THE Philippines will no longer see its second bilateral free-trade agreement (FTA) materialize by November, as negotiators slow down talks after South Korea reportedly became more aggressive in pushing for tariff cuts.
Trade Secretary Ramon M. Lopez said FTA talks with South Korea are becoming difficult lately, as its negotiators are seeking too many concessions from the Philippines. As such, it will be better to prolong the negotiations, passing on the November deadline in the process, than give in to the demands, he added.
“Negotiations there [FTA with South Korea] are becoming difficult. South Korea is demanding too many concessions in exchange of what we are asking. The bottom line is we’re still inching and inching closer [to a compromise],” Lopez told the BusinessMirror.
“That’s just how things are: we should not give in to everything their negotiators will be asking just to get our demands. It has to make sense,” he argued. A source privy to the matter said South Korea wants the Philippines to bring down its tariffs on automobile and car parts at a drastic rate and with a faster schedule.
“We want them to reduce their tariffs on banana and agricultural products and they are asking us to do the same for automobile parts and industrial items.
“Usually, when you say elimination [of tariffs], it takes a couple of years. There’s a reduction schedule. However, they want more than what we can give,” the source said over the phone.
In forging a trade deal with Manila, Seoul hopes to get zero duty treatment for its vehicles—taxed 5 percent under the Asean-Korea FTA—to be on a par with units imported from Asean economies and Japan, which are applied zero rates at present.
Seoul also wants the Philippines to extend preferential duty treatment for South Korean car parts. Negotiators here, for their part, are considering this proposal for as long as South Korean vehicle assemblers invest in the Philippines to do manufacturing work.
On the other hand, Manila is seeking to trim to 5 percent, if not zero, the tariff (now at 30 percent) applied on its agricultural exports, mostly bananas and mangoes, to Seoul.
“We still want to have something concrete [by November], but if their negotiators don’t give in to our maximum position, so be it. We’ll try it for next year. We won’t rush it for November. The intention is to rush it for November, but there are major reek offers and requests that we cannot just give away,” Lopez explained.
However, all hope is not lost that the trade deal could be finished by November, that’s if South Korea grants the Philippines the timeline it wants to do its tariff cuts.
“We’re not saying [it’s] hopeless for a November agreement. There’s still a few more days. The negotiations are easier to do since they are done bilaterally. As long as compromises are made, then we can say November’s possible,” the trade chief said.
The Philippines is pinning its hope on the FTA to balance its trade sheet with South Korea. Merchandise trade between the two economies rose nearly 9 percent to $13.92 billion last year, from $12.79 billion in 2017, according to Philippine Statistics Authority (PSA) data.
However, PSA data also showed this expansion was largely caused by a jump in imports from Seoul at 33.68 percent to $11.31 billion, from $8.46 billion. On the other hand, Philippine exports declined nearly 40 percent to $2.6 billion, from $4.33 billion.
If signed, the FTA with South Korea will only be the country’s second-bilateral trade deal after the Philippines-Japan Economic Partnership Agreement, which entered into force in 2008.