IF you want to be realistic about it, international trade has been a misery story. Are we going to make it personal in the Philippines? Two words: Ferdinand Magellan. He was not looking for the healing waters of Binaliw’s spring.
Brave explorers set out in search of paid adventures by opening up trade routes and seeking to exploit locations for raw materials. Christopher Columbus made landfall in the Caribbean in 1492. Over the next 100 years, between 80 and 95%, depending on location, of the native populations of the “New World” were killed by smallpox, measles, influenza, chickenpox, bubonic plague, typhus, scarlet fever, pneumonia and malaria.
This was offset by the fact that these “natives” were brought into Christianity and that syphilis was a “New World” disease that Christopher Columbus brought back to Europe.
The Trans-Pacific Partnership was supposed to bring “free trade” to the Pacific. Trump killed the deal on the grounds that “free trade had to be fair trade” and felt the United States got the short run. In a sense, he was right, since the huge US market would be open to smaller Asia-Pacific countries. But countries like the Philippines would have been the biggest losers since the power in the TPP agreement went to multinational companies that did not have to respect local legalities. The Philippines previously wanted to join the TPP in 2016 under Aquino.
China, excluded from the TPP, then put in place a comprehensive and progressive agreement for the Trans-Pacific Partnership, which included both China and the United States. The CPTPP was practically dead when the United States withdrew and again countries like Peru opposed the enormous legal power of the multinationals.
We now have China’s initiative, the Regional Comprehensive Economic Partnership (RCEP), with 15 countries based in Asia, from South Korea/Japan to Australia/New Zealand.
Signed in November 2020 and effective from January 2022, the agreement is “intended to reduce tariffs and red tape. It includes unified rules of origin across the block. It also prohibits certain tariffs.
Note this very closely. RCEP “does not establish unified labor and environmental standards or commit countries to opening up services and other vulnerable areas of their economies.” It is not as comprehensive as the TPP/CPTPP, which makes it productive and not just a “progressive” feel-good element of excessive bureaucracy.
What it does is “eliminate around 90% of tariffs on imports between its signatories within 20 years of its entry into force and establish common rules for e-commerce, commerce and Intellectual property”. It’s probably a bargain for the area depending on who doesn’t like it.
Australia’s centre-right former Prime Minister Malcolm Turnbull said: “This is a very old-fashioned trade deal. This is unambitious,” as RCEP “ignores issues of labor, human rights and environmental sustainability.”
In contrast, Kishore Mahbubani, Singapore’s former representative to the UN, said “the future of Asia will be written in four letters, RCEP”. Singaporean Prime Minister Lee Hsien Loong called it “a big step forward for our region” and a sign of support for free trade and economic interdependence.
Former Indonesian Trade Minister Suparmanto said RCEP could increase Indonesia’s exports to signatory countries by 8-11% and boost investment in Indonesia by 18-22%.
India pulled out of the deal in November 2019, citing fears of dumping manufactured goods from China and agricultural and dairy products from Australia and New Zealand. There are those who say the Philippines should follow India’s lead by not joining, but their arguments are hollow.
The Philippines does not produce substantial dairy products and never will due to weather/climate. We already import them from Australia and New Zealand. Moreover, most of what we import from China – electrical and electronic equipment, machinery, nuclear reactors, boilers, iron and steel, and iron or steel articles – does not compete with locally produced products.
This is a long-term trade agreement designed to take place in stages. We must not be left behind. President Duterte ratified the pact last September, but Senate approval is needed for it to take effect. This should be a top priority when the Senate reconvenes.
Email me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock market information and technical analysis provided by AAA Southeast Equities Inc.
