The Philippines Officially Joins the Largest Free Trade Pact in the World. But at What Cost?
On Tuesday, February 21, 2023, the Senate ratified the Regional Comprehensive Economic Partnership (RCEP), making the Philippines the final country to join the agreement among our neighbors. The Upper House voted to concur the ratification just after two days of deliberation, led by sponsors Senate President Juan Miguel Zubiri and Senate President Pro Tempore Loren Legarda. The Senate voted 20-1-1. Opposition Senator Risa Hontiveros was the only one to oppose while Senator Imee Marcos was the only other member to abstain.
The RCEP had been one of the Marcos administration and its economic managers' top priorities but critics are saying that the trade bloc could have negative effects on our local agricultural product. What does the RCEP do for the country and why is it a cause for concern for local producers?
LOOK: The economic managers welcomed the approval of the @senatePH resolution concurring in the ratification of the Regional Comprehensive Economic Partnership (RCEP) agreement on February 21, 2023. pic.twitter.com/UWZOLgAMmD— Department of Finance (@DOF_PH) February 21, 2023
What is the RCEP?
The RCEP is a mutual trade agreement between 10 members of the Association of Southeast Asian Nations (ASEAN). Countries like Australia, China, Japan, South Korea, and New Zealand are part of the deal, as well.
The objective of the RCEP agreement is to "establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership." Its main goal is to facilitate the expansion of regional trade and investment to stimulate global economic growth. The deal is expected to impact roughly 30 percent of the global gross domestic product. With it comes tariff elimination for close to 92 percent of goods in the long run.
National Economic and Development Authority Secretary Arsenio Balisacan has long been an advocate of the RCEP. It is positioned as a way to attract investors for foreign capital and should also improve access for agri-based exports. Balisacan had also explained that it would drive the country's local economic development moving forward.
This agreement should also enhance trade balance for sectors like electronic equipment, metal, oil, gas, vegetables, mineral products, rice, and machinery, among others, according to a study by economist Caesar Cororaton. The economist's research forecast that the RCEP would generate about 1.4 million jobs by the year 2031.
The RCEP, however, has not passed without staunch criticism. Opposition from farmer groups and rights advocates from the agricultural sector have persisted, warning of possible displacement for our local producers. Others are saying that the RCEP would lead to additional agricultural imports and gains from the trade bloc would be minimal at best.
Hontiveros, for instance, had stressed that the country is already reaping the benefits from other agreements. During the deliberations, she quoted the work of United Nations Conference on Trade and Development senior economist Rashmi Banga, saying that the Philippines' goods trade balance would be impacted by the resolution. According to the research, the country stands to lose $264 million (approximately P14.6 billion) and $58 million (roughly P3.2 billion) million of tariff revenues annually. Apart from these, the opposition senator said that more than 100 local organizations has opposed the trade bloc agreement.
Senator Marcos, on the other hand, noted that even India hasn't signed on to the measure. India, we may recall, withdrew from the agreement in 2019 over concerns about Chinese goods.
She explained that the deal would have adverse effects on our local agriculture industry. The President's sister had sounded the alarm over our vulnerable sectors. Liberalization measures like rice tariffication, she said, would only result to a 40 percent decrease in farmers' income. Chances are, farmers would likely sell their goods in a free market marred by competition from stakeholders from advanced economies.