The new Trans-Pacific Partnership (TPP) could trump the economic benefits of the Regional Economic Comprehensive Partnership (RCEP) if the Philippines and four other countries would join the free-trade pact.
In a working paper, the Washington-based Peterson Institute for International Economics (PIIE) said the existing TPP framework can even be strengthened with the addition of five other countries who have initially expressed interest in joining—Indonesia, Korea, the Philippines, Taiwan and Thailand.
The addition of these countries to the TPP, which the think tank referred to as “TPP 16,” is expected to generate income gains amounting to $449 billion globally and $486 billion for member-economies.
“The TPP 16 gains are large because such an agreement would apply high-quality provisions to trade among those three industrialized economies, which do not currently have a trade agreement with each other. Also, the agreement would go further than the others analyzed in establishing new supply chains in the Asia-Pacific region,” the PIIE said.
In a blog, Asian Development Bank (ADB) Economic Research and Regional Cooperation Department Principal Economist Jong-woo Kang said the withdrawal of the United States brings down the scale of economic benefits from the TPP.
With the US, total exports of the 12 members would have accounted for 26.6 percent of world trade but with 11 members, their world trade share falls to 15.2 percent and intraregional share to a mere 2.3 percent.
Kang said this is due to the US being the largest trade player among the original 12 TPP countries, representing 11.4 percent of world trade and 41 percent of trade among members.
However, he said that by pulling out of the TPP, the other members of the TPP will have more incentive to invest in Canada, particularly among those that still do not have free trade agreements with Canada and the US.
“The remaining 11 countries still have good reason to maintain the TPP momentum in one way or another, as shown by the ongoing push to finalize the deal,” Kang said. “Furthermore, the pact’s members should proactively consider expanding the scope to encompass additional members who are willing to commit to similar obligations.”
The additional members, the PIIE said, could prove to be the best option for the TPP. Based on its calculations, the institute said the original TPP framework, which includes the United States, was expected to generate global income benefits of $492 billion.
The income benefits are expected to be lower if the remaining 11 countries continue the TPP on their own. The PIIE said the global income benefits will only reach $147 billion.
Other trade agreements, such as the RCEP, would also pale in comparison to TPP16. The RCEP can generate only global income gains of $286 billion.
However, RCEP and TPP 16 are still better alternatives than just an 11-member trade agreement, such as the current membership of the TPP.
“High-quality agreements lead to substantially larger gains than less rigorous ones. For example, the TPP 16 agreement could produce more than double the gains of RCEP, even though the TPP 16 economies have only half the GDP of the RCEP region,” PIIE said.
Former Tariff Commissioner George Manzano earlier admitted that without the US market, the TPP is a “less interesting” trade agreement for the Philippines.
However, should the US decide to join the TPP after the Trump administration, and the Philippines is not part of the agreement, it will become more difficult for the country to join.
Manzano said joining the TPP now may be “less taxing” on the part of the Philippines, especially where trade concessions are concerned. He said under the TPP proposals, when the US has not yet withdrawn from the trade pact, some proposed provisions were difficult to comply with.
He noted that some of the TPP’s initial provisions required the Philippines, to change the 1987 Constitution. This, he added, will require not only strong political will but also a significant amount of time.
However, National Economic and Development Authority (Neda) Undersecretary for Policy and Planning Rosemarie G. Edillon said the TPP is currently not being discussed at the Committee on Tariff and Related Matters (CTRM).
The CTRM advises President Duterte and the Neda Board on tariff and related matters and on the effects on the country of various international developments; coordinates agency positions and recommends national positions for international economic negotiations; and recommends to the President a continuous rationalization program for the country’s tariff structure.
Edillon added the CTRM does not consider the TPP a priority unlike the RCEP, which is aimed at streamlining the list of FTAs in the region.