IF you want to be realistic about it, international trade has been a tale of misery. Shall we make it personal to the Philippines? Two words: Ferdinand Magellan. He was not in search of the healing waters of Binaliw Spring.
The brave explorers went in search of adventure that was paid for by opening trade routes and looking to exploit locations for raw materials. Christopher Columbus made landfall in the Caribbean in 1492. During the next 100 years, between 80 and 95 percent, depending on the location, of “New World” indigenous populations were killed by smallpox, measles, influenza, chickenpox, bubonic plague, typhus, scarlet fever, pneumonia, and malaria.
This was offset by the fact that these “natives” were introduced to Christianity and that syphilis was a “New World” disease that Columbus brought back to Europe.
The Trans-Pacific Partnership was supposed to bring “free trade” to the Pacific. Trump killed the deal on the grounds that “free trade had to be fair trade” and felt the US was getting the short end. In one sense he was correct, since the huge US market would be opened up to the smaller Asia-Pacific nations. But countries like the Philippines would have been the biggest losers since the power in the TPP agreement went to multinational companies that did not have to follow local legalities. The Philippines previously wanted to join TPP in 2016 under Aquino.
China, excluded from TPP, then set up Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which included both China and the US. CPTPP pretty much died when the US pulled out and here again, countries like Peru objected to the enormous legal power of the multinationals.
Now we have China’s initiative, the Regional Comprehensive Economic Partnership (RCEP), with 15 Asia-based countries from South Korea/Japan to Australia/New Zealand.
Signed in November 2020 and effective as of January 2022, the agreement is “intended to reduce tariffs and red tape. It includes unified rules of origin throughout the bloc. It also prohibits certain tariffs.”
Note this very closely. RCEP “does not establish unified standards on labor and the environment or commit countries to open services and other vulnerable areas of their economies.” It is not as comprehensive as TPP/CPTPP, which makes it productive and not just a feel-good “progressive” piece of bureaucratic overreach.
What it does do is to “eliminate about 90 percent of the tariffs on imports between its signatories within 20 years of coming into force, and establish common rules for e-commerce, trade, and intellectual property.” It is probably a good deal for the region based on who dislikes it.
Former center-right Australian Prime Minister Malcolm Turnbull says “it’s a very old-fashioned trade deal. It’s low ambition” because RCEP “ignores labor, human rights, and environmental sustainability issues.”
In contrast, Kishore Mahbubani, Singapore’s former UN representative, said the “future of Asia will be written in four letters, RCEP.” Singaporean Prime Minister Lee Hsien Loong called it “a major step forward for our region” and a sign of support for free trade and economic interdependence.
Former Indonesian Minister of Trade Suparmanto said that RCEP could boost Indonesia’s exports to signatory nations by 8-11 percent and boost investment into Indonesia by 18-22 percent.
India pulled out of the deal in November 2019, citing concerns of dumping of manufactured goods from China and agricultural and dairy products from Australia/New Zealand. There are those that say the Philippines should follow India’s lead by not joining, but their arguments are hollow.
The Philippines does not produce substantial dairy products and never will due to the weather/climate. We already import these from Australia and New Zealand. Further, most of what we import from China—electrical, electronic equipment, machinery, nuclear reactors, boilers, iron and steel, and articles of iron or steel—do not compete with locally made products.
This is a long-term trade agreement designed to go in stages. We should not be left behind. President Duterte ratified the pact last September, but Senate concurrence is required for it to take effect. This should be a top priority when the Senate reconvenes.
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.