Why does PH need to be part of RCEP? DTI's Pascual explains
Published Feb 26, 2023 08:16 am
What is RCEP and how will the Philippines benefit from it?
The Marcos administration has hailed the Senate’s ratification of the Regional Comprehensive Economic Partnership (RCEP) agreement despite the objection of some groups, particularly the agricultural sector, against it.
Prior to the ratification of the RCEP, various groups especially farmers and fisherfolk, and other agricultural groups have expressed their disapproval of the mega trade deal being touted by the government, citing the possibility of having the same sad experience the Philippines had when it joined the World Trade Organization (WTO).
In a press briefing last Friday, February 24, Department of Trade and Industry (DTI) Secretary Alfredo Pascual said that in his business meetings during President Ferdinand “Bongbong” Marcos Jr.’s presidential visits to partner countries, several investors have been looking at the Philippines as a production hub from which they will export to other countries.
*DTI Sec. Alfredo Pascual answer the questions of media during briefing on the Regional Comprehensive Economic Partnership (RCEP) on Friday, Feb. 24, 2023 at the Centennial Hall, Manila Hotel. RCEP is a free trade agreement (FTA) between the 10-member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and its five FTA partners (Australia, China, Japan, New Zealand and Republic of Korea). (Photo by Ali Vicoy)*
According to Pascual, these investors have been waiting for the Philippines to join the RCEP, said to be a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement among the ASEAN member states and ASEAN’s free trade agreement (FTA) partners namely Australia, China, Japan, South Korea and New Zealand.
Now that the Philippines is formally joining the RCEP, with the Senate’s concurrence to the ratification, last week, Pascual said the Philippines can enjoy the perks of being part of one of the world’s largest free trade deal.
“The concurrence of the Senate on this important trade deal comes at a time when our President has been diligently promoting the country as a prime investment destination in the region. He supports our message that the Philippines is open for business and that we are able to provide a conducive and enabling environment for investments,” Pascual said.
“RCEP is also critical in attracting more investments in the country, investments that will spur our country’s industrialization which in turn will create more sustainable and high-paying jobs for our people,” the DTI chief pointed out.
RCEP, he said, is a more modern trade agreement because it expands the coverage of existing ASEAN FTAs by including emerging trade issues such as e-commerce, competition and intellectual property.
The DTI also said RCEP is more comprehensive, because it covers trade areas that were not covered previously in existing ASEAN FTAs such as small, medium enterprises (SMEs) and government procurement.
RCEP will also provide more stability and predictability to business and investors in most areas and promotes transparency and cooperation, he said, as it also provides an open, inclusive and rules-based trading system that can increase trade and investment in the region.
Thus, under RCEP, the Philippines stand to gain from zero or lower import tariff applied to Philippine exports such as processed foods and garments; benefit from enhanced trade facilitation provisions that make cross-border trade simpler and faster; and more stable market access for services by binding existing regulations.
With RCEP, skilled Filipino professionals and business personalities would be given preferential treatment especially for those in the legal, construction, engineering and banking services. RCEP will also give a development push to the country’s MSMEs in the global value chain.
It is also important to note, Pascual said, that RCEP would give the Philippines wider sourcing of raw materials which Philippine manufacturers could not enjoy before. Under this agreement, there is zero or lower import duties on their inputs as well as more flexibility in the rules of the FTA on product manufacturing.
RCEP, according to the DTI, also provides economic and technical cooperation support that the country can avail to strengthen its competitiveness.
One industry the DTI is looking at is the Philippines’ garments and textile industry which hopefully, could be revived under the RCEP.
“The Philippines lost to other countries in the area of garments-making precisely because we have no textile mills who supply the fabrics needed. And if you export to Japan, you still need 40 percent local content to avail of tariff reduction benefits. We could not meet that target,” Pascual explained.
“Now, with RCEP, we can buy the raw materials from China, for example, do the garments making work here. Even though the domestic content is less than 40 percent, we can export to Japan, to South Korea, and avail of the preferential tariff, and we will be competitive,” he stressed.
“So, hopefully, we can revive those industries we lost because we do not have full supply of raw materials,” the DTI chief reiterated.
