Philippine Participation in Rtas/Ftas*

______

2005/FTA-RTA/WKSP/019

Economy Report: The Philippines

Submitted By: Ms. Amelia A. Menardo, The Philippines

/ Workshop on Identifying and Addressing Possible Impacts of RTAs/FTAs Development on APEC Developing Member Economies
Hanoi, Viet Nam
28-30 June 2005

philippine participation in rtas/ftas[1]

iintroduction

Increased competition in the global market triggered the creation of many regional and free trading arrangements worldwide.. Market integration is seen to make economies more efficient through better division of labor and through economies of scale, stimulate healthy competition; lower costs; enlarge the domestic market, and entice more investments, which in turn translates to job creation.

While active in bilateral trade talks, the philippines remains pragmatic in approaching Free Trade Arrangements (FTAs). as a matter of policy, the philippines ensures that such agreements are consistent with the commitments made in the wto, and thus contribute to global market liberalization.

thus far, the philippines is a party to the Asean Free Trade Area (afta) and has concluded the agreement on trade in goods under the ASEAN-China Framework agreement on Comprehensive Economic Cooperation. together with other asean countiries, the philippines has started negotiations for the Asean-Korea, Asean-Japan and Asean-Closer Economic Relations (CER) ftas.

AFTA

under the common effective preferential tariff (CEPT) scheme the tariff on 100 percent of products in the inclusion list of asean-6 (except sensitive products) would be eliminated in 2010 while the duty on sensitive products are to be reduced to 0-5 percent in the same year. about 60 percent of products in the philippine inclusion list is alreadt at zero duty.

towards the vision of an asean economic community by 2020, the asean leaders selected 11 sectors as priorities for integration. These include e-asean, health care, air travel, tourism, wood based products, rubber based products, textiles and apparel, agro-based products, fisheries and electronics and automotive. Measures to fastrack the liberalization of these sectors include the elimination of tariffs, immediate removal of barriers to trade, faster customs clearance and simplified procedures,accelerated development of mras and accelerated liberalizati on of services.

Asean China Free Trade Area (acfta)

under the ASEAN and china fta, the tariff elimination shall be based on the following tracks:

reduction/elimination trackend rateimplementation period

ehp0%2004-2006

normal track0%2005-2010 with

flexibility up to 2012

sensitive track (for asean 6)

sensitive list0-5%2012-2018

higly sensitive list50%2015

the philippines did not immediately join the early harvest program but after a seires of bilateral consultatinions, she finally conclided her ehp with china on 27 april 2005 during the state visit of the chinese president in manila.

tariff reduction for products placed under the normal track by asean 6 and china shall follow the schedule below:

x=applied mfn rate / 2005* / 2007 / 2009 / 2010
x20% / 20 / 12 / 5 / 0
5% x< 20% / 15 / 8 / 5 / 0
10%x< 15% / 10 / 8 / 5 / 0
5% <x<10% / 5 / 5 / 0 / 0
X5% / standstill / standstill / 0 / 0

The first date of implementation of concessions shall be 1 july 2005.

threshold: (a) 40% at 0-5% no later than july 2005

(b) 60% at 0-5% no later than january 2007

© 100% at zero not later than 1 january 2010, with

Flexibility to have tariffs on some prudcts not exceeding 150 tariff lines eliminated not later than 1 january 2012.. the philippines is given the flexibility to eliminate tariffs exceeding 150 tariff lines in 2012. The list of said products shall be determined after a review in 2008.

for the sensitive track, asean 6 and china shall reduce the applied MFN rates on tariff lines placed in the sensitive list to 20% not later than 2012 and further to 0-5% not later than 1 january 2018. MFN rates on products placed in the highly sensitive list shall be reduced to at least 50% not later than 1 January 2015 and 1 january 2018 for the newer asean member states.

with the completion of the negotiations for the trade in goods agreement, focus has now shifted on the negotiations for trade in services and investment agreements.

asean –india regional trade and investment area (RTIA)

The asean-india rtia also provides for an EHP with tariffs to be reduced progressively starting 1 november 2004 to be eliminated by 31 october 2007 for asean-6 and india and october 2010 for the new asean member states. for the fta proper, products listed in the normal track shall be gradually reduced and eliminated in accordance with specified schedules and rates to be mutually agreed by the parties over a period from

-1 january 2006 to 31 december 2011 for bruneidarussalam, indonesia, malaysia, singapore, thailand and india;

1 january 2006 to 31 december 2016 for the philippines and india; and

-1 january 2006 to 21 decenber 2011 for india, and 1 january 2006 to 31 december 2016 for the new asean member states.

asean and india have not reached agreement on the rules of oriigin to date and therefore unable to implement the agreement.

Asean Korea Free Trade Area (AKFTA)

a staged approach will be adopted for the akfta negotiations beginning with trade in goods in 2005 and services and investments in 2006. separate agreements will be negotiated in each of the three areas with broad provisions included in the framework agreement. the AKFTA aims to have at least 80 percent of products with zero tariffs by 2009, with consideration for special and differential treatment and additional flexibility for new asean member economies. deliberations of the drafts of the framework agreement, the trade in goods agreement including modalities, the dispute settlement agreement and the draft roo text have started, with the latter two targetted for conclusion by November 2005.

provision of cap/ceiling for sensitive and highly sensitive products based on tariff lines or import value, base year, staging of tariff reduction and use of HS 6 digit lines as basis, possible exclusions, flexibility for tariff elimination and reciprocity and multilateralization of tariff concessions are among the outstanding issues for the determination of the modality for tariff reduction, and elimination.

Asean AustraliaNew Zealand Free Trade Area (AANZFTA)

Asean continues to cooperate with australia and new zealand under the AFTA-CER Agreement. FTA Negotiations were reviived in 2004 when Leaders at the Asean –Australia and New Zealand commerative Summit announced their launching to commence in early 2005 and to be completed within two years. the FTA is to be comprehensive covering progressive Liberalization of all barriers to trade in goods, services and investments; build on wto commitments; have flexibility fir the newer Asean member economies and be fully implemented in 10 years

asean –japan comprehensive economic partnetship agreement

negotiations already started with discussions focused on the structure and scope of the agreement.

Japan-philippines economic partnership agreement

the epa covers trade in goods, trade in services, investment rules, government procurement, cooperation, improvement of business environment, mras, intellectual property, competition policy, among others. negotiations are expected to be concluded within the year.

iimproving coordinating mechanism and transparency

given the number of on-going trade negotiations at the multilateral, regional and bilateral levels, the government is continually trying to improve cooridnation among concerned government agencies to synchronize their work programs and be better informed of the various aspects and issues relating to these negotiations. given its limited financial and manpower resources, the government is considering various approaches for negotiating trade agreements. A more efficientand effective way to keep the private sector updated to latest developments in trade negotiations, aside from public consultations that the departments of trade and industry and agriculture conduct for their stakeholders. regional consultations could be held as necessary. The President also appointed a private sector representative as special envoy for international trade negotiations whose task is to link the government to the private sector during these negotiations.

1

[1] Prepared by Amelia A. Menardo, National Economic and Development Authority for the “APEC International Workshop on Identifying and Addressing Possible Impacts of FTAs and RTAs, held in Ha Noi, Viet Nam from 28 – 30 June 2005.