The Philippines could lose $ 100 million in exports within the Regional Comprehensive Economic Partnership (RCEP) region with the implementation of the mega trade deal, according to a report by the United Nations Conference on Trade and Development ( UNCTAD), who nevertheless said the gains of joining him far outweighed the losses.
While RCEP will boost trade among signatories in general, the Philippines – along with Cambodia, Indonesia and Vietnam – could pull the short end of the stick, as some business activities are expected to be shifted to other territories with more. better tariff concessions.
“The reason is the negative effects of trade diversion,” the UN committee said, although it clarified that on balance, this does not mean RCEP members had better withdraw from the commercial agreement.
“Some of the exports from these economies should be diverted to other RCEP members because they have obtained relatively higher tariff concessions,” he said to explain the trade diversion effect. A tariff concession eliminates customs duties, making trade between RCEP members cheaper.
According to Unctad’s calculations, the impact of the trade pact on Philippine exports to the RCEP region is down 0.1%.
This figure is lower than that of other affected countries. UNCTAD notes a decrease of 0.3 percent for Indonesia, 1.2 percent for Vietnam and 3.9 percent for Cambodia.
Lopez disputes the claim
Commerce Secretary Ramon Lopez, however, considers Unctad’s assertions “unlikely”.
“Will the team recheck.” This [RCEP] should have the new concessions for the Philippines, âhe told BusinessMirror.
He reiterated his point in previous congressional hearings that the Philippines would lose a lot if it belatedly accedes to the trade deal, which takes effect in January 2022.
âWe are losing the gains going forward. It’s not just about trade, it’s about investments. And to note, trade in services which is our strength, âhe told BusinessMirror in a text message.
He added: âAnd again, Agri has the necessary exclusion. Walang nabago [Nothing changed] And yet they have even gained better market access.
Despite the negative impact on exports, Unctad said RCEP members are best served by joining the trade deal.
“Even without taking into account the other benefits of the RCEP agreement in addition to tariff concessions, the trade creation effects associated with participation in RCEP mitigate the negative effects of trade diversion,” he explained. Trade creation for the Philippines, for example, is expected to reach $ 200 million in the RCEP region.
Trade among the 15 signatories has already reached around $ 2.3 trillion in 2019, but the economic deal is expected to increase overall exports within RCEP by 1.8% or $ 41.8 billion in the future.
“This would result from trade creation – as lower tariffs would boost trade between members by nearly $ 17 billion – and trade diversion – as lower tariffs within RCEP would redirect closely valued trade. of $ 25 billion from non-members to members, “the UN said. the group said.
Japan is seen as the biggest winner, with Unctad calculating a 5.5% increase in exports to RCEP, mainly due to trade diversion effects. This translates into a $ 20.2 billion increase in exports.
After Japan, Unctad also foresees “substantial positive effects” of the trade agreement on exports to RCEP by Australia, China, Korea and New Zealand.
Removal of tariffs
The regional bloc agreement covers several areas of cooperation, including tariff concessions; RCEP is seeking to eliminate 90 percent of their tariffs.
âUnder the RCEP, trade liberalization will be achieved through progressive tariff reductions. While many tariffs will be eliminated immediately, others will be gradually reduced over a period of 20 years, ânoted UNCTAD.
The report states that “the tariffs that will remain in effect will mainly be limited to specific products in strategic sectors, such as agriculture and the automotive industry.”
Under the RCEP, the percentage of zero tariff lines in agriculture, natural resources and manufacturing is 75 percent, 90 percent and 91 percent, respectively.
As a result, UNCTAD calculates an average tariff reduction for agriculture of 12.8 percentage points, natural resources by 4.8 percentage points and manufacturing by 8 percentage points.
RCEP signatories include the 10 member states of the Association of Southeast Asian Nations (ASEAN) and their free trade agreement partners: Australia, China, Japan, Korea and New Zealand. The pact was signed last November.
One of the largest economic agreements in the world, the RCEP covers about a third of the world’s gross domestic product and international trade.
It is expected to go into effect next month, but the Philippines has yet to ratify the deal to allow participation.