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Metro Manila (CNN Philippines, November 16) – The Philippines can officially tap into a broader market for its exports more easily, as it joined the world’s largest trading bloc on Sunday that many hope will help in the recovery of economies devastated by the coronavirus pandemic.
The Secretary of Commerce, Ramón López, signed on behalf of the country the Regional Comprehensive Economic Association Agreement or RCEP, an agreement with 14 other states that allows simpler cross-border trade that covers a quarter of world production.
The 10 ASEAN member states signed the agreement, which will facilitate the Philippines’ import and export to and from Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand and Vietnam. Neighbors Australia, China, Japan, South Korea and New Zealand also joined the free trade agreement, which was signed Sunday in a virtual signing ceremony.
The RCEP, the product of eight years of negotiations between the parties, provides guidelines on trade in goods and services, investment, intellectual property, electronic commerce, public procurement and competition. It was concluded at a time of global recession in the midst of a pandemic, when economies are recovering from lockdowns that stifled tourism, jobs and profits.
Expected earnings
López said the Philippines will benefit through “better exchanges and investments, greater transparency, integrated regional supply chains and strengthened economic cooperation” with the RCEP signatories.
The agreement must be ratified by the member states. For the Philippines, López said the RCEP should be adopted by President Rodrigo Duterte and agreed with the Senate, a process that he hopes will be completed by 2021.
RCEP will provide “open, inclusive and rules-based trade and investment” in all member states. The rules simplify and make importing and exporting cheaper by lowering customs duties, liberalizing tariffs, and granting import licenses, to name a few.
The RCEP agreement, which spans 20 chapters, also provides general guidelines on financial services, telecommunications, professional services, and the movement of travelers.
López said the agreement will improve market access for locally made clothing, auto parts and agricultural products such as canned foods and canned fruits. He explained that the RCEP will provide a margin to safeguard local farmers through an “exclusion list” that will limit the entry of cheaper variants of agricultural products and other “sensitive” items from abroad.
The RCEP also includes provisions to boost small-scale businesses and their entry into the regional value chain, which should support growth.
The Philippines is seen to benefit greatly from RCEP, a market that receives half of the country’s exports and provides 61% of imports. It is also the source of 11.4% of foreign direct investment.
Regional momentum
The trade deal is seen to unlock faster growth in the region, which has now risen to $ 23.9 trillion, representing 28.2% of the global economy.
“The RCEP will boost world trade and economic growth, especially among Asian countries reeling from the adverse effects of the US-China trade war that has raged for the past 1-2 years,” said the RCBC economist Michael Ricafort.
In a separate comment, HSBC Global Research said the trade deal will increase the block’s share to 50% of global production by 2030.
India has pulled out of the RCEP, a potential market of more than 1 billion people, but can always join the bloc at a later date, according to the framework.
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