By Cai U. Ordinario & Elijah Felice E. Rosales
Despite the absence of the United States, experts said the Duterte administration should consider hopping on the Trans-Pacific Partnership (TPP) train, as this would provide opportunities to bolster the country’s economy.
“I believe the Philippines will benefit from further economic integration and it should continue to explore regional and multilateral trade and investment agreement options,” Ateneo School of Government Dean Ronald U. Mendoza told the BusinessMirror in an interview.
“The TPP offers opportunities for the country, potentially expanding its exports, attracting more foreign direct investments [FDI ] and taking part in cross-border value chains,” Mendoza added.
He said the TPP can lead to as much as a 42-percent increase in Philippine exports, contributing to economic expansion by almost 60 percent of GDP. He added exports can grow by up to $3 billion.
“Most critically, TPP signatories, like Vietnam, will stand to gain if the Philippines does not join TPP, as the former will likely outstrip the latter in FDI due to TPP membership,” Mendoza added.
However, the Ateneo dean warned these gains would not take effect if grassroots reforms are not applied.
“However, TPP and trade integration more broadly, will only bear fruit if these are matched by deep institutional reforms in the Philippines, including those that further boost competition policy in the country, enhance the competitiveness of the energy sector, liberalize key economic sectors and enhance ease of doing business,” Mendoza said.
“Recent years have also emphasized that economic integration that is too deep and too fast risks leaving behind vast groups in society, so the challenge is to match the ambition of integration with robust reforms. If reforms fail to catch up with our ambition, then we risk a potential blowback from sectors that have failed to adjust to the new economic environment,” Mendoza added.
To the government, Mendoza has one advice: “The correct response here is to boost reforms rather than retreat toward protectionism.”
Even without the US, the Philippines should still join the TPP and consider it as an “investment,” according to former Tariff Commissioner George Manzano.
Manzano admitted, however, that without the US, the TPP is a “less interesting” trade agreement for the Philippines. But the absence of the US could also be beneficial to Manila.
“[If], eventually the US [decides to] join the TPP, then you’re already part of the agreement. I think we should consider it as an investment. We should make the investment now,” Manzano said.
Manzano added joining the TPP now may be “less taxing” on the part of the Philippines, especially where trade concessions are concerned. He said under the US-led TPP, some of the proposed provisions were “difficult” to comply with.
He added some of the TPP’s initial provisions required the Philippines to change the 1987 Constitution. This will require not only strong political will but also a significant amount of time.
The chairman of the House Committee on Banks and Financial Intermediaries also agreed with the experts and said it is time for the Philippines explore all the economic opportunities presented by the TPP.
“I believe [we should join the TPP]. We should explore all trade opportunities to expand our market and investments,” Rep. Ben P. Evardone of Eastern Samar, the panel chairman, told the BusinessMirror.
“I just hope there won’t be unreasonable conditions in joining the TPP, which could displace Filipino workers,” he added.
With this, Evardone supported proposals to relax the restrictions in the economic provisions of the 1987 Constitution. “Our Constitution should adapt to the changing times.”
“We will be overtaken [by] other countries if [we] do not open up our economy because globalization is an irreversible trend,” he added.
Currently, there is a proposal in the 17th Congress amending the economic provisions of the Constitution. There is also present effort to amend the Constitution in the shift toward federalism type of government.
‘Death trap’
Rene E. Ofreneo, labor and industrial relations professor at the University of the Philippines, warned Manila not to enlist in the TPP, as this might be a “death trap.”
Ofreneo said the Philippines should weigh its options before entering into major trade agreements, especially the TPP, as the deal is “prone to complications” between the government and the private sector.
“Lalakas ’yung relasyon between the State and investors [Relations between the State and investors will strengthen under the TPP]”, Ofreneo told the BusinessMirror. “With this, investors are given power to sue the State in partnerships that they deem unfavorable to their commercial interests,” Ofreneo added, citing the arguments of Malaysian lawmaker Charles Santiago against the TPP.
Santiago is a staunch critic of the TPP, and has urged Kuala Lumpur not to pursue its plan of joining the trade agreement. Santiago in 2013 said the TPP “intrudes” in domestic affairs by allowing international arbitrations to decide on cases involving the State and the private sector.
“Once the TPP rules and regulations are adopted by negotiating countries, it must be ratified by national governments or parliaments, then local laws must be changed to accommodate the new rules agreed upon,” Santiago said.
“This will allow companies to sue national governments at international arbitration centers based in Washington and Geneva; thus, undermining national sovereignty and public policy-making responsibilities of nations. In short, tribunal verdicts cannot be reviewed in domestic courts, and companies can dictate policies to governments,” the Malaysian lawmaker added.
Echoing Santiago, Ofreneo said democratically elected governments will bear the burden of financial penalties and trade sanctions ruled by international arbitrations. This, he said, is a drawback of the TPP, and should already be a reason enough not to enlist in it.
Ofreneo added the government should come up with a development framework first before it even considers entering into the TPP, as Manila might be on the receiving end of the trade agreement in the long run given its weak manufacturing base.
Dr. Rolando T. Dy, executive director of the University of Asia and the Pacific’s Center for Food and Agri Business, is also not keen on the TPP, as it seeks to lower tariffs on some agricultural products.
“Low tariffs mean threats to poultry and pork from non-Asean countries like Canada and South Korea,” Dy told the BusinessMirror. “Also, how will rice be treated? Feed wheat tariff is already very low, [which is a] corn substitute.”
There have been talks of cutting tariffs for meat traded within TPP member-countries, particularly those from Canada, the US, Australia and New Zealand, which are Philippines’s major meat-import sources.
Economist Pablito M. Villegas echoed Dy’s remarks. But, he also noted the lowering of tariffs could also result in cheaper goods for Filipino consumers.
“TPP is pro-open economy. Filipino consumers will benefit more from cheaper imports but not producers and manufacturers who are into sectors where we have limited competitive advantages,” said Villegas, who is the vice president of Confederation Filipino Consulting Organizations.
The TPP is a free-trade agreement aimed at lowering tariff and nontariff barriers to trade involving Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
Members of the TPP last Saturday agreed to move forward with the negotiations without the participation of the US, which was withdrawn in January upon the instruction of US President Donald J. Trump. Trump has criticized the TPP for allegedly abusing trade relations that hurt American workers. With Jovee Marie d. dela Cruz and Jasper Emmanuel Y. Arcalas