Senate okays PH entry into world’s largest trade pact
MANILA, Philippines — The Senate approved late Tuesday night the country’s entry to the world’s biggest free-trade bloc, a move cheered by major business groups on Wednesday as it will boost investment and jobs.
Twenty senators approved Resolution No. 485, which expressed Congress’ ratification of the Regional Comprehensive Economic Partnership (RCEP) agreement, with one negative vote cast by Sen. Risa Hontiveros, and one abstention by the President’s sister, Sen. Imee Marcos.
RCEP includes the 10 members of the Association of Southeast Asian Nations (Asean) along with China, Japan, South Korea, New Zealand and Australia. India withdrew from the agreement in 2019 over concerns about cheap Chinese goods entering the country, but may opt to join at a later date.
The agreement to lower tariffs and open up the services trade does not include the United States and is viewed as a coup for China in expanding its influence.
The RCEP area covers 50.4 percent of the Philippines’ export markets, 67.3 percent of the country’s import sources, and 58 percent of the foreign direct investments that came here.
Launched in 2012, the deal was signed in November 2020 and took effect in January 2022 with most member countries ratifying the pact. The country’s participation in RCEP was signed by former President Rodrigo Duterte in September 2021, but to be official, it must be ratified by the Senate.
Before Tuesday’s approval by the Senate, the Philippines was the last holdout to the trade deal.
Trade Assistant Secretary Allan Gepty said the next step is to send the document of ratification to the Secretary General of Asean.
“Upon receipt of the instrument of ratification, 60 days thereafter, the RCEP agreement will be effective in the Philippines,” he said.
President Marcos on Wednesday lauded the Senate’s ratification of the deal.
“Being part of this regional free trade agreement holds immense potential for promoting economic growth and development across the Asia-Pacific and brings numerous opportunities for our country, particularly in the areas of agriculture, manufacturing, and micro, small and medium enterprises (MSMEs),” the President said in posts on his social media pages.
“I think for us it’s a game changer,” Economic Planning Secretary Arsenio Balisacan said.
“Foreign investors look for places to go where there are clear rules, particularly trade facilitation, investment policies, and which are followed and not subject to change at any time,” Balisacan told reporters. “By being a member we are saying to the world, ‘we are ready for this, we play by the rules of the game, and your investment is safe with us.’”
The Joint Foreign Chamber of the Philippines (JFC) highlighted the benefits that it will bring to the country.
“The Philippines’ inclusion in the bloc further expands the network of foreign markets accessible to Philippine exports. It reinforces the decision of many of our members to invest in the Philippines and will attract more investment from our home countries,” said the JFC, a coalition of the American, Australian-New Zealand, Canadian, European, Japanese, and Korean chambers of commerce.
The JFC added that RCEP also builds on the significant economic reforms that have been implemented recently, citing in particular the Tax Reform for Acceleration and Inclusion (TRAIN) Act and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, among others.
The coalition, which represents more than 3,000 member companies with around $30 billion worth of investments in the Philippines, also cited recent legislations such as the Electric Vehicles Industry Development Act and the Philippines Creative Industries Development Act that complement RCEP.
MSMEs to benefit
The Makati Business Club said the pact would also help Philippine companies expand overseas and accelerate job creation, adding there were “adequate safeguards” to protect local industries.
“We also believe competition will result in better local players and better products and services for Filipinos,” it said.
The Management Association of the Philippines highlighted the deal’s benefits to local exporters that will benefit from easier market access to other RCEP countries.
“RCEP will help MSMEs expand market access, especially with more liberal rules of origin on traded products to qualify for trade concessions,” said the association.
“It will also provide broader and cheaper alternative sources of inputs, and reduce costs of doing business through improved trade facilitation, especially customs and trade clearance procedures,” it noted.
Two garment trade groups also expressed optimism about RCEP.
“However, there should be this tall order to industries, especially to the garments and apparel (firms) to seriously shape up [or] otherwise be shipped out,” Foreign Buyers Association of the Philippines president Robert Young, whose trade group exports $1.5 billion worth of garments and apparels annually, said in a message sent to the Inquirer.Bigger market
The Confederation of Wearables Exporters of the Philippines pointed out that the value of exports in RCEP countries amounted to $315 million in 2022, 19.3 percent of which were wearable goods.
“It is for this reason that we would like to emphasize the importance of the Philippines’ inclusion in the [RCEP]. The numbers [and] data speak for itself,” it said.
The National Economic and Development Authority and the Department of Trade and Industry (DTI) had said the ratification of RCEP was needed to boost the economy.
Import tariffs for key Philippine exports will go down, according to the DTI, and allow a number of Philippine products to gain enhanced market access through lower tariffs, among them canned tuna, coconut water, coffee, fruit cocktail, ignition wiring sets, leather goods and bicycles.
For example, it said that under RCEP, Philippine exports of preserved pineapple and pineapple juice to China, Philippine chocolate to Japan and fresh papaya and durian to South Korea will be slapped lower tariff rates and eventually be duty-free after a certain number of years.
—WITH REPORTS FROM JEROME ANING, AFP AND INQUIRER RESEARCH
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