CITING its benefits to the economy, the House of Representatives on Tuesday adopted a resolution supporting the immediate ratification of the Regional Comprehensive Economic Partnership (RCEP) agreement.
The plenary adopted House Resolution 728, after the House Committee on Trade and Industry approved the same at the committee level.
In his manifestation, economist and Albay Rep. Joey Sarte Salceda expressed his support for the ratification of the RCEP, provided that “we can address certain concerns about domestic competitiveness.”
According to Salceda, the tariff reduction commitments are almost negligible, for only 14 tariff lines with import values in 2021, amounting to a total of USD131.5 million, are involved.
“None of these tariff lines are for products where a domestic industry is under threat. Live swine and live poultry are the closest I could think of, but it is not practical to import them in any significant way,” he said.
This pitch, however, does not impress Sen. Chiz Escudero, who separately said, while grilling RCEP negotiators in the Senate plenary, the exclusions are no comfort for the local sectors, because under the treaty, the Executive Department or Congress can change “tomorrow, next week, next month” the exclusion lists embodied in the annex of the RCEP. Salceda believes, though, that domestic competitiveness will not suffer as a result of the tariff reductions.
“The issue that could affect domestic competitiveness is someplace else—particularly in the simplification of rules of origin,” he said.
“Certain products with a certain level of regional value content—or how much of its inputs are from the region—qualify for preferential tariff treatment. That is particularly relevant for complex products where inputs are from RCEP partners,” he added.
What RCEP proposes basically is that inputs in complex products from the RCEP partner countries will be treated as domestic input, said Salceda.
“Therefore, depending on regional value-content rules, many of these complex products involving inputs from RCEP countries could be tariff-free when imported within these countries,” he said.
Concerns
However, Salceda noted his two key concerns, including the level of preparation of local industries as well as the Bureau of Customs and the Tariff Commission.
“The first is what are steps being taken to prepare Philippine industries for these changes? While raw agricultural products are not subject to tariff reduction, imported processed bananas, mangoes, and pineapples from RCEP countries could be zero-tariff under these arrangements, if my reading is correct,” he asked.
“The second concern is administrative. Rules of origin are a customs valuation concern principally. Is our customs administration system prepared for these changes? What are the steps being taken at the Bureau of Customs and the Tariff Commission to prepare for these changes?” he added.
If these concerns can be addressed, Salceda said the Philippines can better allay the fears of those who believe that Philippine industries, especially agriculture, will be hurt by the RCEP.
On November 15, 2020, the Philippines signed the RCEP agreement, a trade agreement that covers trade areas for goods, services and investments, sustainable growth, and business environment involving the 10 member states of the Association of Southeast Asian Nations and its five other free trade agreement (FTA) partners, namely Australia, China, Japan, New Zealand, and Republic of Korea.
For her part, Marikina Rep. Stella Luz Quimbo, also an economist, said MSMEs can maximize the benefits from the RCEP.
“RCEP has a specific chapter on MSMEs. In this chapter there are provisions towards integration of MSMEs into the global value chain and trade facilitation provisions, which can help MSMEs,” she said.
“[There is also] language on providing information and promoting cooperation so that MSMEs are empowered and therefore they can maximize their benefits from RCEP,” Quimbo said.
She also noted a chapter on electronic commerce and financial services that, again, is expected to contribute to the digitalization of MSMEs in the country.
“If we don’t proceed with this, we will be left out, our current export—about half—go to RCEP States. If we do not join and ratify [RCEP] it will affect our competitiveness,” she said.
For his part, Department of Trade and Industry Assistant Secretary Allan B. Gepty cited two studies showing RCEP’s benefits to the country’s real GDP.
“There are 2 studies [one showing that] by 2031 it is expected that the Philippines will experience a positive 1.93 percent [while the other study said that] joining the RCEP can contribute to a 2.02 real GDP growth,” he said.
“[But] the cost of not joining RCEP, we will suffer a negative .26 reduction in our real GDP. If you are going to quantify it, we will be missing the opportunity of increasing our real GDP by an average 2 percent,” he added.
For his part, Speaker Martin Romualdez said by immediately ratifying the RCEP agreement, the Philippines can sooner benefit and take the advantages of this mega-trade deal that could attract more foreign investors, create more job opportunities, and curb the unemployment and poverty rates in the country.
In the resolution, authors noted DTI Secretary Alfredo Pascual’s statement that the tariff liberalization under RCEP will make preferential market access easier for Philippine exporters, thereby allowing the country to capitalize on potential market gains.
“Due to various FTAs that the Philippines entered into in the Asia-Pacific Region, there is overlapping of the numerous bilateral FTAs involving different sectors, with varying levels of commitment for tariff reduction and conflicting technical trade rules,” the resolution read.
The RCEP is expected to address this debacle.
According to Romualdez and the other authors, the benefits that the RCEP agreement will bring to the Philippines “far outweigh the risk, as it will promote greater openness, create a more business-friendly environment, encourage closer integration of economies, and provide a more stable and predictable rules-based system of trade.”
Designed as the framework for economic and trade cooperation in the Asia Pacific Region, the RCEP integrates and optimizes the economic and trade rules, including the changing digital landscape that affects intellectual property rights, trade facilitation measures, electronic commerce, and cross-border trade.