RCEP to facilitate recovery from pandemic

MANILA, Philippines — Economists said the Philippines and other member countries are expected to recover faster from the recession caused by the COVID-19 pandemic with the signing of the Regional Comprehensive Economic Partnership (RCEP) agreement over the weekend.

Frederic Neumann, co-head of Asian economics research at HSBC, said RCEP would account for more than half of the global gross domestic product (GDP) by 2030 and would provide a platform for meaningful integration in the coming years.

Neumann said the new deal also aims to streamline the various overlapping preferential trading arrangements that most RCEP members already have with each other by establishing common trade rules, helping reduce trade costs for businesses.

“The unified rules of origin may help to strengthen regional supply chains in the wake of COVID-19, and provide market diversification opportunities for exporters and importers of intermediate inputs operating within the bloc,” Neumann said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the world’s largest free trade agreement offers wider market opportunities for Philippine exporters and service providers amid the pandemic.

Ricafort said RCEP countries account for more than half of the country’s export market.

“RCEP will definitely help faster recovery of the global economy from COVID-19 and a welcome development in terms of spurring exports and imports,” Ricafort said.

Ricafort said RCEP would boost global trade and economic growth, especially among Asian countries reeling from the adverse effects of the US-China trade war lingering over the past two years.

A total of 15 member countries, including the Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia, and New Zealand, which account for a third of the world’s population and gross domestic product (GDP) signed the RCEP on Nov. 15 after eight years of negotiations.

The new trade agreement covers 2.2 billion people, combined GDP of $26.2 trillion, and $12.4 trillion of total exports and imports for RCEP member countries.

All countries would have to ratify the RCEP within two years before it becomes effective.

Ricafort said the agreement would progressively reduce tariffs in the coming years and eliminate tariffs on at least 92 percent on traded goods.

Ricafort also said the US, through the incoming Biden administration, could revive more free trade agreements such as possibly joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), shifting from more protectionist policies, after the Trump administration pulled out of the TPP in early 2017.

Fitch Solutions Country Risk and Industry Research said the RCEP would simplify rules and procedures within a single arrangement for the many ASEAN ‘plus one’ free trade agreements that currently exist.

Fitch Solutions said the agreement would also solve the problem of ASEAN being saddled with complicated rules spanning multiple FTAs that stipulate different rules for each country.

Southeast Asia as a region has a high level of intra-industry trade owing to its large and growing electronics sector. It would also help strengthen the integration of regional supply chains and benefit participants over the long run.

Moreover, ASEAN economies also stand to gain from increased technical cooperation with advanced economies in the bloc to improve their competitiveness.

“We believe that over the long-term, the positive impact of the trade pact will include increased market access and variety of goods and services for participants, as well as improved prospects for regional economic cooperation,” Fitch Solutions said.