RCEP: World’s Largest Trading Bloc & What Does it Mean for the Philippines?

By Dennis Pabelico

I attended an AmCham virtual session last September 9, 2021 where the topic was RCEP: World’s Largest Trading Bloc and What Does it Mean for the Philippines?. The first speaker was Allan Gepty, Assistant Secretary of DTI. RCEP stands for Regional Comprehensive Economic Partnership. RCEP consists of 10 ASEAN member states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. It has 5 FTA (Free Trade Agreement) partners that include Australia, New Zealand, China, Japan, and South Korea.

RCEP is important as ASEAN is led by FTA, which strengthens ASEAN centrality and maintains a regional balance of power. According to ADB, the signing of RCEP among its 15 members provides the crucial momentum to redouble their strong commitment to pursuing free trade and expanding open and inclusive trade and investment regimes to enhance economic recovery beyond the COVID-19 pandemic.

The RCEP region consists of the following:

• 28.2% of total GDP or $23.9 trillion
• 27.8% of total trade or $10.5 trillion
• 23.6% of global inward FDI
• 33.5% of global outward FDI
• 29.7% of total population or 2.2 billion

The RCEP region represents the following:

• 50% of global manufacturing output
• 50% of global automotive output
• 70% of electronic products
• 28% of Global Value Chain (GVC) Trade volume
• Main GVC hubs of Japan, China, and Korea
• 60% GVC for electrical/machinery, petroleum/chemicals, textile/apparel, metal and transport equipment
• 35% contribution to global exports and electronics machineries

The Philippines stands to gain in RCEP because it offers:

• Cheaper costs
• Convenience
• Competitiveness
• Complementation

The signing of the RCEP agreement is a welcome development because it is a strong demonstration of the region’s commitment in ensuring a stable and predictable regional economic architecture amidst uncertainties and the growing trend in protectionism worldwide.

The second and last speaker was Francis Mark Quimba. With his analysis on the RCEP participation, he mentioned the following:

1. Exports will increase for the East Asian partners of ASEAN (Korea, Japan, China) and Singapore

2. The Philippines and Vietnam would be winners because of the decline in trade costs

3. Fear of missing out: If an economy fails to ratify the agreement despite the others doing so, the economy will experience a decline in exports and GDP.

Recommendations:

1. Start the conversation now on RCEP. We cannot be the last economy to ratify because we will miss out.

2. The success of any trade agreement depends on utilization (for example, reduce trade costs)

3. Innovation is important. Support private sector innovation and exploration of new products and new markets.

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About the author:

Dennis is an avid collector of authentic NBA jerseys. He also sells some of them on his online store. Despite his busy work schedule, he makes sure that he goes to the gym for a workout and an aerobic class at least once a week. During his free time, he reads spiritual books and attends meditation classes.