The Trans Pacific Partnership and the Philippine Economy: Joining the Big League

Cielito F. Habito

Chief of PartyTrade-Related Assistance for Development (TRADE) Project

Presentation for the AmCham-COCUSA-TRADERoundtable on TPP and the Philippines

AmCham Conference HallSeptember 1, 2015

TPP: What is it?

An ambitious ‘new generation’, ‘high-standard’ trade agreement

Currently with 12 participating countries on both sides of the Pacific having:

• Combined population of 800 million

• GDP of $28 trillion (40% of global GDP)

• $9 trillion in merchandise trade; $2 trillion trade of services (30% of world trade)

TPP: Who are in it?

• Australia (2008)

• Brunei (2005)

• Chile (2005)

• Canada (2012)

• Japan (2013)

• Malaysia (2010)

• Mexico (2012)

• New Zealand (2005)

• Peru (2008)

•Singapore (2005)

•United States (2008)

•Vietnam (2008)

TPP & Existing FTAs Current TPP members already form part of

a growing network of Asia-Pacific FTAs.

Source: WTO FTA database and websites of TPP countries’ trade ministries. Trade data from IMF.

TPP & Existing FTAs

Source: WTO FTA database and websites of TPP countries’ trade ministries. Trade data from IMF.

Notes: TPP goods trade, both imports and exports, as reported above. ASEAN also includes countries outside the TPP: Burma (Myanmar), Cambodia, Indonesia, Laos, the Philippines, and Thailand. TPP goods trade covered by existing FTAs, as depicted above, reflects all goods trade between FTA partners. This measure slightly overstates trade covered under FTAs, as most FTAs exclude market access for at least some goods.

TPP: Who are hoping to come in?‘Second Wave’ Countries

• South Korea

• Taiwan

• Thailand

• Colombia

• Indonesia

• Philippines

TPP: What will it do?

Comprehensive Market AccessEliminate tariffs and other barriers to trade in goods & services and investmentto create new opportunities for workers and businesses, and immediate benefits for consumers.

Fully Regional AgreementSpur development of production & supply chains across members, creating jobs, raising living standards, improving welfare and promoting sustainable growth among them.

New Cross-Cutting Trade Issues

Regulatory Coherence – Promote more seamless & efficient trade across borders

Competitiveness & Business Facilitation – Enhance domestic/regional competitiveness; push economic integration (via regional supply/value chains)

Small & Medium-Sized Enterprises – Internationalize SMEs and raise their utilization of FTAs

Trade & Development – Strengthen economic devt & governance institutions via comprehensive & robust market liberalization, trade & investment enhancing disciplines

New Trade Challenges

Promote trade & investment in innovative products and services, including those related to the digital economy and green technologies

Living Agreement

Enable updating of the agreement as appropriate to address new emerging trade issues and new issues arising from inclusion of new members

The TPP Agreement: What will it address?

Goods & Services

- Textiles, Apparel & Footwear

- Trade in Services

- Government Procurement

Agriculture

- Sanitary & Phytosanitary Standards (SPS)

- Tobacco

- Geographical Indications (GIs)

- Agricultural Competition

Core Negotiating Issues

Market Access

Intellectual Property Rights (IPR)

- Copyrights & Patents

- Access to Medicines

- Biologics, Trade Secrets

Rules of Origin

Technical Barriers to Trade (TBT)

Transparency and Pricing of Health Care Technology & Pharmaceuticals

Core Negotiating Issues

Rules

Foreign Investment

Competition Policies

Trade Remedies

Labor

Environment

E-Commerce and Data Flows

Customs and Trade Facilitation

Core Negotiating Issues

Rules

Regulatory Coherence

State-Owned Enterprises

Competitiveness and Global Supply Chains

Small- and Medium-Sized Enterprises

New and Cross-Cutting Issues

Institutional Issues Secretariat

Dispute Settlement

“Living Agreement”

The “Noodle Bowl”

Chapter Highlights Trade in Goods

Expand market access thru elimination of tariff & non-tariff barriers; provisions on import licensing, import/export restrictions, temporary importations, goods re-entered after repair, and commercial samples.