Pascual also reiterated his assurance that the RCEP will not directly affect agriculture as there would be no changes to the tariffs for the agricultural products the Philippines produce.
Nevertheless, with or without the RCEP, the government is committed to make the country’s agricultural sector achieve high productivity and eliminate smuggling activities in the Philippines.
“At the end of the day, at least 90 percent of the Philippine economy will benefit from RCEP,” Pascual stressed.
*DTI Sec. Alfredo Pascual answer the questions of media during briefing on the Regional Comprehensive Economic Partnership (RCEP) on Friday, Feb. 24, 2023 at the Centennial Hall, Manila Hotel. RCEP is a free trade agreement (FTA) between the 10-member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and its five FTA partners (Australia, China, Japan, New Zealand and Republic of Korea). (Photo by Ali Vicoy)*
According to Pascual, these investors have been waiting for the Philippines to join the RCEP, said to be a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement among the ASEAN member states and ASEAN’s free trade agreement (FTA) partners namely Australia, China, Japan, South Korea and New Zealand.
Now that the Philippines is formally joining the RCEP, with the Senate’s concurrence to the ratification, last week, Pascual said the Philippines can enjoy the perks of being part of one of the world’s largest free trade deal.
“The concurrence of the Senate on this important trade deal comes at a time when our President has been diligently promoting the country as a prime investment destination in the region. He supports our message that the Philippines is open for business and that we are able to provide a conducive and enabling environment for investments,” Pascual said.
“RCEP is also critical in attracting more investments in the country, investments that will spur our country’s industrialization which in turn will create more sustainable and high-paying jobs for our people,” the DTI chief pointed out.
RCEP, he said, is a more modern trade agreement because it expands the coverage of existing ASEAN FTAs by including emerging trade issues such as e-commerce, competition and intellectual property.
The DTI also said RCEP is more comprehensive, because it covers trade areas that were not covered previously in existing ASEAN FTAs such as small, medium enterprises (SMEs) and government procurement.
RCEP will also provide more stability and predictability to business and investors in most areas and promotes transparency and cooperation, he said, as it also provides an open, inclusive and rules-based trading system that can increase trade and investment in the region.
Thus, under RCEP, the Philippines stand to gain from zero or lower import tariff applied to Philippine exports such as processed foods and garments; benefit from enhanced trade facilitation provisions that make cross-border trade simpler and faster; and more stable market access for services by binding existing regulations.
With RCEP, skilled Filipino professionals and business personalities would be given preferential treatment especially for those in the legal, construction, engineering and banking services. RCEP will also give a development push to the country’s MSMEs in the global value chain.
It is also important to note, Pascual said, that RCEP would give the Philippines wider sourcing of raw materials which Philippine manufacturers could not enjoy before. Under this agreement, there is zero or lower import duties on their inputs as well as more flexibility in the rules of the FTA on product manufacturing.
RCEP, according to the DTI, also provides economic and technical cooperation support that the country can avail to strengthen its competitiveness.
One industry the DTI is looking at is the Philippines’ garments and textile industry which hopefully, could be revived under the RCEP.
“The Philippines lost to other countries in the area of garments-making precisely because we have no textile mills who supply the fabrics needed. And if you export to Japan, you still need 40 percent local content to avail of tariff reduction benefits. We could not meet that target,” Pascual explained.
“Now, with RCEP, we can buy the raw materials from China, for example, do the garments making work here. Even though the domestic content is less than 40 percent, we can export to Japan, to South Korea, and avail of the preferential tariff, and we will be competitive,” he stressed.
“So, hopefully, we can revive those industries we lost because we do not have full supply of raw materials,” the DTI chief reiterated.
Pascual also reiterated his assurance that the RCEP will not directly affect agriculture as there would be no changes to the tariffs for the agricultural products the Philippines produce.
Nevertheless, with or without the RCEP, the government is committed to make the country’s agricultural sector achieve high productivity and eliminate smuggling activities in the Philippines.
“At the end of the day, at least 90 percent of the Philippine economy will benefit from RCEP,” Pascual stressed.