Last push for RCEP, but trade deal on hold

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Economic leaders, including the current and future Commerce Secretary, are making a final push for ratification this week of the Regional Comprehensive Economic Partnership (RCEP), but its fate in the Senate remains uncertain.

Senator Panfilo Lacson noted that the “two-thirds vote” required for treaty ratification “may be a tall order in the current makeup of the Senate,” as he pointed to a general sense of “reluctance” given the uncertainties as to whether the Philippines was competitive enough to engage the other members of the trading bloc.

However, he was quick to clarify that “at least it’s my own opinion which may not affect that of at least 15 others”.

Reluctance on the basis of competitiveness issues was to be reinforced by President-elect Ferdinand “Bongbong” Marcos Jr.’s remarks last week that he would prefer to wait for RCEP until it had finished reviewing it and that he is convinced that the Philippine agricultural sector can stand up to the members of the bloc.

However, Socio-Economic Planning Secretary Karl Kendrick Chua urged senators to vote in favor of ratification, stressing that it will benefit the agricultural sector and the country as a whole.

To further improve the agricultural sector, the National Economic Development Authority (Neda) said the country should join RCEP and pursue parallel efforts to address structural problems in the sector.

During a dialogue with members of Samahang Industriya ng Agrikultura (SINAG), Chua explained the greater benefits that the agricultural sector and the country could reap if the Philippines joins RCEP. Chua was joined in the dialogue by Secretary of the Department of Trade and Industry (DTI), Ramon Lopez, and officials from Neda, the DTI and the Department of Agriculture.

While the Chief of Neda acknowledged the concerns of the sector regarding importation, he explained that importation is a temporary measure that the government needs to take to improve agricultural productivity.

“Hurry up”

“The economic team lobbied for the adoption of three liberalization laws that will attract a lot of foreign direct investment. But if we limit our intervention by not joining RCEP, we will not reap the full benefits of all the reforms we have pushed and are pushing for. By not joining RCEP, we lose so many other opportunities. Today, countries are looking for the next best source of agricultural and non-agricultural products due to the Russian-Ukrainian conflict. Time is running out and we have no time to waste,” Chua said.

He added, “We hope that the Senate will urgently ratify RCEP this week, given its urgency and the great benefits to the country.”

RCEP is a free trade agreement between the 10 members of the Association of Southeast Asian Nations (ASEAN), together with China, Japan, South Korea, Australia and New -Zealand. This covers approximately 50.4% of the Philippines’ export markets and 67.3% of the country’s import sources.

President Duterte has already ratified the RCEP agreement on September 2, 2021. However, it still requires the approval of Senate Resolution No. 963, in accordance with the constitutional requirement that this requires Senate approval. .

Joining RCEP will preserve 98.1% of tariff lines, which corresponds to 228 products or $16.9 billion in imports. Only 15 agricultural products representing 33 tariff lines will see their tariff rates drop. They represent only 1.9% of total tariff lines and only $132 million or 0.8% of total agricultural imports. These products will be affected since the RCEP rates for these items are generally lower than the most favored nation rate and lower than the ASEAN+1 rate.

The Philippine Institute of Development Studies (PIDS), in December 2021, estimated that participation in RCEP could lead to a 10.47% increase in the country’s exports and a 2.02% increase in gross domestic product. (GDP) real. Factors that enable this include lower transaction costs due to wider supply of raw materials for manufacturing sectors and inputs for agricultural production, the PIDS said.

Root causes of problems

While conceding that there are other problems in the agriculture sector that need urgent solutions, Chua said the solution is not to stop RCEP but to address the root causes of inefficiency in the sector. .

The problem with the agricultural sector is not funding but also how best to allocate resources to improve productivity, he explained.

“Even if we have funds for the sector, if we misuse them or allocate them incorrectly, or if we put them only in production inputs and not in support services or mechanization or seeds to high returns, we can spend the same amount and get little return.Our support for agriculture will have to shift from providing subsidies, which we have been doing for decades, to providing public goods and support services. That’s really how I think we can improve productivity,” Chua said.

Pascual’s opinion

Philippine Management Association (MAP) President Alfredo Pascual said he agreed with Commerce Secretary Ramon Lopez that RCEP ratification should not be stopped because the trade deal is safe for agriculture.

In a televised interview Friday night, Commerce Secretary-designate Alfredo E. Pascual said the regional economic deal is secure, mainly because no new sensitive products have been included in the regional trade deal.

“Yes, this is one of the arguments why we can move forward with the Senate ratification of RCEP because the impact on the agricultural sector is not as imagined,” Pascual said. .

Indeed, Pascual underlined, “the MAP that I lead today and that I will lead until the end of June has taken a position in favor of the RCEP”.

The Senate is running out of time

The Senate is still poised to firm up a consensus on whether to ratify RCEP in its remaining plenary agenda before Congress adjourns from June 4 to July 24, after which the 19th Congress will take place on July 25.

From the outset, however, Senator Aquilino Pimentel III stressed that “action on RCEP depends on the sentiment of the majority in the Senate”, despite Marcos Jr’s comments on the wait.

When asked if the Senate should still put RCEP on its plenary agenda, Lacson replied:

“It’s not really about whether or not the new leaders want RCEP to pass or not.”

On the contrary, Lacson said, “it rather indicates that a good number of senators have reservations about ratifying the measure in plenary, mainly because of our country’s apparent lack of competitiveness to be a co-signer of RCEP.” He admitted that “for my part, I share this reluctance”.

As previously endorsed by Malacanang for Senate ratification, the objective of launching RCEP negotiations was to “achieve a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement” between ASEAN members and their foreign partners, Lacson said.

The new trade chief also pointed out that reviews have already been done on the regional economic agreement and that it is only a matter of “bringing all the stakeholders together and agreeing on what constitutes a real obstacle and what which is simply misunderstood at this point”.

The DTI aims to submit its full statement on this issue when the Senate resumes deliberations on RCEP this week.

In addition, Lopez said they would provide a document on the regional economic agreement as part of their incoming administration briefing materials with Commerce Secretary-designate Pascual.

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