RCEP ratification should be priority for senators

WHEN they convene next week, senators should prioritize ratifying the Regional Comprehensive Economic Partnership (RCEP). That trade agreement already went into effect in January 2022, but despite endorsements from the previous government, along with warnings of opportunity losses, the Philippines has not yet done so.

Fortunately, Secretary Alfredo Pascual of the Department of Trade and Industry (DTI) reaffirmed the new government's commitment to RCEP. His predecessor argued that it could bolster gross domestic product (GDP) growth by two points. The GDP growth target for the year was downgraded to between 7 percent and 8 percent.

The Management Association of the Philippines (MAP), whose president was Mr. Pascual before his appointment to DTI, has also recommended ratification to President Ferdinand "Bongbong" Marcos Jr. "Exclusion from RCEP would be immensely costly to our economy and our people," MAP said in a joint statement with the Makati Business Club and the Financial Executives Institute of the Philippines.

"We can anticipate a significant decline in our exports to RCEP countries, which now account for nearly two-thirds (64 percent) of our total exports, as trade with us will logically be diverted to fellow members. It would also make us even more unattractive to job-creating investments than we already are, as these would best locate in RCEP member countries to take advantage of free access to its vast market."

Once ratified by all 16 member countries, RCEP will be the world's largest free trade area. That will cover half of the world's population, and contribute 30 percent of global GDP, as well as 25 percent of the world's total exports. These figures suggest that the Philippines cannot afford to miss out.

In fact, the Philippines already lags in trade pacts compared to others in Asean. That is the Association of Southeast Asian Nations, a regional bloc of 10 countries that include the Philippines. In a recent MAP meeting, Mr. Pascual said the Philippines only has 10 free trade agreements, while Singapore has 27, Malaysia 17 and 15 each for Thailand, Indonesia and Vietnam. He noted that without RCEP and other trade agreements, the Philippines will not be an attractive location for export-oriented enterprises.

Changing mindset

Resistance to RCEP and free trade seem misplaced. Some worry that lowering trade barriers will open the floodgates to imports and ruin domestic industries. But they fail to appreciate that RCEP and bilateral trade agreements also open markets to Filipinos, particularly micro, small and medium enterprises (MSMEs) seeking new opportunities.

For now, the country's top export is electronic products. But those are mostly locally assembled goods of large firms that use imported raw materials that are re-exported as finished products. There are better opportunities that can be explored, like exporting agricultural goods, such as mangoes and coconuts, as well as locally manufactured items, like furniture and others. Many of the firms supplying those are MSMEs, which account for 99.6 percent of all registered businesses in the Philippines.

Granted, RCEP and trade alone are not enough to unlock untapped potential. The country also needs to resolve many other issues. For instance, the Philippines needs more infrastructure, like farm-to-market roads, sea ports, cold chain facilities, among others. Also, existing laws, like the Magna Carta for MSMEs, should be revisited, to ensure that provisions, like those facilitating access to capital, are implemented better. But most of all, policymakers and business leaders need to change their mindset and become export-oriented.

Regrettably, importing is a default option for most Filipinos. But those are, in economic terms, leakages. Exports, on the other hand, are injections to the economy, as they bring in income from abroad. With the country's trade balance being negative and getting worse, boosting exports not only closes the trade gap, but also increases GDP.

Understandably, importing goods seems easier for those with money to spend. Making products or sourcing them locally can be challenging in any developing country. Still, the Philippines has abundant natural resources and talented Filipinos, who have proven their competitiveness in various fields abroad when given a chance.

We just have to believe in ourselves. If we can manage that, opportunities like RCEP would be a no-brainer.

Source: TheManila Times