Time for the Senate to look into RCEP

By Jemy Gatdula, BusinessWorld, 19 Nov 2020

The big news is last weekend’s signing of the Regional Comprehensive Economic Partnership (RCEP) agreement. Touted as the world’s biggest free trade agreement, the RCEP is said to promise gazillions for the Philippines.

On paper the RCEP does seem impressive, covering (according to a Joint Leaders statement) “a market of 2.2 billion people, or almost 30% of the world’s population, with a combined GDP of 26.2 trillion US dollars or about 30% of global GDP.”

Trade Secretary Ramon M. Lopez was also reported by BusinessWorld as saying that “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.”

And yet, it still needs to be asked: what does RCEP really do for the Philippines? The question is appropriate due to the obtuseness of the proceedings and (until recently) text of the agreement (a copy though can now be seen at the ASEAN website).

India, it should be remembered, pulled out of the RCEP negotiations over concerns the intellectual property provisions unduly restrict its ability to provide cheaper medicines for its citizens. There are also worries of Chinese goods flooding the market, either by way of dumping or an outright import surge.

And for all of RCEP’s vaunted GDP coverage, a free trade agreement however is about trade. And the RCEP on that score merely accounts for “28% of global trade (based on 2019 figures)” of countries at varying degrees of development.

It’s also a fairly intricate, complicated document, covering 20 chapters (not counting the opening and signing section), plus four Annexes of country “Schedules.” It covers the usual (e.g., trade in goods, rules of origin, services, etc.), as well as some relatively new areas (e-commerce and SME’s).

Notably, the RCEP is without the Investor-State Dispute Settlement (ISDS) mechanism, which proved so controversial it became one of the reasons the United States pulled out of the TPP (Trans-Pacific Partnership). The RCEP does not, however, close itself off to the idea: member countries promised to look again into the matter within two years after the agreement enters into force.

The RCEP membership itself is something needing examination. Set aside the fact that our closest security ally, the US, is excluded from the agreement, the Philippines already has free trade agreements with all of the RCEP countries: Indonesia, Malaysia, Singapore, Thailand, Brunei, Burma, Cambodia, Laos, Vietnam, Australia, China, Japan, South Korea, and New Zealand. What the RCEP brings is that the other FTA’s don’t need further elucidation.

Right there should also raise concerns on what this “noodle bowl” of trade agreements has on our overworked bureaucracy. The depth and complexity of RCEP leads to further questions on Philippine companies’ capacity for utilization of benefits. After all, we’re still trying to attain the rewards promised by AFTA, JPEPA, and others.

Which should lead to an examination on whether there’s still a need for the Philippines to be part of the previous agreements should the RCEP prove beneficial.

Then there’s the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which at least could add for the Philippines new free trading partners like Canada, Peru, Mexico, and Chile.

It’s also doubtful, particularly in these times when the Philippines is struggling at all levels with this COVID-19 pandemic, whether people are actually aware of the RCEP and its implications for the country.

The possible issue, then, confronting RCEP is “adverse selection.” It refers roughly to a situation whereby a possible wrong decision is made due to the absence of information, perhaps asymmetric information, or even wrong information.

The important next step thus is to ensure the Senate looks into the RCEP.

Executive Order No. 459/s.1997 allows the Department of Foreign Affairs to determine whether an agreement is an executive agreement or a treaty. The Supreme Court had occasion to affirm this authority, both when ruling on the country’s accession to the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, as well as its ruling on EDCA.

There’s also Section 1609 of the Customs Modernization and Tariff Act, by which Congress authorized the president to enter into “trade agreements with foreign governments or instrumentalities thereof” for the purpose of “expanding foreign markets for Philippine products as a means of assisting in the economic development of the country, in overcoming domestic unemployment, in increasing the purchasing power of the Philippine peso, and in establishing and maintaining better relations between the Philippines and other countries.”

Undoubtedly, the foregoing should not override the Constitution’s Article VII.21 provision, requiring treaties to be “concurred in by at least two-thirds of all the Members of the Senate.” Free trade agreements, like the RCEP, are treaties. Note that the Philippine-European Free Trade Association Free Trade Agreement (PH-Efta FTA) needed Senate concurrence.

So, like the present lockdown, even assuming the RCEP does bring benefits, the more important question is: at what cost?