Rules of Origin (ROO)

Objective, transparent and predictable rules for establishing origin within TPP; rules/treatment that apply to certain products/goods (e.g. fungible materials, spare parts, packaging materials)

Chapter Highlights Services and Investment

- Covers wide range of sectors; all existing measures affecting cross-border trade in services; investors and their investments

- Adopts negative list approach

- Commitments scheduled at the level of regulatory application

- Ratchet mechanism to lock in future reforms

Competition Policy

Establish competition laws & competition authority, with obligations on enforcement, transparency, consumer protection & private rights

Chapter Highlights

Government Procurement

- Basic principles & procedures for conducting procurement in a fair, transparent, and non-discriminatory manner

- Defines coverage of procurement and specifies obligations on use of electronic means for procurement, conditions of participation, publication of notices, time-period and modification and rectification

- Re-affirms rights and obligations under the WTO-GPA; adopts APEC Non-binding Principles on GP

Chapter Highlights

Telecommunications Services

Competitive access; non-discriminatory interconnection; transparency of regulatory process; right of appeal

E-Commerce

Customs duties; authentication of transactions & e-signatures; consumer protection; free flow of information and paperless trading

Chapter Highlights

Cross-Border Services

Open & transparent cross-border services trade among TPP

Customs Procedures

Predictable and transparent rules & procedures on automation, risk management, express shipment & advance rulings

Sanitary & Phytosanitary (SPS) Standards

Builds on WTO SPSA to balance animal/plant health protection & TF; new commitments on transparency, regionalization, cooperation & equivalence

Chapter Highlights

Technical Barriers to Trade (TBT)

Sets compliance periods, conformity assessment procedures, international standards, institutional mechanisms and transparency

Intellectual Property

Reinforces WTO TRIPS Agreement with specific provisions on trademarks, geographical indications, Internet domain names, copyright &related rights, patents, cable signals, encrypted programs; and regulated products, genetic resources and traditional knowledge

Chapter Highlights

Investment

Investor & investment legal protection e.g., non-discrimination, minimum standard of treatment, expropriation, etc.; expeditious, fair, and transparent ISDS

Financial Services

Investment in FIs, cross-border trade in financial services; transparency, non-discrimination, investment protection; protects right of financial regulators to ensure integrity & stability of financial markets, including in financial crises.

Why still ‘No Deal’?

Access to the Japanese agricultural &industrial markets

Rules of origin for auto parts (of particular concern to Mexico)

Workers’ rights, especially in Vietnam

Environmental protections

Labor standards

Patent protection and access to generic medicines in developing countries

Open Issues after Maui (2015):

TPP: Why still ‘No Deal’?

Copyright protections for entertainment content, including on the Internet

Investment and dispute settlement procedures, particularly the use of investor arbitration rights to block local government actions

Food safety measures, and making sure that arbitrary and scientifically indefensible barriers are not allowed to block imports (controls on GMOs, for example)

Restrictions on state-owned enterprises (SOEs)

Tobacco controls and rules on cigarette packaging

More Open Issues after Maui (2015):

Philippines & TPP• Signed the 2011 Phil-US Trade Facilitation Protocol

• Expressed interest to join negotiations

• Efforts to ease foreign ownership restrictions

• March 2014 technical consultations in US

• Consultations with 5 other TPP members

• DTI: Roadmap to TPP focused on

- Stakeholder engagement in trade policy‐making

- Trade policy research

- Capacity-building

- Enhanced inter-agency cooperation

Implications of Philippine Membership in TPPClarete (UP School of Economics) Study (2014):• Increase exports by up to 42% • Raise GDP by up to 59%

Cororaton (Virginia Tech) Study (2014) :

• Non-membership will divert substantial trade away from PH to TPP members

• Vulnerable industries: Textile & wearing apparel, petroleum products, construction, services, equipment manufactures

• Membership will increase exports by $300 million in 2015, rising to $3 billion by 2024

Questions to Address

• Given the above, what do you think are the key shortcomings that PH must address to be able to join TPP?

• What in your view are the most important actions PH must take to be “TPP-ready”?

• How would your industry/company be benefited by PH accession to TPP?

• How might your industry/company be impacted by PH exclusion from TPP?