The Duterte administration is keen on joining the China-led Regional Comprehensive Economic Partnership (RCEP) rather than the US-led Trans-Pacific Partnership (TPP), the Department of Finance (DOF) said on Monday, citing the most ideal and lucrative market bloc for Southeast Asia.
In a statement on Monday, the DOF said members of Association of Southeast Asian Nations (Asean) that have cast their lot with the TPP are facing an uncertain future as the trade deal is dead in the water given President-elect Donald Trump’s “America first” policy.
The TPP is a trade agreement signed in February 2015 by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam. It is focused on cutting tariffs, lowering the cost of trade, as well as reducing policy restrictions or non-tariff measures (NTM) to encourage free trade.
The TPP was supposed to be the gateway for the Philippines to the US, Chile, Mexico, Peru and Canada.
The Finance department said RCEP appears to be the ideal and lucrative market bloc for Southeast Asia, now that outgoing US President Barack Obama himself appears to have all but given up on his pet initiative TPP following Trump’s upset victory.
The proposed RCEP covers mutual trade between the 10-member Asean and other markets including Australia, New Zealand, India, Korea, Japan, and China. The RCEP block accounts for nearly 30 percent of global trade.
It is projected to encompass a combined gross domestic product (GDP) of about $21.2 trillion. The RCEP is expected to be signed in 2017, if not this year.
In terms of merchandise exports, RCEP is larger than the TPP as China’s exports of $2.3 trillion alone in 2014 are larger than the combined exports of the US ($1.6 trillion) and Canada ($474 billion), the lead members of the TPP.
The RCEP covers trade in goods and services, investment, economic and technical cooperation, intellectual property rights, competition policy, and dispute settlement. It does not cover labor, environment and state-owned enterprises.
However, member countries must first fulfill domestic processes to join the RCEP. In the case of the Philippines, the Senate must ratify the RCEP as a treaty.
Finance Secretary Carlos Dominguez 3rd previously said the Duterte administration is more open to the RCEP than TPP, given its policy of moving the country swiftly towards economic integration within Asean and major trading partners in Asia and the Pacific.
“I personally would like to look at RCEP more closely because that’s the 10 Asean countries, I think. That one, we are more open to. With regard to TPP, that’s being reviewed all over, including in the US. So maybe we’ll put that in the back burner,” Dominguez said.
President Duterte’s China pivot could not have come at a better time, especially with the Philippines chairing the Asean on its golden anniversary as a regional trade bloc next year, the DOF said.
The President earlier announced a rebalancing of the Philippine foreign policy and ordered his Cabinet to move quickly toward regional economic integration with Asean and North Asia’s powerhouses – China, Japan and South Korea.