DTI renews appeal for Senate to approve RCEP
The Department of Trade and Industry (DTI) has again appealed to the Senate to soon approve the Philippines’ participation in the Regional Comprehensive Economic Partnership (RCEP) agreement, touted as the world’s largest trade deal that will take effect on Jan. 1, 2022.
“Not joining RCEP or delaying our participation will cause disruption in this momentum. Investments will shy away from the countries who are not participating, and there will be capital flight and lost investment opportunities,” Trade Secretary Ramon Lopez said in a statement on Tuesday.
“This may impact the country’s ability to attract foreign direct investments, especially when compared with our Asean (Association of Southeast Asian Nations) neighbors that are already part of the RCEP. This may also affect other international trade engagements we are pursuing,” Lopez added.
The Philippines signed the RCEP in November last year with the rest of the Asean as well as Australia, New Zealand, Korea, Japan, and China. It used to include India, until the latter opted out of the negotiations.
As provided under the Constitution, the Senate has to approve free trade agreements such as the RCEP. Congress has already ended its sessions for 2021 but the DTI hopes that the Senate will put the approval of the trade agreement at the top of its agenda when it resumes sessions next year.
RCEP participants together account for 30 percent of the global economy.
It is estimated, however, that Philippine exports to countries under a China-led mega trade deal will initially fall by $100 million since it will lose out to other member countries with better trade concessions, according to estimates made by the United Nations Conference on Trade and Development (UNCTAD).
However, the benefits of joining will still outweigh the potential harm to the local economy, according to the latest UNCTAD report on the trade effects of the RCEP.
The UNCTAD report, titled A New Centre of Gravity, said Japan’s exports would benefit most from the trade concessions, with their outbound shipments seen to increase by $20.2 billion. It is then followed by China and South Korea, which would have an overall increase of $11.2 billion and $6.7 billion, respectively.
“On the other hand, RCEP tariff concessions result in lower exports for Cambodia, Indonesia, Philippines and Viet Nam,” the report said, noting that this is the impact of trade diversion, wherein other RCEP countries would rather order goods from other members.
“For example, some of the imports of China from Vietnam will be replaced by imports from Japan because of the stronger tariff liberalization between China and Japan,” it said, noting a $1.5 billion dollar decline in exports for Vietnam.
Trade diversion, however, would have happened even if the countries were not part of RCEP, UNCTAD said. In essence, the UN body said it was still better to join the deal because of other benefits that come with RCEP, such as foreign direct investments and technology sharing.
“The large potential of the RCEP agreement in creating trade for the member economies also implies that even for members that may initially negatively affected by trade diversion effects, it is better to be in than out the RCEP agreement,” UNCTAD said.
“Not only because being part of the deal creates additional trade that may offset the losses, but because it strengthens economic integration and the benefits that may come with it, such as foreign direct investment, technology sharing, structural transformations, among others,” it added.
