THE Senate ratified on Tuesday, Feb. 21, 2023, the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement (FTA) among the 10 members of the Association of Southeast Asian Nations (Asean) and its five FTA partners Australia, China, Japan, New Zealand and the Republic of Korea.
With 20 affirmative votes, one negative and one abstention, the Senate concurred with the ratification of RCEP, which was sponsored by Senate President Juan Miguel Zubiri and Senate President Pro-Tempore Loren Legarda.
“RCEP has been a long time coming. Now that we can see how our neighboring countries have reaped the benefits of joining the agreement, I am confident that we have made the right choice by finally concurring on its ratification,” Zubiri said.
"This will put us on equal footing with our neighbors, rules and policies-wise. We will prevent trade diversion, and we will be giving our industries a fair chance at being truly competitive," he added.
RCEP is the world’s largest FTA by members’ gross domestic product (GDP), as the 15-member bloc accounts for 30 percent of global GDP.
Only Myanmar has yet to ratify the agreement, which came into force on Jan. 1, 2022 for its 10 original parties.
Local business leaders welcomed the ratification of the agreement.
Not convinced
Sen. Imee Marcos, chairperson of the Senate committee on foreign affairs who refused to lead the hearings on the RCEP amid concern that farmers will be badly affected by the agreement, abstained, while Sen. Risa Hontiveros voted against the ratification.
Hontiveros said she is not convinced that joining the RCEP is good and beneficial for the country.
Earlier, farmers and agriculture groups expressed doubt that the government can protect them when imports start flooding the markets due to the reduction of tariff rates.
Advantageous
Zubiri maintained, however, that the implementation of RCEP will go hand in hand with developmental and capacity-building programs of the government, especially for the agriculture sector, which is among the top priorities of President Ferdinand “Bongbong” Marcos Jr.’s administration to strengthen the country’s food security and sufficiency.
He noted that "sensitive" agricultural products such as rice, sugar and onions are not covered by the agreement.
He said the RCEP will also aid in the developmental growth of other industries.
Earlier, the President said RCEP will be advantageous for the country as it will increase the trade that it will bring to its member economies.
The agreement aims to promote greater openness, create a more business-friendly environment, encourage closer integration of economies, and provide a more stable and predictable rules-based system of trade.
The FTA covers about 50.4 percent of the Philippines’ export markets and 67.3 percent of the country’s import sources, according to the National Economic and Development Authority and the Department of Trade and Industry.
To allay the fears of the agricultural sector, the two agencies, in a joint media release in May 2022, said only 15 agricultural commodities representing 33 tariff lines would get lower tariff rates under the RCEP, and these account for only 0.8 percent of total agricultural imports.
On the other hand, the RCEP would bring down import tariffs for Philippine exports such as canned tuna, coffee, coconut water, fruit cocktail, fresh papaya and durian, leather goods, bicycles and ignition wiring sets.
Cebu reacts
Business leaders in Cebu welcomed the ratification, saying that being part of the RCEP agreement will enhance the country’s market access to global trade.
Cebu Chamber of Commerce and Industry president Charles Kenneth Co said: “Based on the Philippine Institute for Development Studies, the Philippines will be importing more electrical and machinery especially from China, Japan and South Korea. RCEP will open up trade with our regional neighbors, so exporters will stand to benefit the most. However, industries that are inefficient will need to upgrade.”
“MVP (Manuel V. Pangilinan) is making a P1 billion investment in vegetable greenhouse farming. Overall, we expect RCEP to be beneficial as foreign direct investments are also expected to come in and create jobs,” Co added.
Melanie Ng, Philippine Chamber of Commerce and Industry-Central Visayas governor, told SunStar Cebu that the trade agreement will translate to the creation of more jobs to support the export market and foster economic growth.
“It's good as it will open up our economy to more suppliers and new markets that represent one-third of the global economy. Filipino consumers will benefit from the increased supply in the form of a wider array of products and possibly at better prices,” said Kelie Ko, president of Mandaue Chamber of Commerce and Industry (MCCI).
“Our export industries must see this as an opportunity, since this opens up new markets for them,” Ko added. “However, they should work double time in innovating and improving their manufacturing processes to be able to compete with the influx of competitors.”
