First of two parts
THE recently concluded Trans-Pacific Partnership (TPP) took center stage in the discussions of business magnates and state leaders during the last leg of the Asia-Pacific Economic Cooperation (Apec). Still, questions on the best route to achieve regional integration, amid competing initiatives—the US-led TPP and the China-initiated Regional Comprehensive Economic Partnership (RCEP)—remain.
What is clear, however, is that the Philippines won’t be introducing any changes to the Constitution during the Aquino administration to bend to the ambitious standards of the TPP.
During the first session of the Apec CEO Summit at the Makati Shangri-La Hotel, President Aquino addressed the Philippines’s stance on the TPP, making a blanket statement that any change in the Constitution at this time is out of the question.
“There’s still some debate whether the Constitution has to be rewritten, the idea of economic provisions and term limits…at this point in the administration, I think it’s too late for me to consider any of that. And, of course, I don’t want them to consider the issue of term limits,” Mr. Aquino said. “But if it can be demonstrated that it will lead to common good, then that is subject to review or can be made to be reviewed.”
Considering Apec’s overarching priority to realize free and open trade by 2020, the business sector and the government emphasized the need to achieve regional integration through the Free Trade Area in the Asia Pacific (FTAAP), the initiative in Apec, where both the US and China are major players.
According to Asian Development Bank (ADB) President Takehiko Nakao, regional integration is a step toward creating an open and free investment and trade regime, and has been the primary engine of growth for previously closed economies. Nakao said the steady rise of China over the years is a result of the gradual opening of its trade and investment policies.
Integration initiatives, such as the US’s TPP and China’s RCEP, will keep the momentum of growth, not just of China, but the regional economy, as well, Nakao said.
According to the Pacific Economic Cooperation Council, both initiatives can be sources of future growth, as the Asia-Pacific region is bound for its slowest growth this year to 3.2 percent—the slowest pace for the region since 2009.
This overarching goal of regional integration—or achieving the FTAAP—can be achieved in a number of agreements. However, considering the existing geopolitical ambition of both China and the US to rewrite the rules of trade, much of the focus has been on TPP and RCEP.
Government heads and business magnates across the Asia-Pacific region—save for those already included in the TPP—have been careful in espousing support of one over the other, and simply pushed for free trade.
“The reason that Asean and Southeast Asian countries are now growing fast is because of an open trade and investment regime; there’s no question about it, an open trade and investment regime, and that is the most important reason China started growing fast, and Myanmar and Vietnam also. How we can maintain this momentum in that regard, the TPP and other initiatives like RCEP are so important,” Nakao said.
The Apec Business Advisory Council (Abac), representing the private sector in Apec, acknowledged the significance of this objective.
“Our work over the years has been underpinned by the conviction that an open and predictable environment for the free flow of goods, services and investment can generate new growth opportunities. A free-trade area of the Asia Pacfic provides the comprehensive framework for achieving this environment. The completion of the TPP is a significant step toward this, as we build pathways to the FTAAP,” said Abac Chairman Doris Magsaysay-Ho after the Abac members of the 21 Apec economies wrapped up their meeting last Monday.
The private sector’s support toward general regional economic integration has been clear, as they sent a letter of support to the Apec leaders, encouraging ratification of the TPP to those member-economies that are party to it.
“One of the things we achieved under [Doris Magsaysay-Ho’s ] chairmanship is writing a letter going to the leaders of the countries encouraging those that are involved to ratify the TPP through their own government systems. That is a key forerunner to the bigger opportunities, which involves all the Apec countries, which is the FTAAP,” said Abac Australia representative Sir Rod Eddington in anews conference.
Abac members said that, while not all Apec members are part of the TPP, the conclusion of this expansive trade pact will eventually be beneficial to all Apec members, with the expectation that the trade advantages will trickle down to nonmembers through FTAAP.
But Abac representatives pointed out that the FTAAP would also be achieved through China’s RCEP, another “building block” toward regional integration.
Other building block-regional trade agreements like the Pacific Alliance are also regional-integration initiatives. But considering the geopolitical friction between the US and China, as reflected in each country’s attempt to rewrite the rules of trade, the Asia Pacific’s focus has been on the two competing initiatives—the TPP and RCEP.
During the Apec Summit Leaders’ Week, business leaders and government heads gave measured responses on whether the best route would be through an alliance with the US or with China.
Those included in the trade pact, however, are optimistic as to the gains they will realize once the governments ratify the TPP.
In an Apec CEO Summit session on trade, FedEx COO David Cunningham noted that moving toward an open and freer regional economy would be a good reprieve from the rise in protectionism observed in the past few years following the global financial crisis.
“If you look at trade over the past six years, you’ve seen increase in protectionism and decrease in trade, that’s where TPP is so important in terms of moving forward because, just within this past seven months, in the G-20 [Group of 20], there are over 190 protectionist measures that have impacted trade flows. That’s why we’re supportive of TPP,” Cunningham said.
New Zealand Prime Minister John Key stressed the importance of regional trade agreements (RTAs), like the TPP, as opposed to the multilateral trading system.
“The WTO [World Trade Organization] process isn’t working well and there’s no good sign it’s moving anytime soon. In the absence of that, we need RTAs that are expansive as possible. In this situation countries would voluntarily sign up to the TPP, or alternatively RCEP,” Key added.
But on the question on whether two megatrade deals could sit alongside each other, stakeholders are elusive.
Key said:“[the TPP] is not perfect…but in a perfect world you get a situation where the FTAAP would be concluded and include all 21 economies of the Apec, and everyone would want to join because of its sheer size,” Key said. New Zealand is among the 12 nations included in the TPP.
For the Philippines, while the government has been vocal about its enthusiasm to join the TPP, observers noted that provisions in the country’s Constitution may be blocking the country’s bid. To be continued