The Philippines and The Trans-Pacific Partnership (TPP)

Immediately after taking his seat in the White House, President Donald Trump signed a presidential memorandum to formally withdraw US participation from the TransPacific Partnership (TPP). In a statement released last Jan. 23, President Trump said he is not supporting the TPP as it will only “undermine the US economy and its independence.” As an alternative, the American Chief Executive introduced alternative strategies which he claims will “put America first and bring jobs back to American shores.”

The TPP was originally planned as the most comprehensive free trade agreement between 12 nations that border the Pacific Ocean. It included Australia, Brunei, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.

With the America’s withdrawal from the trading bloc, many thought that the TPP was dead in the water. Recently, however, the remaining member countries announced that TPP will push through with or without US participation. It is a clear sign of America’s decreasing importance in world trade.

The eleven remaining members have a collective GDP of $ 9.963 trillion, big enough to challenge the economies of China and India. It further boast of 470 million affluent consumers.

The TPP deliberately leaves out China and India since its ultimate objective is to balance the dominance of these two superpowers in international trade. TPP is designed to give other economies a fair chance to secure their fair share of global exports.

At the heart of the TPP is the commitment of each member country to lower trade barriers on 18,000 products, including contentious agricultural crops. In as far as non-trade barriers are concerned, TPP mandates each of its members to install express

Our participation in the TPP will help us gain a stronger foothold in global trade.

customs clearing mechanisms for importations coming from fellowTPP members. It further prohibits them from levying duties for online transactions.

All these make it easier and cheaper to trade among TPP members. They become each other’s preferred trading partners, in effect.

When fully implemented, inter-trade among TPP economies is seem to increase by $146 billion a year. Along with boost in trade comes job creation, enhanced innovation, increased productivity, competitiveness and greater prosperity for all.

Those excluded in TPP, like the Philippines, are seen to lose out on this windfall of economic gains.

NON-TRADE ADVANTAGES OF TPP MEMBERSHIP

Apart from the economic benefits of TPP membership, member countries are also compelled to comply with the basic tenets of good governance.

For one, TPP members are required to join the United Nations Convention Against Corruption (UNCAC). Participation in UNCAC necessitates strict compliance with its anti- corruption code of conduct including the criminalization of government officials involved in bribery and conflicts of interest.

TPP also mandates its members to adhere to strict human rights standards. As such, it imposes stiff consequences for those who utilize child labor and practice discrimination in the workplace.

As far as intellectual property is concerned, members are obliged to adapt advanced policies to guard

against of copyright, trademarks, and patent infringements.

Member countries are further committed to establish an “investorstate dispute settlement mechanism.” This gives foreign investors the right to sue its host country for treaty violations. It is meant to provide investors with basic protection from discrimination, uncompensated expropriation of property, denial of justice, and right to transfer capital.

All requisites considered, membership in TPP accelerates nations to become responsible, progressive, and aggressive exporters within the framework of good governance. It is a win-win situation.

PHILIPPINES PARTICIPATION

Although the Philippines was keen to join the TPP even during its conceptualization in 2005, it was not invited (nor considered) to join the group due to the prohibitive provisions of our Constitution relating to foreign investments.

See, embedded in our constitution are protectionist statues that go against the very tenets of a liberalized trading bloc. In particular, the 1987 constitution prevents foreign investors from owning majority stake in businesses relating to agriculture, fisheries, public utilities, education, private practice, and media, among others. On top of this, foreign ownership of land is prohibited.

Exclusion from TPP will be disastrous for our export industries on two counts.

First, since our key trading partners — Japan, Singapore and Canada, are signatory countries of TPP, not being part of the bloc weakens our competitive position in these markets. Second, the Philippines exports practically the same products as Vietnam and Malaysia. These include semiconductors, electronic products, food and beverages, furniture, garments, chemicals, auto and aerospace parts. Not being part of TPP puts Filipino-made products at a price disadvantage considering the duty-free privilege enjoyed by Vietnam and Malaysia. Duties can range anywhere from 2% to 100%, depending on product category.

The 10-point economic agenda of the Duterte administration calls for the amendment of the Constitutional restrictions that relate to foreign investments. While economic Charter change has yet to be earnestly deliberated upon in Congress, many are optimistic that it will come to pass. This should remove the obstacle to our inclusion in TPP.

Last week, DTI Secretary, Mon Lopez announced that he is reviving our application into TPP. It is doing so with the help of Japan, a strong member of the trading bloc, which is endorsing our application.

The initiative was applauded by local business groups as well as foreign chambers of commerce. Not only will our participation in TPP preserve our existing export markets, it will allow the Philippines to gain a stronger foothold in global trade, a scenario that will benefit Filipino manufacturers, traders and consumers alike. More importantly, inclusion in TPP prevents existing manufacturers based in the Philippines from moving to Vietnam.

The Philippines is currently a signatory to ASEAN, APEC, the World Trade Organization and the East Asian Community Trading bloc. Unfortunately, none of these treaties carry the same weight and scope of benefits as the TPP. For the Philippines to remain competitive and for it to sustain is upward trajectory in economic development, membership in TPP is fundamental.

We applaud Sec. Lopez for being forward thinking and taking this initiative.