A MEGA trade deal like the Regional Comprehensive Economic Partnership (RCEP) has substantial advantages over the existing Association of Southeast Asian Nation Free Trade Agreements (Asean FTAs) since it enhances market access and provides a stable regulatory framework for the entire region, according to the Department of Trade and Industry (DTI)
DTI Assistant Secretary Allan B. Gepty emphasized that RCEP is not just about trade in goods but has notable value-added provisions in services, investments, e-commerce, competition, and intellectual property, among others.
This, as he warned that non-ratification by Manila of RCEP negates the positive impact of its recently enacted trio of liberalization reforms on retail trade, public services and utilities, and foreign investments.
Meanwhile, in relation to RCEP’s effects on agricultural products, Gepty noted that tariff liberalization under the agreement would be comparatively limited considering existing FTAs with the other RCEP parties.
Gepty stressed: “Only 33 agricultural tariff lines will be further liberalized under RCEP, which is only equivalent to 1.9 percent of the total agricultural tariff lines.”
He also elaborated some key features of the RCEP agreement such as streamlined customs procedures and a single set of rules of origin for the export products of all RCEP countries, as opposed to the multiple sets of rules that govern trade within the region.
The above-mentioned features will help lower the prices for goods and materials within the region, as administrative costs will be reduced by these measures.
On concerns over the possible deferral of Philippine accession to the RCEP agreement, Gepty stressed that such a move may result in the erosion of the country’s comparative advantage in existing export products and the country’s positioning as a manufacturing hub in the region.
He added that investors and businesses might opt to invest in and trade with countries within the RCEP region instead.
Rejecting RCEP negates reforms
Not ratifying the RCEP agreement, Gepty stressed, would derail the momentum caused by the recent passage of economic reforms and send conflicting signals to investors and other stakeholders
“We have amended the Foreign Investments Act, the Retail Trade Liberalization Act and the Public Service Act. So basically, we are telling the whole world that we are opening our market for trade and investment, and yet here you are, the Philippines, trying to restrict [your] participation in the globalized economy,” he stressed.
The forum was hosted by the Association for Philippines-China Understanding (APCU) on April 21. It was attended by APCU members composed of Filipino businessmen, academics, journalists, various local and international organizations, and diplomats.
Other speakers at the event included Dr. Theresa Chong Cariño, Senior Research Consultant at The Amity Foundation, and Dr. Henry Lim Bon Liong, President of the Federation of Filipino Chinese Chambers of Commerce and Industry (FFCCI).
For her part, Dr. Cariño tackled the geopolitical implications of the agreement and emphasized RCEP’s role in fostering peace and stability in the region.
She described RCEP as a triumph of Asean’s middle power diplomacy since Asean member states were able to utilize their collective bargaining power in positioning the terms of interregional and global trade.
“I think if RCEP can strengthen regional economic integration, this will strengthen the role of Asean as a whole. What’s important is that with RCEP, Asean as a whole will uphold rules-based regional architecture and work for cooperation, peace, stability, and prosperity,” Cariño said.
Resilience
Dr. Liong, for his part, highlighted the resilience of the Philippine economy and the lucrative export opportunities that the RCEP agreement could provide to businesses, particularly for micro, small, and medium enterprises.
He noted that local enterprises should brace themselves for competition as it will always be present but acknowledged innovation as a way for them to adapt to the market.
“I hope that we can try to adapt and try to attract foreign investment, but then local business families should try also to do on our own, by trying to adopt innovations and investing in our own capabilities. As I said, at the end of the day, competition will always be there and we should be ready for that,” he said.
RCEP is a free trade agreement among Asean countries and their trading partners including Australia, China, Japan, New Zealand and South Korea. This represents 30 percent of the global gross domestic product (GDP) or $26.2 trillion.
It entered into force on January 1,2022.
The trade department has been lobbying for the ratification of RCEP as it is seen to “help restore business confidence and encourage more economic activities, particularly MSMEs [micro,small and medium enterprises], investors, service providers, and professionals.”