Philippines signs RCEP, world’s biggest trade deal

by By Jenina P. Ibañez, Reporter, BusinessWorld, 16 Nov 2020

FIFTEEN Asia-Pacific economies, including the Philippines, signed the world’s largest free trade deal on Sunday, with observers saying the deal could boost Philippine market access while others believe it would worsen the trade balance.

The Regional Comprehensive Economic Partnership (RCEP) is a trade pact that includes China, Australia, New Zealand, Japan, South Korea and all 10 ASEAN member countries. This is the first time that China, Japan and South Korea are all in a single free trade agreement.

The deal was signed in a virtual ceremony as part of the annual ASEAN summit in Hanoi, Vietnam.

“The RCEP will further broaden the Philippines’ economic engagements with its trading partners through improved trade and investment, enhanced transparency, integrated regional supply chains, and strengthened economic cooperation,” Trade Secretary Ramon M. Lopez, who signed a copy of the agreement during the virtual ceremony, said in a statement on Sunday.

“This agreement will also complement ongoing programs and policies to make the country a manufacturing and investment hub in the region.”

The prospective free trade area accounts for around a third of the global population and economy, and builds on existing bilateral and multilateral agreements in the region. It also allows for a common “rules of origin” in the region, which means it simplifies the regulations identifying if products are “made in” a country.

Talks on the China-backed trade pact began in 2012.

Mr. Lopez, calling the deal a “modern” free trade agreement, said that it covers issues surrounding intellectual property, e-commerce, small business, government procurement, and competition.

The RCEP is expected to enhance market access for key Philippine products including garments, automotive parts, and agricultural products like canned food and preserved fruits, Trade Assistant Secretary Allan B. Gepty said in a statement.

“(It is) also a platform for more investments in the country in vital sectors such as manufacturing, research and development, financial services, game development, e-commerce, and the IT-BPO (information technology-business process outsourcing) sector,” Mr. Gepty said.

The deal has also been seen as a way to jump-start trade as Asian economies reel from the effects of US-China trade tensions and the ongoing coronavirus disease 2019 (COVID-19) pandemic.

“The RCEP will definitely help faster recovery of the global economy from COVID-19 and a welcome development in spurring export and imports,” Rizal Commercial Banking Corp. Economist Michael L. Ricafort said in a mobile message.

RISKS AND BENEFITS

But Trade Justice Pilipinas, a campaign for equitable trade, criticized the lack of transparency during the RCEP negotiations.

Trade Justice Pilipinas said that the deal does not give enough flexibility for least-developed ASEAN member states, which could lead to a widening of the gap between the richer and poorer economies. It added that strict enforcement of intellectual property rights could block access to affordable medicines and agricultural seeds.

Citing a report by United Nations Conference on Trade and Development Senior Economist Dr. Rashmi Banga, Trade Justice said that the Philippines would see the cost of imports rise by as much as $908 million while the value of exports to RCEP countries is expected to increase by around $4.4 million.

“RCEP will only deepen inequalities that already exist and were exacerbated further by the pandemic. It will further undermine the livelihoods of farmers, fishers, indigenous peoples and rural women, and threaten jobs for workers,” the group said.

George N. Manzano, University of Asia and the Pacific economist and former tariff commissioner, said that the stakes are now lower as nations shift their policy focus to domestic economic and employment recovery amid the pandemic, noting that there could be less resistance to RCEP.

“I think the policy attention right now is how to stimulate economies, and how to get economies to tide over until the (COVID-19) vaccine,” he said in a phone interview on Sunday.

Mr. Manzano said pandemic-related disruption influenced a rethink of the traditional efficiency and low cost-based global value chain in favor of reliability.

“So basically there’s a lot of pressure now to rethink having very far-flung global value chain networks. They’d rather have something which is close by,” he added.

RCEP could also create a framework for trade facilitation and digital trade.

“Digital trade will take up a bigger transmission of trade in the future as we’re experiencing now, so the earlier transition in getting comfortable in getting into agreements involving digital trade. It will help us at least, policy-wise,” Mr. Manzano said.

He added that the agreement could help facilitate the trade and distribution of vaccines and personal protective equipment.

“Small countries, those who don’t have much bargaining power in the world, the only way you can do that is by signing into an international cooperation, because it’s difficult for you to bargain with China or the US,” Mr. Manzano said.

Last year, University of the Philippines Professor of Economics and Finance Epictetus E. Patalinghug said domestic high-cost industries that are protected by tariffs and safeguards will not survive against RCEP competition, noting that advantages and risks to Philippine industry will depend on which sectors are finally included in the agreement.

He had said that trade in labor-intensive outsourcing services stands to benefit.

The agreement will be implemented after a ratification process, which could take up to two years.

India had backed out of the RCEP negotiations last year, but ASEAN leaders are still open to the country’s participation.

The United States is not part of the RCEP, as well as the Obama-led trade pact Trans-Pacific Partnership (TPP). US President Donald Trump pulled out of the TPP in 2017.