24 Jan 2022 – Industries have differing views on RCEP

Industries have differing views on RCEP
By …- January 24, 2022

By JED MACAPAGAL and IRMA ISIP, Malaya

Industries and business groups have banded to lobby for the concurrence by the Senate to the ratification of the Regional Comprehensive Economic Partnership (RCEP) Agreement, saying they will miss out on opportunities if the Philippines does not join the deal.

But agricultural groups and private organizations have a different opinion: better to miss RCEP than be run over by it.

The Federation of Free Farmers (FFF) and 73 other signatories renewed calls to reject or defer any decision on RCEP, saying the Senate and the general public are being provided with bloated projections and misleading claims regarding the benefits of RCEP.

Foreign and business groups have all thrown their support to RCEP which had been ratified earlier by 10 signatories. The agreement took effect January 1.

The latest business organization to issue a statement in support of RCEP is the garments industry which noted that Philippines being part of the agreement will help sustain the sector especially that the deal is enjoyed by RCEP signatories such as Vietnam, the Philippines’ closest competitor in the industry.

The RCEP allows manufacturers from member countries to source raw materials such as yarn and fabric worldwide, with the finished products qualifying for preferential tariff treatment under the agreement.

Marites Jocson-Agoncillo and Rosette Carillo, executive directors of the Confederation of Wearables Exporters of the Philippines (CONWEP) and affiliate Coalition of Philippine Manufacturers of PPE (CPMP), respectively, through their letter furnished to the Department of Trade and Industry (DTI), said global brands have redirected their orders to the Philippines from Vietnam due to the hesitation of the latter’s workforce to return to the factories because of the COVID-19 pandemic.

“We need RCEP to sustain such opportunities. Otherwise, we again lose these orders, as well as significant planned investments on apparel and textile from countries such as China, Taiwan, and others, to Vietnam which is expected to resume its operations in the next couple of months,” CONWEP and CPMP said in their joint letter.

The sector was among those affected by the slowdown in the economic activities brought by the COVID-19 pandemic and is still reeling from its effects. CONWEP’s data highlighted that almost 20,000 direct workers were displaced due to the global pandemic. Pre-pandemic, the sector employed 260,000 to 280,000 workers.

Diana Santos, president emerita of the Garment Business Association of the Philippines has reaffirmed their support through a letter to the Department on the Philippines’ joining the RCEP.

“We opine that the Philippines would be at a trade disadvantage if we are not part of the aforementioned partnership,” Santos said.

Oppositions to the RCEP, in a joint statement released by FFF through its national manager Raul Montemayor, said proponents of the deal have conveniently downplayed, if not deliberately concealed, one crucial caveat about the agreement – that “any tariff concession from our trading partners under RCEP will not be exclusive to the Philippines, and will actually be available to all other member- countries.”

“ There is therefore no assurance, and only a small chance, that we can take advantage of these trade opportunities inasmuch as other RCEP countries are way ahead of us in terms of competitiveness, efficiency and dependability,” the groups said in the statement.

They added that while RCEP may provide more incentives for foreign investors to come to the Philippines, investors can also decide to place their money in other countries where the environment for doing business is more attractive.

Montemayor and the signatories also mentioned that while the country may have gained some concessions which are better than existing free trade agreements (FTAs) with RCEP countries, these only involve a small percentage of total agricultural tariff lines and trade value.

“Moreover, many of the purported gains are insignificant. For instance, the Japanese offer to drop tariffs on chocolates to zero applies to a single and obscure tariff line for other chocolates, which we most probably do not export. Likewise, we need to wait 20 years before China’s tariff on our canned pineapples becomes zero, even as the current tariff is already very low at 5 percent,” the statement further read.

The groups also highlighted that almost all our tariffs on fishery, dairy, cacao and tobacco products will drop to zero on the very first year of RCEP while import duties on high fructose corn syrup and other substitutes to cane sugar will be eliminated apart from the possibility of the local market be flooded with cheap vegetables from China.

“All this, with our local producers left with little or no protection because of stringent RCEP rules on the use of additional tariff safeguards during import surges,” the groups warned.

Montemayor and the signatories also mentioned that under RCEP, all FTAs with other RCEP countries will remain in effect even if the Philippines choose to stay outside RCEP.

“The preferential tariffs that are already available to us under the Asean+1 FTAs are not much different from what RCEP can offer us. Our bilateral FTAs with Japan and South Korea, which actually give better terms for our products than RCEP, will also be maintained.

Nor will our competitors within Asean get any tariff concessions under RCEP that are significantly better than what we can avail of under the existing FTAs,” the groups highlighted.

The groups said only China, Japan, South Korea, Australia and New Zealand are expected to gain much from RCEP as they currently do not have reciprocal FTAs among themselves, unlike Asean countries.

“While it is possible that they will use RCEP to penetrate our traditional markets, they will do so anyway whether we join RCEP or not. The warning therefore that trade will be diverted away from our country simply because we decide not to join RCEP is baseless,” the groups further said.

South Korea will become the 11th signatory of RCEP on February 1, after the prescribed 60 days from its ratification last December 2. The other remaining countries, Indonesia, Malaysia and Myanmar, are reportedly poised to ratify the agreement shortly.