I started to talk about Regional Comprehensive Economic Partnership (RCEP) last week, and the positive game-changer it will be for a more rapid and widening Philippine economy. The mega trade deal is now in force except in Indonesia, Myanmar, and the Philippines. India pulled out of the deal. The hugeness (1.38 billion population) of India has given it chaotic problems, particularly in agriculture, that won’t soon be fixed.
Myanmar ratified the agreement but is pending acceptance by other members. Earlier, New Zealand and the Philippines have said they won’t recognize the ratification of Myanmar because of the brutal maltreatment of the people by its military leaders. Indonesia has not ratified yet the agreement, but intends to.
For the Philippines, there has been some hesitation about joining RCEP coming principally from some in the agricultural sector, and a few who still think we must protect Filipinos from the big bad world, despite that world experience has thoroughly discredited protectionism as a workable model.
The most successful, largest countries in the world got there by having open economies: the US, China, Japan, Germany, and the UK are but a few. China rose from being the 11th among the world’s economies in 1978 to second—after opening its economy.
Then, look at the closed economies like North Korea protecting their people from the big bad world, thereby leading their people into unbearable poverty. In that country, 60 percent of the people are living in poverty and 43 percent are undernourished. Compare that to South Korea, which is the same race on the same land, but embraced free trade and invested heavily in its export-oriented manufacturing sector to become the 10th biggest economy in the world. Today, South Korea has an income per capita of $32,960 (we are an unacceptable $3,430), while North Korea has approximately $1,200.
All sectors will benefit from us joining RCEP, even agriculture. We have 26 million Filipinos in poverty, struggling just to stay alive. They need jobs. RCEP will help provide those jobs.
RCEP added to the other bills—and don’t forget the lower taxes we now all pay— will bring us into the fold of nations that will jump-start real, substantial growth of the economy for the incoming administration. Ferdinand Marcos Jr. will thank President Duterte and Congress for bringing us into the fold of our neighbors.
Romy Bernardo says it well in his book “Momentum”: “The (RCEP) agreement’s immediate value lies not in the incremental tariff reductions, which may take up to 20 years to implement, but in the promise of seamless production networks among the members who will be tied to common standards, disciplines on intellectual property, rules of origin, customs processes, e-commerce, and competition policy. Within this framework of stable and predictable rules, the Philippines could aspire to become a regional manufacturing and services hub, thereby creating much needed domestic jobs.”
RCEP provides preferential arrangements (e.g., market access) in 14 countries with one set of rules for all. Joining RCEP will result in improved export competitiveness of those Philippine products where we can have a competitive advantage, such as automotive parts, processed food, garments, electronics, and much else. And, important to our future, export of our agricultural products to the 14 countries.
Zero or reduced tariff rates for imported raw materials and intermediate goods will result in a lower cost of production for businesses, particularly producers and manufacturers, while simplified rules and customs procedures will mean less administrative cost for business and trade.
The micro-, small-, and medium-sized enterprises, which we must support, will be assisted through a platform of institutionalized support and cooperation.
It extends into the service sector by providing opportunities in the financial sector, telecommunication sector, business services, and IT-BPO. That will result in a more stable and enhanced environment for e-commerce and a digital economy. Essential in today’s modern world.
The business sector, including the foreign chamber organizations, has recognized the value and importance of RCEP, and the urgency to join it. They have also urged the Senate to ratify it as soon as possible.
By adopting the standardized competition policies, and establishment of competition authorities in RCEP, the members of RCEP will be assured of a fair business environment. For Philippine companies, RCEP opens the doors to a much wider market. It also gives them better protection of their intellectual property rights. This is a tipping point for the country. We either join the world and succeed, or stay behind cloistered bars, staring in longingly at our wealthier neighbors as we sink into isolated oblivion.
More next week.
Email: wallace_likeitis@wbf.ph
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