The Federation of Free Farmers (FFF) has rebuffed the claim by business groups that the country will lose its export markets if the Senate does not endorse the Regional Comprehensive Economic Partnership (RCEP) trade treaty.
Recently, the country’s local and foreign business groups banded together to push for the Senate concurrence to Malacanang’s ratification of RCEP in Sept. last year. The business groups warned that exclusion from RCEP would result in the country’s “significant decline in exports to RCEP countries” since “trade will logically be diverted to fellow members.” The garment industry also raised fears that they would lose orders and investments if the Philippines remains outside RCEP.
But the FFF, in a statement, countered that RCEP is basically a consolidation and not a replacement, of several free trade agreements (FTAs) among ASEAN countries and between ASEAN and – separately – China, Japan, South Korea, Australia and New Zealand. These existing FTAs will continue to operate alongside RCEP, and provide essentially the same preferential tariffs and trade arrangements that are available under RCEP.
As such, FFF National Manager Raul Montemayor said, “We will not lose any competitive advantage by being outside RCEP. For example, the tariffs on our banana exports to China under the ASEAN-China FTA will be the same as China’s tariffs under RCEP. Our garment exporters can continue selling their products to Japan and South Korea at the same tariffs as their competitors from RCEP member-countries. This is true for almost all other goods.”
Montemayor also downplayed claims that local manufacturers will find it harder to secure their raw materials if the country snubs the RCEP. He added that these inputs will not become cheaper or more accessible merely because of RCEP membership. On the garments industry, Montemayor noted that RCEP rules of origin will not be critical since the Philippines currently sends 75 percent of its exported products to non-RCEP countries
The FFF stressed that Philippine membership in RCEP - by itself - will not convince foreign investors to put up business locally, since they can enjoy the same preferential tariffs in other RCEP countries. “Investors will still shy away from us unless we fix our power, communications, traffic, and other problems.” said Montemayor.
The FFF reiterated that joining RCEP now is ill-advised since many sectors, particularly in agriculture, are unprepared for open competition. It noted that the business groups pushing RCEP have themselves acknowledged the need for safety nets for vulnerable sectors and have urged government to “assist those adversely affected meaningfully and effectively, to allow them to achieve competitiveness or adjust to alternative products or livelihoods”. The FFF prodded the Senate to ensure these measures are emplaced first, and not “put the cart ahead of the horse”.
Meantime, the Department of Trade and Industry said in a separate statement warned of economic impact of the delay in ratification on the mega trade deal.
DTI Secretary Ramon M. Lopez highlighted that RCEP agreement would support the Philippines’ inclusion in global value chains, improve economic efficiency and jobs creation.
“It is not just a simple trade agreement that provides enhanced market access and stable business environment. It is a strategic tool to sustain the region’s economic advantage. RCEP is expected to promote economic efficiency of member states, linking their strengths in manufacturing, technology, agriculture, and natural resources, and it will reinforce the global value chain (GVC) network, which the Philippines is very much a part of.”
The Trade Secretary noted that most economists and trade experts are one in saying that the Philippines stands to gain economically from the agreement, from lower trade costs, higher factory gate prices, increase in exports, increase in real GDP growth rate, reduction of poverty incidence, and enhance competitiveness of industries.
Lopez also warned that a delay in ratification would hamper job creation and economic activity, as trade and investments would be diverted away from the country to competitors within RCEP. Furthermore, exclusion from the trade bloc would erode the Philippines’ export competitiveness.
“As other countries in the region enjoy the preferential treatment arising from enhanced market access, wider sourcing of raw materials and strengthened and transparent trading systems, the existing linkages of the Philippines to the global value chain may deteriorate as investors and businesses look to other countries for better economic environment and opportunities. Even our exports could become less competitive, including electronics, which account for 62 percent of our exports, and even agricultural product exports,” the Trade Secretary said.
Sec. Lopez also stressed that consultative processes with sectoral stakeholders were followed over the course of negotiating the Agreement, noting that safety nets and flexibilities were available under RCEP, and that sensitive products were excluded from tariff liberalization.
Amidst the concerns raised by a group of farmers, Secretary Lopez emphasized that the RCEP agreement provides vast opportunities for the agricultural sector, ranging from enhanced market access, trade facilitation measures, time bound consultation in addressing trade issues to more investments in research and development in agricultural sciences and even manufacturing.
He also clarified that highly sensitive agricultural products for the Philippines are excluded from the country’s Schedule of Commitments. “This means that these products are still protected by tariffs,” Lopez clarified.
The RCEP already entered into force on 1 January 2022 for Australia, New Zealand, Brunei Darussalam, Cambodia, China, Japan, Laos, Singapore, Thailand and Vietnam, with Australia as an original party. The Republic of Korea will enter on Feb. 1, 2022.