The Department of Trade and Industry (DTI) has again called on the Senate to approve the Philippines’ participation in the Comprehensive Regional Economic Partnership Agreement (RCEP) soon, billed as the world’s largest trade deal to come into effect. effective January 1, 2022..
âNot joining RCEP or delaying our participation will disrupt this momentum. Investments will shift away from countries that do not participate, and there will be capital flight and lost investment opportunities, âCommerce Secretary Ramon Lopez said in a statement on Tuesday.
âThis may have an impact on the country’s ability to attract foreign direct investment, especially compared to our neighbors in Asean (Association of Southeast Asian Nations) who are already part of RCEP. It may also affect other international trade commitments that we pursue, âLopez added.
The Philippines signed RCEP in November last year along with the rest of ASEAN as well as Australia, New Zealand, Korea, Japan and China. It included India until the latter withdrew from the negotiations.
As the Constitution provides, the Senate must approve free trade agreements such as RCEP. Congress has already ended its sessions for 2021 but the DTI hopes the Senate will put approval of the trade deal high on its agenda when it resumes next year.
RCEP participants together represent 30 percent of the global economy.
However, Philippine exports to countries under a China-led mega trade deal are estimated to fall initially by $ 100 million as they lose to other member countries with better trade concessions, according to estimates. of the United Nations Conference on Trade. and development (UNCTAD).
However, the benefits of membership will always outweigh the potential damage to the local economy, according to the latest UNCTAD report on the trade effects of RCEP.
The UNCTAD report, A New Center of Gravity, said Japanese exports would benefit the most from trade concessions, with their outgoing shipments set to increase by $ 20.2 billion. It is then followed by China and South Korea, which are said to have an overall increase of $ 11.2 billion and $ 6.7 billion, respectively.
“On the other hand, RCEP’s tariff concessions lead to lower exports for Cambodia, Indonesia, the Philippines and Viet Nam,” the report says, noting that it is the impact of the diversion. trade, in which other RCEP countries would prefer to order goods from other members.
“For example, some of the Chinese imports from Vietnam will be replaced by imports from Japan due to the tighter tariff liberalization between China and Japan,” he said, noting a drop of 1, $ 5 billion in exports from Vietnam.
However, trade diversion would have occurred even if the countries were not part of RCEP, UNCTAD said. In essence, the UN body said it was always better to join the deal because of other RCEP benefits, such as foreign direct investment and technology sharing.
“The great potential of the RCEP agreement in creating trade for member economies also implies that even for members who may initially be adversely affected by trade diversion effects, it is better to be in the RCEP agreement than out of the deal, âUNCTAD said.
“Not only because being part of the agreement creates additional trade that can compensate for losses, but because it strengthens economic integration and the benefits that can flow from it, such as foreign direct investment, technology sharing , structural transformations, among others, “he added. added.
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