacific — the 10 Asean countries and their five trade partners Australia, China, Japan, Korea and New Zealand — in signing the Regional Comprehensive Economic Partnership (RCEP) agreement at the 4th RCEP Leaders’ Summit in Hanoi, Vietnam held via video conference.
Lopez said the landmark deal is in line with the country’s initiatives and reforms of building a more robust and conducive investment and business environment towards recovery from the new coronavirus disease 2019 (COVID-19) pandemic and overall economic development.
The DTI said the deal provides not only enhanced market access for Philippine key products—such as garments, automotive parts, and agricultural products like canned food and preserved fruits—but is also a platform for more investments in manufacturing, research and development, financial services, game development, electronic commerce, and the information technology-business process outsourcing (BPO) sector.
“This agreement will also complement ongoing programs and policies to make the country a manufacturing and investment hub in the region,” Lopez said.
Apart from the usual areas of trade in goods and services, investment, and economic cooperation, the deal also covers emerging trade areas such as intellectual property, electronic commerce, government procurement, and competition.
A chapter dedicated to support MSMEs development is also a key feature of the RCEP agreement, and is expected to facilitate the integration of MSMEs into the global value chain, Lopez said.
“RCEP will bring job opportunities for the Filipinos in the country as it facilitates inclusive and open regional economic policies, especially for MSMEs, which can take advantage of the increasing globalization and creation of new supply chain linkages. In addition, it opens up more services that can be provided by Filipinos or Filipino companies in the RCEP participating countries,” he added.
The deal, however, still provides flexibilities, through the exclusion list, for the Philippines’ sensitive products, which are mostly agricultural products.
Developed countries to benefit more Business hailed the deal as a boost towards recovery from the COVID-19 crisis but noted more developed countries in the deal are likely to benefit more from the elimination of tariff barriers.
Benedicto Yujuico, president of the Philippine Chamber of Commerce and Industry, said the major beneficiaries of RCEP are China, Japan and South Korea due to the significant lifting of tariffs between these countries and the volume of trade between them. Yujuico said the Philippines can also benefit from tariff reduction to the extent of its exports to member-countries but this will not significant because “our foreign currency income is mainly from OFW (overseas Filipino) remittances and BPO revenues, not merchandise exports.”
Yuijico nevertheless believes the RCEP will stimulate trade, investment and digital transformation in the member-countries.
“The agreement is timely because it will also help in the recovery of the members’ economies post-pandemic,” he added, noting this is also a major step in lessening the member countries’ dependence on the economies of the West, particularly at this time when US President-elect Joe Biden will be preoccupied with domestic matters.
The deal, Yujuico added, will also diffuse security concerns caused by trade tensions between China and Japan.
“The RCEP will accelerate the movement of the center of the economic gravity toward the East, where it was 2,000 years ago,” he said.
Sergio Ortiz-Luis, president of both the Philippine Exporters Confederation Inc. and the Employers Confederation of the Philippines, said as RCEP will eliminate or reduce tariffs, doors will open for Philippine products which will boost exports that will in turn create more jobs.
Ortiz-Luis said while the deal will not solve the pandemic, it will certainly help the Philippines recover from the slump in export orders arising from low global demand.
“Our exports will be competitive and will have an assured, open market. Even if the Philippines competes with countries within the group, it could identify the products where it has a competitive advantage to trade. RCEP is another vehicle for our products with special preferences,” Ortiz-Luis said.
Francis Chua, founding chairman of the International Chamber of Commerce of the Philippines,
said the signing of the RCEP during this pandemic will rekindle hopes that enlarging Asean to include China, Korea, Japan , Australia and New Zealand will make the group the biggest regional trade group.
“It is the most important event in anticipation of post-COVID economic recovery. It is the turning point in global trade , an important trade agreement in modern history,” Chua added.
The agreement will be implemented once ratified by the six Asean member-states and three of its dialogue partners.
While India opted out from RCEP in 2019, the agreement remains open for its participation.
Once in place, RCEP will enable faster growth in the region, which now account for 28.2 percent of global GDP—amounting to $23.9 trillion; 27.8 percent of the world’s trade valued at $10.5 trillion; 23.6% of global inward foreign direct investments (FDIs) and 33.5 percent of global outward FDIs; and 29.7 percent of the world’s total population.
In 2019, the RCEP participating countries accounted for 50 percent of Philippine export market, and 61 percent of Philippine import sources. The region accounts for 11.4 percent of FDIs entering the Philippines in the same period.
The China-backed deal that excludes the US, which had left a rival Asia-Pacific grouping under President Donald Trump.
The signing of the RCEP is a further blow to the group pushed by former US president Barack Obama, which his successor Trump exited in 2017.
Amid questions over Washington’s engagement in Asia, RCEP may cement China’s position more firmly as an economic partner with Southeast Asia, Japan and Korea, putting the world’s second-biggest economy in a better position to shape the region’s trade rules.
The US is absent from both RCEP and the successor to the Obama-led Trans-Pacific Partnership, leaving the world’s biggest economy out of two trade groups that span the fastest-growing region on earth.
By contrast, RCEP could help Beijing cut its dependence on overseas markets and technology, a shift accelerated by a deepening rift with Washington, said Iris Pang, ING chief economist for Greater China.
Despite being outside RCEP and having been in the administration that propelled the TPP, Biden — Obama’s vice president – is unlikely to rejoin the TPP anytime soon, analysts said, as his government will have to prioritize handling the COVID-19 outbreak at home. (With Reuters)