A POST-BREXIT scenario may be a blessing to the Philippine economy, particularly in terms of the country’s exports to the United Kingdom, according to the United Nations Conference on Trade and Development (Unctad).
In Unctad Research Paper 42, titled “Brexit Beyond Tariffs: The role of non-tariff measures [NTMs] and the impact on developing countries,” developing countries like the Philippines are said to stand to benefit from the Brexit.
Unctad
estimates Brexit to
boost Philippine economic growth by less than a percentage point, but exports
to the UK could see a growth of over 3 percentage points.
“A no-deal Brexit could offer some opportunities for developing countries as trade barriers between the UK and the EU would benefit suppliers from third countries. By contrast, a deal between them would preclude the incentive to turn to third countries, the study finds,” Unctad said.
Unctad said the study quantitatively explores the post-Brexit role of NTMs and the consequences for developing countries by simulating possible impacts using a panel data gravity model.
Under a tariffs-only scenario, exports of developing countries to the UK would increase 1.3 percent to 1.5 percent, while a tariffs-and-NTMs scenario would see them rise 3.5 percent to 4 percent, according to the study.
“The positive impact would be strongest in agriculture, food and beverages, wood and paper sectors; and weakest in electrical and machinery, metal products, chemicals, and textiles and apparel industries,” Unctad said.
In terms of the economy, the Brexit will increase Philippine GDP growth of 0.002 percentage points, taking into consideration tariffs, and 0.005 percentage points when tariffs and NTMs are considered.
Using only tariffs as basis, the country’s overall exports growth will see a boost of 0.022 percentage points while imports growth will see a 0.32-percentage point increase.
Tariffs and NTMs considered, the Brexit will lead to a growth of 0.059 percentage points for exports and 0.085 percentage points for imports.
Unctad said the country’s exports to the UK are expected to get a major boost of around 1.416 percentage points using only tariffs, while the impact would be larger at 3.812 percentage points when both tariffs and NTMs are considered.
The Philippines’s exports to the remaining members of the EU or EU27 would still increase by 0.024 percentage points when tariffs are considered while the impact would be larger at 0.051 percentage points when tariffs and NTMs are considered.
“The positive third-country effect could be diminished by increasing regulatory divergence. If the UK’s regulations divert over time from the EU’s, trade costs would rise for third countries due to production process adjustment costs and potential duplication of proofs of compliance.
This would disproportionately affect smaller and poorer countries, as well as small and medium-sized enterprises,” Unctad, however, said.
Last week, UK Trade Envoy to the Philippines Richard Graham said the UK’s decision to leave the EU gave trade partners the opportunity to forge FTAs with it. He said one of the terrains explored by London is Manila, as merchandise trade between the two parties is complementary.
However, he admitted the UK has its priority trading partners at the moment that it plans to deal with, including China, Japan, Australia, the United States and New Zealand. After forging FTAs with these countries, only then will the UK consider negotiating a trade deal with the Philippines, as well as other Southeast Asian states.
Graham ranked who among the Southeast Asian economies will the UK focus on in terms of coming up with a trade deal. He said Singapore and Malaysia are on top of the list, while the Philippines and Indonesia come next.
Image credits: AP/Kirsty Wigglesworth