A megatrade deal
For years, the Philippines has been part of active negotiations for a regional trade agreement poised to become the largest economic bloc in the world. Expanding on the 10-member Association of Southeast Asian Nations (Asean), it would also include the six major neighboring countries with which the economic bloc already has existing free trade agreements (FTAs): China, Japan, South Korea, Australia, New Zealand and India. Called the Regional Comprehensive Economic Partnership (RCEP), the megaregional FTA would cover nearly half (3.6 billion) of the world’s population, $11.5 trillion or 30 percent of world trade, and $27.5 trillion or nearly a third of world economic output or GDP.
Just a few years ago, before Donald Trump became president of the United States, it was a US-dominated megatrade agreement called the Trans-Pacific Partnership (TPP) that was considered the next big thing in trade discussions. Straddling both sides of the Pacific Ocean, it was to cover a smaller number (12) of economies, an even smaller share of world population (800 million), but about the same volume and share of total world trade and output. TPP exemplified the Obama presidency’s “pivot to Asia,”but was abruptly scrapped by his successor, who came into office renouncing the major trade agreements of the United States in general. In so doing, President Trump is seen to have yielded America’s prominent economic influence in Asia to China, RCEP’s largest member. After all, even as this “Asean-centric” trade deal was initiated and led by the Asean countries, China’s sheer size makes it the group’s de facto dominant player.
Severely reduced by the US pullout, the other 11 TPP countries (Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam) went ahead anyway and signed in 2018 the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). They kept the bulk of the TPP provisions, including detailed intellectual property standards and protections, but suspended or revised 22 provisions pushed vigorously by the United States earlier. Meanwhile, the countries that are part of both RCEP and CPTPP, namely Australia, Japan, Malaysia, New Zealand, Singapore and Vietnam, stand to gain the widest economic linkages by virtue of membership in both.
For the Philippines, TPP had been emerging as a costly missed opportunity because unlike our neighbors Singapore, Malaysia, Brunei and Vietnam, we were left out of the vast economic opportunities membership therein promised. Worse, we were bound to lose both existing and potential trade and investment interests in the TPP economies, especially the United States, to nearby similar economies that were already in it, especially Malaysia and Vietnam. The American pullout was thus somewhat of a blessing in disguise, as it gave us a reprieve on these disadvantages of not belonging.
RCEP will be something else. Like TPP, it advances the cooperation agenda well beyond liberalizing trade in goods, into the area of trade in services and investment policy, while pushing for even higher degrees of trade liberalization. It will also address nontariff measures that impede trade, including customs procedures and regulatory restrictions that get in the way of trading specific commodities and services. But observers and analysts believe that the “main battleground” in the RCEP will be trade in services and investment liberalization, where the Philippines remains among the most restrictive, especially in the latter, where the Constitution is a barrier.
Market access provisions — that is, liberalized trade and trade facilitation to open up more foreign markets to our products — seem to be of little consequence to our country, where lack of trade has been more of our own making. That is, our inability to export more is not so much because foreign markets block our products, but because we simply can’t get our act together to be able to produce more exports and tap the vast income and job-generating opportunities from selling beyond our shores.
RCEP is expected to be finally realized in the year ahead. But there’s much homework we still need to do if we are to reap its benefits at all.
