The Association of Southeast Asian Nations (ASEAN)
Economic Community (AEC) will take shape by Dec. 31, or just three weeks from
now. The 10 ASEAN member states will be more integrated regionally to become
one single production base, movement of most goods will become unhampered with
zero tariff, except for a few goods that are subject to some tariffs and import
quotas, and various nontariff barriers.
Professionals and highly-skilled individuals will also be
able to move more freely. Some people fear that this will mean “invasion” by
other professionals of their generally niche markets reserved generally for the
locals (aka local monopolies). But they should also look it as an opportunity
for them to reach out and expand their businesses, services, and consultancies to
our neighbors in the region.
Now there are two “mega” free trade agreements or areas
(FTAs) that are being prepared for the Philippines and few other countries in
the region. They are called “mega” because of the hugeness in both consumers or
population size, and economic or gross domestic product (GDP) size.
One is the Regional Comprehensive Economic Partnership
(RCEP) and it is composed of 16 countries: the ASEAN-10 plus six partner
economies that regularly attend the annual ASEAN Summit. The six partners are
the giant economies of North and South Asia, China, Japan, South Korea, and
India. Plus Australia and New Zealand.
RCEP is not a new initiative, it has been planned since
about a decade ago but we do not hear or read it often because the AEC and
Trans-Pacific Partnership (TPP) tend to dominate the news. It is supposed to
materialize this month too, but some hurdles have come in, but it is expected
to become a reality within the next two years.
The other mega FTA is the TPP and it is composed of 12
countries: five from North and South America (US, Canada, Mexico, Peru and
Chile), four from ASEAN (Malaysia, Singapore, Vietnam, Brunei) and Japan,
Australia and New Zealand.
From the original four members (Brunei, Singapore, New
Zealand, and Chile) that constituted the Trans-Pacific Strategic Economic
Partnership Agreement, it was joined by eight other countries, later expanded
to 12, and the group started to be called TPP in 2008. The TPP Agreement was
signed only last month, and each member country must ratify it before it will
be implemented. This will take about two years or by 2017.
Here are the relevant data on population and economic
size of the two mega FTAs. (See Table)
The four biggest economies in the planet in PPP values --
China, USA, India and Japan -- are in both RCEP and TPP. RCEP is smaller than
TPP in GDP nominal values but larger than TPP in PPP values. RCEP is said to be
China-led while TPP is US-led.
In population size, RCEP is really huge with a combined
population of some 3.45 billion people in 2014, almost half of the global
population of 7.1 billion. TPP group has a combined population of only 0.8
billion.
People are not only consumers, they are also producers,
as entrepreneurs and workers; as manufacturers and sellers. So a bigger
population is a bigger consumer and production base especially if the
population’s skills keep improving.
And in terms of merchandise exports, RCEP is larger than
TPP. Note that China’s exports are larger than the combined exports of US and
Canada.
Taking the three factors together -- GDP size, population
and exports -- membership in both is better than membership in “either” or just
one. Thus, the four ASEAN economies are lucky to belong to both RCEP and TPP.
Various NTBs, hidden from the public but are felt by exporters and traders are
imposed by many countries, developed and developing. By being a member of
either or both mega FTAs, these NTBs are significantly relaxed and hence, there
is greater market access for these four ASEAN countries to those giant
economies in North Asia and North America.
The decision of the Philippine government to join the TPP
in the next round of membership expansion is wise and correct.
The US will remain to be the most innovative huge economy
in the planet for the next decade or two. It is important that the Philippines
can gain greater market access to it. Fears of the application of strict
intellectual property rights in copyright and patents of newly-invented
medicines and vaccines are based more on alarmism than reality as reflected in
the actual texts of the TPP Agreement. This will be tackled in a future paper
of this column.
Regardless of the rhetorics against free trade, many
people and consumers in the planet want more choices, more options, more
freedom in choosing where they want to buy and sell various products and
services. Governments, in turn, are swayed by the preferences of their
citizens.
Bienvenido S. Oplas, Jr. is a Fellow of the South East
Asia Network for Development (SEANET) and President of Minimal Government
Thinkers. Both are members of the Economic Freedom Network (EFN) Asia.
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See also:
BWorld 28, Economic freedom in Asia, November 28, 2015
BWorld 29, Paris COP's emission cut targets vs. energy needs, December 06, 2015
BWorld 30, Tourism and airport transfer at NAIA, December 09, 2015
BWorld 31, Comparative electricity exchange market in Asia-Pacific, December 13, 2015
Free Trade 56, Trade, investments and taxes in APEC countries, November 08, 2015
Free Trade 57, Growth, IPRI 2015 and the TPP, November 28, 2015
Free Trade 58, TPP and its rabid critics, December 10, 2015.
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