Senate President Juan Miguel Zubiri made a promise earlier this month that upon resumption of sessions, the Senate would prioritize pieces of legislation that would have a profound impact on national interest. Critical to economic recovery is the pending ratification of the Regional Comprehensive Economic Partnership (RCEP).
The Philippines is one of 15 signatories to the RCEP signed in November 2020 after eight years of deliberations on the merits and the provisions of this free trade agreement. Other signatories include the members of the Association of Southeast Asian Nations (Asean), as well as South Korea, China, Japan, Australia, and New Zealand.
The agreement has the potential to bring significant economic benefits to its signatories—promoting greater openness, creating a more business-friendly environment, encouraging closer integration of economies, and instituting a stable, predictable, and rules-based system of trade.
Specifically for the Philippines, the RCEP is crucial to our shift to an investment-driven economy and to enable our industries to prosper in a huge ecosystem that will be tapped to address the ongoing economic challenges and the lingering effects of the pandemic to sustainable economic growth.
Former president Rodrigo Duterte did, in fact, give his executive ratification of the RCEP in September 2021, and forwarded it to the Senate for deliberation and concurrence. However, our senators deferred its ratification, seeing a need for more safeguards to protect our embattled agriculture sector.
Certainly, the agriculture sector needs all the help and support of the government. But in the RCEP hearings at the Senate, no less than the National Economic and Development Authority and the Department of Trade and Industry said parallel efforts—taking advantage of the RCEP to boost our economy on the one hand, and improving the productivity and competitiveness of our agriculture sector on the other—are possible and will prove to be more beneficial.
Indeed, the Philippines stands to gain much from its participation in the RCEP. It is important to note that our cosignatories make up roughly 50.4 percent of our export markets, 67.3 percent of our import sources, and 58 percent of the sources of foreign direct investments.
More importantly, we can zero in on the export markets, given the Philippines’ long-standing trade deficit which, as of January 2023, stood at $58.3 billion. The RCEP is an opportunity to gain greater access to a wider export market, increase export production, and lessen our reliance on imports by encouraging more investments—especially in the manufacturing sector.We acknowledge that given our import-dominated total trade (imports account for 60.3 percent of trade), there is a possibility that the free trade agreement, through relaxed tariff rates, might cause larger import volumes, and widening the trade deficit instead of narrowing it. Still, it is prudent to work toward gaining access to export markets. The potential benefits of this far outweigh the risks. Imagine—RCEP will enable our local industries to get into the larger economies of participating countries. Philippine industries will be driven to be more competitive, ultimately redounding to a stronger economy.
And with lower tariffs in those export markets, our local industries will be encouraged to expand external trade. The RCEP will enhance investment opportunities through improved promotion, protection, and facilitation. In turn, an investment-led growth will create higher quality jobs and more employment opportunities for Filipinos, all contributing to resilient economy and better quality of life for more people.
Any misgivings that our senators might have on RCEP should by now have been assuaged.
The upgrade negotiations for the Asean-Australia-New Zealand Free Trade Area, concluded in November 2022, is yet another positive development for the Philippines that we should exploit. Now that critical economic legislation such as the amendments to the Public Service Act are in place, we are in a better position to make ambitious investment commitments.
We must show the world that we mean business when we say we are a good place to invest in, and that our industries are ready to competitively engage the economies under the RCEP free trade agreement.
Further delays in the ratification of the RCEP will not be a good signal.
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Dindo Manhit is founder and CEO of the Stratbase Group.