Full benefits of RCEP require more trade openness — PIDS

THE PHILIPPINES needs to improve its openness to trade to fully benefit from the Regional Comprehensive Economic Partnership (RCEP) agreement, according to a study issued by the Philippine Institute for Development Studies (PIDS).

Conducted by PIDS Senior Research Fellow Francis Mark A. Quimba, PIDS Supervising Research Specialist Mark Anthony A. Barral, and PIDS Research Analyst Abigail E. Andrada, the study concluded that the Philippines is less open to trade than other countries in the region.

The authors defined trade openness as the ability “to integrate into world trading patterns.”

 “(The Philippines) scored below 100% in trade openness in 2018. It has not followed a growth path similar to its neighbors in the region, particularly Thailand and Vietnam, which scored above 100 percent,” the study found.

The study also concluded that the Philippines needs to diversify its exports and explore new products and markets.  

“Patterns of concentration can be seen in the country’s exports as (the bulk consists of) machinery and electronic equipment. The destinations are also concentrated among the traditional partners in the region and the US,” the study found.  

“Innovation is important. Support for private sector innovation and exploration of new products and new markets should be optimized,” it added.  

According to the authors, the Philippines “is exploring new products to export, which is a good indication of innovation… However, the country still needs support to sustain exports of these products to the Philippines’ current markets.”  

The authors also cited the need to improve trade complementarity within the Association of Southeast Asian Nations.

The study defined trade complementarity as the extent to which two countries are “natural trading partners,” with one country’s exports fulfilling another country’s import needs and vice versa.

“The success of any trade agreement depends on utilization. The reduction in trade costs needs to be internalized by the Philippine businesses which, can be done by increasing the awareness and utilization of Philippine trade agreements,” the authors said.