The Philippines stands to benefit in case the Trans-Pacific Partnership (TPP), previously pushed by the US, falters during the Trump presidency, London-based economic research firm Capital Economics said.
“The main beneficiaries of the failure of the TPP and the improved prospects for RCEP [Regional Comprehensive Economic Partnership] are parts of Asia that were due to be excluded from TPP, namely the Philippines, South Korea and Thailand. These countries would have seen their growth prospects suffer if the TPP triggered the formation of regional supply chains which excluded them,” Capital Economics said in a Jan. 24 report titled “How big a blow is the demise of the TPP to Asia?”
RCEP will group Asean and six other countries with which it has existing regional FTAs, namely: Australia, China, India, Japan, New Zealand and South Korea. Negotiations to form the RCEP are ongoing.
In December, the head of the Duterte administration’s economic team said the Philippines would pursue membership in the planned Asean and China-led free trade agreement (FTA) while abandoning inclusion in the TPP.
“I personally would like to look at RCEP closely because that’s the 10 Asean countries. That one, we are more open to,” Finance Secretary Carlos G. Dominguez III said in a statement last December.
This is in line with the Philippines’ pivot to China and other Asian countries, the Dominguez earlier said.
The Duterte administration, meanwhile, has been cold to joining the TPP, which former US President Barack Obama had pushed for.
“With regard to TPP, that’s being reviewed all over, including in the US. So maybe we’ll put that in the back burner,” Dominguez had said.
The Philippines had not been invited to participate in negotiations for the ambitious TPP as the country still has investment restrictions enshrined in the Constitution.
The previous Aquino administration had nonetheless expressed interest to join the TPP later on following the conclusion of talks among 12 countries led by US early this year.
According to Capital Economics, “the demise of the TPP represents a major blow to some countries in emerging Asia, most notably Vietnam,” especially as US President Donald Trump withdrew the US from the ambitious FTA.
“For the Asian participants of the deal, most notably Vietnam and Malaysia, who were set to be the biggest beneficiaries of the TPP, this represents a blow. These two countries already have low-tariff access to the US, but the main benefits of the TPP were likely to come through the elimination of non-tariff barriers, including rules on government procurement, investment restrictions and hidden subsidies,” Capital Economics said.
“The remaining 11 countries may press ahead with the TPP anyway, but this seems unlikely as access to the US market was the main attraction,” it added.
For Capital Economics, “the retreat on the part of America has created an opportunity for China, which was not part of the TPP negotiations, to expand its influence in Asia.”
“[China] is already in negotiations on a regional free trade deal, the RCEP, which includes the whole of Asean, Japan, India and Korea, but excludes the US. These talks have been given renewed impetus by Trump’s decision to withdraw from the TPP,” it noted.
“Closer ties with China have the potential to provide a significant boost to the rest of Asia. For large parts of Asia, China is already a bigger export market than the US, and its growth prospects are much better. By including South Korea as well as the rest of Asean, more Asian countries are included in the RCEP talks than the TPP,” according to Capital Economics.
For his part, Dominguez had noted that “President Duterte had come under heavy fire for his sharp foreign policy turn, earning harsh criticism from certain sectors in the process, only to be now seen as the leader who had presciently seen that a timely pivot to China is in the best interests, not only of the Philippines, but of Asean as a whole.”
“No one seems to be raking President Duterte over the coals nowadays with the unexpected triumph of Trump, who won on a campaign message of US protectionism and scaling down American engagement in international trade blocs in order to save jobs in the US,” Dominguez had said.
“With the TPP’s uncertain fate, President Duterte’s China pivot could not have come at a better time, especially with the Philippines chairing the Asean [this year] on its golden anniversary as a regional trade bloc,” according to Dominguez. CDG