The Regional Comprehensive Economic Partnership (RCEP) free trade agreement (FTA) will benefit participating countries but the Philippines must temper its expectations as the country and other economies in Southeast Asia are already benefiting from existing FTAs, analysts said.
“RCEP was signed but we’ll need for it to be ratified and implemented by all governments of its members,” ING Bank Manila senior economist Nicholas Mapa said.
“RCEP is touted to boost global trade but we also need to temper expectations given that the Philippines and the rest of Asean are currently already benefiting from existing free trade agreements and low tariff regimes with most members of RCEP,” added Mapa.
After almost eight years of negotiation, the RCEP was finally signed by Association of Southeast Asian Nations (Asean) member-states Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) and its five trading partners — Australia, China, Japan, Korea, and New Zealand last November 15 at the 4th RCEP Leaders’ Summit.
The Department of Trade and Industry (DTI) claimed that once implemented, the RCEP agreement will improve export competitiveness of the Philippines’ key products of interests, such as agricultural products, automotive parts and garments.
It will also provide wider cumulation for certain products such as canned tuna and preserved fruits.
Mapa, however, said that although there will be some benefits due to synergies and new access to markets, the gains may be more marginal than initially expected.
“And although we do expect a pickup in overall trade, the gains that may accrue to the Philippine export sector will be commensurate to our prominence and presence in the global value chain. Currently we occupy the lower end of the supply chain, and it would be best to move higher in terms of value added to truly benefit from RCEP,” said Mapa.
Rizal Commercial Banking Corp. chief economist Michael Ricafort likewise noted that given the other pre-existing FTAs of the Philippines with the other members of RCEP over the past decade, lower tariffs for both exports and imports and increased competition for goods from other member countries is “nothing really new for the Philippines.”
“RCEP helps enhance and build upon existing free trade agreements of the Philippines such as the Asean-China since 2010 that removed tariff rates on almost all products (except rice and other highly sensitive products), as well as other FTAs of Asean with Japan, South Korea, Australia and New Zealand over the past five to 10 years,” said Ricafort.
“Thus, imports from China have already increased since 2010 under the Asean-China FTA, so RCEP is really nothing new as far as the Philippines is concerned, as the Philippines even has a separate free trade agreement with Japan, through Jpepa (Japan-Philippines Economic Partnership Agreement) for nearly a decade already,” he added.
He said that competition imports from other RCEP member- countries would still realistically increase.
“Increase competition for both exports and imports increase the urgency to be more competitive in terms of value proposition in terms of increased productivity, lower costs, higher quality, further differentiation, serving unique market niches,” said Ricafort.
According to Ricafort, other Asean countries already have competitive advantages in terms of much lower production costs.
“Thus, the Philippines may be able to compete better with higher-value-skill propositions in the global supply chain,” he said.
Ricafort pointed out, however, that as the country of origin rules have been eased and simplified further under RCEP, from separate bilateral deals, this would allow more goods to be eligible for much lower tariff rates even if inputs come from multiple sources from other RCEP member-countries.
He further said that improved economic and credit fundamentals of the Philippines would help make the country a compelling business destination and help attract more foreign investments, especially foreign direct investments (FDIs), which will help make the country a manufacturing, investment and marketing hub.
“Further easing of foreign investment limits, lower corporate income taxes and more predictable investment incentives under the Create bill, as well as further streamlining permit process and further improvement of infrastructure would help facilitate this vision of having a more important role for the Philippines as a hub for global businesses in the region, as enhanced by the RCEP,” said Ricafort, referring to the Corporate Recovery and Tax Incentives for Enterprises Act pending in Congress.
MSMEs to benefit from RCEP
The DTI, for its part, also revealed the agreement is expected to benefit the country’s micro, small and medium enterprises (MSMEs).
A specific chapter in the agreement is dedicated to the institutionalization of support and cooperation geared towards inclusive growth of MSMEs.
Trade Secretary Ramon Lopez said the Chapter on Intellectual Property (IP) in the agreement will help push the Philippines to become an innovation hub for the region.
“The IP Chapter of RCEP is an important element in promoting the region as the center of economic activities, while complementing the country’s drive to be one of the leading innovation hubs in Asia,” he said.
The commitments and obligations in the IP chapter include harmonizing the protections for the standard suite of IP rights and protection beyond the level of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, including provisions relating to technological protection measures and enforcement in the digital environment. It also includes appropriate criminal procedures and penalties against unauthorized copying of a cinematographic work on a commercial scale.
Filipinos seeking protection of their IPs — including inventions, utility models, industrial designs, and trademarks — within the region standing to benefit as the IP Chapter has provisions to streamline and align procedures such as those relating to electronic filing of applications and making relevant information available online.
“Under the RCEP Agreement, Filipino authors, artists, composers and performers can now expect that their works can be protected and enforced under the same standards in the entire region. Moreover, the provision on collective management organizations could potentially facilitate the collection and transfer of royalties due to them,” said Trade Assistant Secretary and Philippine lead trade negotiator Allan Gepty.
“Equally important is the affirmation in the RCEP agreement of the right to use the flexibilities under TRIPS to address or protect public health concerns, such as compulsory licensing of patented drugs and medicines. This is especially critical in this time of pandemic,” Gepty added.
RCEP will account for 27.8 percent of the world’s trade valued at $10.5 trillion, and 23.6 percent of global inward FDI and 33.5 percent of global outward FDI.