In its editorial on Jan 30, the paper argues that the China-led Regional Comprehensive Economic Partnership (RCEP) may be a better option for the Philippines and other developing nations now that the United States has officially pulled out of the Trans-Pacific Partnership (TPP).
As he promised during the election campaign, United States President Donald Trump has officially removed the world's biggest economy from the Trans-Pacific Partnership (TPP), an international agreement aimed at strengthening trade and investment relations among a dozen countries that signed it, including Japan and Australia.
The Philippines is not among the 12 original signatories to the then America-led TPP, but it had been advised to sign up along with countries like Thailand and Indonesia. Advocates of joining the TPP claimed that the Philippines would benefit from increased trade particularly with the United States, and that its exclusion would mean losing export potential to other emerging markets joining the TPP, like Vietnam.
Experts have pointed to some of our neighbours as among the major losers in the impending demise of the TPP. An earlier World Bank paper, for example, estimated that the TPP could boost Vietnam's economic growth by 10 per cent and Malaysia's by eight per cent by 2030. Singapore is another country that is expected to suffer from the TPP's shelving. Analysts noted that with its heavy reliance on trade, the island-state was to benefit from an increase in services like shipping and trade financing that would have followed a stronger regional and global trade from the TPP.
Vietnam could have benefited greatly from the TPP. Studies had projected that the trade deal would have given the still relatively closed economy tax-free access for its exports of rice, seafood, textiles and other low-end manufactured goods. Malaysia was also earlier tipped to benefit from the TPP as it would give that country's huge palm oil exports access to the US market.
The shelving of the TPP will now benefit China, which can push more aggressively its alternative trade proposal called the Regional Comprehensive Economic Partnership (RCEP). This includes the Asean 10 (Brunei, Myanmar, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam) in addition to China, India, Japan, Korea, Australia and New Zealand-countries already with strong trade links with Asean. It excludes the United States. The RCEP seeks to facilitate trade and investments among countries that collectively account for a third of the global economy and half of the world's population. In terms of merchandise exports, the RCEP will be bigger than the TPP. China alone logs exports of more than $2 trillion (S$2.8 trillion)a year.
At this point, it no longer makes sense for the Philippines to pursue membership in the TPP. It should now focus on the China-led RCEP-a move that the head of President Duterte's economic team can spearhead. As early as last November, Finance Secretary Carlos Dominguez said he personally would like to study the RCEP more closely because it includes the 10 Asean countries; he added that the administration is more open to it than to the TPP.
With the TPP getting out of the picture, Dominguez said the RCEP appeared as the ideal and lucrative market bloc for the Philippines to sustain its economic expansion. This would be more in line with Mr. Duterte's rebalancing of Philippine foreign policy toward regional economic integration with the Asean and North Asia powerhouses China, Japan and South Korea.
Experts believe that focusing on China and the RCEP may be the better option for developing countries like the Philippines. Economists point out that developing countries are better off joining the RCEP to boost their economies through the reduction or removal of tariff and nontariff barriers to trade. This becomes more obvious given Trump's protectionist tendencies of focusing on economic interests at home and his emphasis on local jobs and businesses. These are expected to lead to renegotiations of existing foreign trade agreements, or the imminent return of trade protectionism in the world's biggest economy.
The Philippine Daily Inquirer is a member of The Straits Times media partner Asia News Network, an alliance of 22 news media entities.