US-led trade bloc seen to harm Philippines

The Philippines stands to lose some of its major markets if it will not be able to join the United States-led Trans-Pacific Partnership (TPP) trade bloc, a US-based economist said.

In his paper titled “Trade Implications of the Trans-Pacific Partnership for Asean and other Asian countries,” University of Michigan economist Alan V. Deardorff noted that Japan and the United States—both participants in the ongoing TPP negotiations—were among the top export destinations of the Philippines, as well as of other Asean countries such as Cambodia, Indonesia and Thailand.

“Because these [Asean] countries are part of Afta (Asean Free Trade Agreement) but not part of the TPP, the latter is not expected to benefit them, and will instead cause some trade diversion away from them,” Deardorff said explaining that TPP markets could import instead their requirements from Afta countries that were TPP partners.

“In addition, to the extent that these countries have benefited from the preferences provided by their many FTAs [free trade agreements], these preferences will be eroded,” he added in the paper published in the Asian Development Bank’s Asian Development Review this month.

In the case of the Philippines, it has a bilateral FTA with Japan and is a part of Asean’s regional FTAs with Australia, China, India, Japan, New Zealand and South Korea.

“I conclude that four of these [Asean] countries—Cambodia, Indonesia, the Philippines, and Thailand—could expect to be harmed by the TPP,” Deardorff warned.

The TPP is a free trade agreement aimed at further opening up economies in the Asia-Pacific region. At present, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam are involved in TPP talks.

The Philippines wants to join the TPP, but is beset by restrictions on foreign investments enshrined in the Constitution. The TPP is said to be a very ambitious FTA that will significantly slash trade barriers across member-economies.

US officials had asked the Philippine government to liberalize the economy so it could participate in the TPP. Since the Philippines has no FTA with the US, the TPP is Manila’s only chance to have one with Washington.

Officials of the Department of Trade and Industry (DTI) had nonetheless been expressing confidence that TPP participants might consider the Philippines’ entry later in their talks, especially as technical consultations between Manila and TPP members were ongoing.

The Philippines has already conducted technical consultations with Australia, Malaysia, New Zealand and the US, and it is eyeing similar discussions with Canada and Japan, Trade Undersecretary Adrian S. Cristobal Jr. said last month.