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Trans-Pacific treaty to trim tariffs, boost trade – DTI
MANILA, Philippines — Allan Gepty remembers it all too well. In 2014, when then US president Barack Obama paid the Philippines a visit, he told then president Benigno Aquino III to consider enlisting the country in the Trans-Pacific Partnership (TPP). Aquino promised to study the offer.
As soon as Obama left the archipelago, Gepty, at the time a deputy director general for the Intellectual Property Office of the Philippines, received a phone call from his principal.
Gepty was instructed to examine the intellectual property chapter of the TPP, evaluate if the Philippines can comply with it, and study how it may affect IP development here.
At the time, the Philippines had just been removed from the US watch list of countries that violate IP rules and regulations. For 20 years since 1994, the country had been flagged as a hotspot for pirated optical media, counterfeit bags and contraband cigarettes.
Years later, the US would withdraw as a founding party to the trade deal and the TPP would be renamed the Comprehensive and Progressive Agreement for TPP or CPTPP. The Philippines would also stay out of the US watch list with improvements in its IP framework.
Gepty now serves as an assistant secretary for the Department of Trade and Industry (DTI) and may lead the negotiations in acceding the Philippines to the CPTPP.
In February, Trade Secretary Ramon Lopez sent a letter of intent to New Zealand, the depository nation of the CPTPP, to inquire about the process of participating in the trade deal.
In this renewed bid to sign the CPTPP, the DTI identified five product groups that the Philippines can ship to CPTPP economies: automotive parts, agricultural goods, garments, processed food, including meat alternatives, and electronics.
The CPTPP, signed by Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, makes up roughly 14 percent of world trade. If the Philippines hops on, it will be the first time for the country to engage Canada, Chile, Mexico and Peru in an export deal.
At present, the four markets apply tariff rates ranging from zero to 18 percent on products made from the Philippines. On the contrary, the Philippines slaps just up to 10 percent duty on imports from Canada, Chile, Mexico and Peru.
As such, the CPTPP parties will bear the brunt of bringing down their tariffs for Philippine goods, especially farm produce and clothing items, which are taxed at maximum rates.
“So given this, joining the CPTPP could offer us unique opportunities to engage Canada, Chile, Mexico and Peru,” Gepty told The STAR.
According to the Philippine Statistics Authority, exports to CPTPP parties as a group slipped by a five year average of 1.4 percent to $18.11 billion in 2020, from $19.18 billion in 2016.
On the contrary, shipments to Canada, Chile, Mexico and Peru improved by 3.3 percent during the period. Further, exports were growing by about $83 million a year from 2016 to 2019, before the pandemic slashed it to $998.01 million, from a peak of $1.39 billion.
“Of all the signatories in the CPTPP, the Philippines has no free trade agreement with Canada, Chile, Mexico and Peru. They are important trading partners,” Gepty said.
“We need to also enhance our market access in these countries and expand our opportunities in them, [as] these four countries alone account for around 240 million population. In simple terms, this means new markets [and] new opportunities for our SMEs [small and medium enterprises]. This is why the CPTPP is important,” Gepty said.
For meat alternatives, SMEs like Worth The Health (WTH) can capitalize on the CPTPP not just to ship their food items, but also to find investment partners, as they try to develop their industry by meeting the demand here and abroad.
WTH co-founder and CEO Stephen Michael Co said he would use the CPTPP to look for investors who may want to share their best practices in preparing plant-based food.
“With the ease of trade, the money will also flow, whether it’s an alternative protein company in Canada investing locally or sharing intellectual property. Maybe we can even secure orders for whole manufacturing or toll manufacturing,” Co told The STAR.
Garment makers, on the other hand, demand the government to develop the textile industry first before committing to another trade deal. They said they will keep on losing the race for apparel contracts without a domestic supply for fabric.
Robert Young, president of the Foreign Buyers Association of the Philippines, said efforts should be centered on bagging orders from traditional markets like the United States to propel garment exports back to pre-pandemic level of $1 billion.
“Even if we are able to penetrate [new markets], we cannot offer right now the right products at the right price and the right quantity,” Young told The STAR.
Last year Philippine exports dipped by about 10 percent to $63.87 billion, from $70.92 billion in 2019, and contributed to the overall decline of the economy at 9.6 percent.
Whether the CPTPP will benefit domestic industries remains to be seen. However, one thing is for sure: the government needs to fill in gaps in the supply chain for exporters, especially SMEs, to gain from the CPTPP, or any trade deal for that matter.