THE GOVERNMENT is expected to forego tariff revenue of over $58 million a year from the 15-country Regional Comprehensive Economic Partnership (RCEP) trade deal, among the smallest projected losses in the region, Boston University (BU) said, citing the findings of a study.
These losses are milder than the foregone revenue to be experienced by other ASEAN countries. The trade pact binds all 10 ASEAN countries and major trade partners and was signed in November.
“Simulation for tariff liberalization under RCEP shows that tariff revenue loss post-RCEP will be highest for Malaysia, which will lose around $2.1 billion per annum, followed by Thailand with tariff revenue loss of $800 million,” BU said.
According to the working paper RCEP: Goods Market Access Implications for ASEAN published this month, Cambodia and Vietnam will sustain tariff revenue losses of $334 million and $192 million per year, respectively.
Developing countries are facing health and economic threats due to the pandemic, the report said, adding that it is now important for the economies to revisit trade policies.
“Tariffs are the most simple and efficient tools in the hands of the governments for raising financial resources at the times of crisis, protecting valuable domestic financial resources from being wasted on imports of luxury items, protecting domestic firms from unreasonable competition, and protecting the livelihoods of their citizens.”
The report said that the balance of trade will deteriorate for ASEAN countries, but will improve for countries like Japan and New Zealand.
“The reason for deterioration of BoT (balance of trade) of most of the ASEAN countries is trade diversion within the RCEP group towards more efficient exporters which adversely impacts the existing exports of ASEAN countries. This will lead to a decline in intra-ASEAN trade as ASEAN countries import from more efficient exporters like China instead of other ASEAN countries,” BU said.
The percentage change in balance of trade for the Philippines post-RCEP is a 1.1% decline, equivalent to $260 million each year. ASEAN countries in total stand to lose $8.5 billion each year in their goods trade balance post-RCEP.
Imports to the Philippines will increase by more than $148 million each year. In ASEAN, the largest increase will be seen in Malaysia and Cambodia at $3.7 billion and $2.3 billion, respectively.
“Around half of the increase in imports of Malaysia, Myanmar and Philippines post-RCEP will be from China,” BU said, adding that the Philippines will experience a fall in imports from all ASEAN countries but higher imports from China and South Korea in products like arms and ammunition and electrical equipment.
Philippine exports to RCEP countries are also expected to fall, because of “trade diversion in favor of more efficient exporters within the RCEP.”
The study was conducted by United Nations Conference on Trade and Development (UNCTAD) Senior Economic Affairs Officer Rashmi Banga, UNCTAD Consultant Prerna Sharma, and BU Professor of Global Development Policy Kevin P. Gallagher.
According to the Trade department, the bulk of imports under RCEP are raw materials and intermediate goods, which Philippine manufacturers will be able to buy at cheaper rates.
The department has been promoting the deal as an export market access advantage for the country’s exports in garments, automotive parts, and agricultural products such as canned food and preserved fruit. — Jenina P. Ibañez