Philexport Cebu executive director Fred Escalona said the RCEP will give exporters the opportunity for market expansion.
He said Cebu stands to benefit from this trade agreement, especially since the province is a major exporter of various creative goods such as furniture.
Raw material sources
Under RCEP, the Philippines will be able to source raw materials and intermediate goods from fellow RCEP countries, process products locally, and then export the products back out to RCEP countries at a preferential agreement.
This is not possible under some of the existing FTAs such as the Asean Japan Comprehensive Economic Partnership and the Philippine Japan Economic Partnership Agreement, which have strict rules of origin that restrict sourcing and export activities, said Senate President Zubiri.
“On an overall scale, RCEP is favorable and beneficial to the Philippines,” said Steven Yu, past president of the MCCI. “Any challenges that we will encounter will be minute compared to the good that it will bring. We will also be challenged to improve ourselves and be competitive with global standards.”
Despite the benefits and opportunities seen in this biggest free trade zone, many are worried about its impact on the country’s agricultural sector whose growth has been sluggish for years.
The anticipated surge in agricultural imports from RCEP nations may affect the country’s local farmers and fisherfolk.
“We need to make our agricultural and fisheries products more competitive and sustainable,” said Ko.
Ng said the public and private sector must work on strengthening the plans and programs for agricultural resiliency and viability, especially for the micro, small and medium enterprises.
However, Yu explained that “the perceived impact on certain segments of the agricultural industry will be absorbed by the greater good that it brings.”
“DA (Department of Agriculture) has many progressive plans and programs that will uplift our capabilities. In time, it will be overcome and still, the benefits outweigh the disadvantages that will redound to the upliftment of the greater good. In times of rising food costs, we will reap the benefits of being part of RCEP,” said Yu.
Zero tariff
The Philippines, according to Zubiri, has secured zero tariff for papaya and durian exports under RCEP--versus 24 percent in the Asean-Korea Free Trade Agreement. Similarly, coffee will enjoy zero tariff in 16 years under RCEP, versus 10 to 12 percent in the Asean-Japan Comprehensive Economic Partnership. In 16 years, RCEP will also have zero tariff for preserved fruits and fruit juices for export to Japan, and for alcoholic beverages for export to South Korea.
"With the growth of our trade in the RCEP region, we can expect a ripple effect in different sectors," Zubiri said. "Goods and services being transacted will have to be mobilized, thus, complementary sectors such as transportation, logistics, warehousing, energy, and even infrastructure will flourish, not to mention attract more investments."
Escalona also raised the challenge of how to optimize the sharing of market intelligence to Filipino exporters.
“The sharing of market intel has been the main concern of RCEP. Thus, that will be the challenge for our trade attaches and market researchers on how to funnel opportunities in their respective markets to our exporters. This can be delivered with speed by Department of Trade and Industry and organizations like Philexport and Foreign Buyers Association of the Philippines,” said Escalona.
Agri sector weighs in
Amid fears on its negative impact on the agricultural industry, DA 7 Director Joel Elumba said the RCEP will be beneficial to the local market and spur the economic recovery of the nation from the coronavirus disease pandemic.
Elumba told SunStar Cebu that the RCEP will facilitate the entry or importation of the much needed farm inputs such as fertilizers and other products into the country at lower tariffs.
“If what enters are farm inputs that are expensive in our place like fertilizers, our farmers will benefit. The raw materials for fertilizers are imported. And if that becomes less expensive when it enters our country under the free trade deal, of course, it will be with regulation that will be imposed by the Philippine government,” he said in Cebuano.
The RCEP will also spur the development of local products and transform them into products that are competitive for exportation.
In Central Visayas, the official said, mango remains a competitive product for export.
Elumba urged all stakeholders to await the implementing rules and regulations and safeguard measures included in the RCEP.
Philippine Association of Meat Processors Inc. president Felix Tiukinhoy also welcomed the Senate’s ratification of the RCEP, saying it will be beneficial to the nation's economy.
"For our industry, it will enable us to export our products to member countries without endangering our presence in the domestic market since there are safeguard measures in RCEP to protect us from unfair and ruinous foreign competition," Tiukinhoy said.
The RCEP was first signed by then President Rodrigo Duterte in 2021.
