THE Philippines and South Korea are targeting to conclude their free-trade agreement (FTA) by the first half of 2020, but they have a lot of catching up to do as just one of the seven chapters was finalized by the parties after nearly half a year of negotiations.
Trade Secretary Ramon M. Lopez on Monday signed with South Korean Minister for Trade Yoo Myung-hee an early achievement package for the FTA between Manila and Seoul. The package reported the progress of negotiations, particularly on bananas, garments and automobile parts for the Philippines and on pharmaceuticals, petrochemicals and auto parts for South Korea.
Failing to meet the initial November deadline, the two camps are now targeting to conclude the trade deal by first half of next year even as only one chapter is settled so far—and it’s not even a major chapter.
Since FTA talks began in June, negotiators concluded just the chapter on competition. In the the next months, negotiators will be working on the remaining six chapters, namely, trade in goods, trade in services, investments, rules of origin, economic and technical cooperation and legal and institutional issues, according to Lopez.
Lopez said, “it is commendable that both sides have achieved substantial progress both in the market access and text-based negotiations in a span of just six months” in spite of the failure to conclude the FTA this November.
He stressed the objective for the Philippines is to improve access for its agricultural products, particularly bananas, and industrial goods and services to the South Korean market. Bananas, Lopez said, are a particular interest as the country needs a level playing field with its competitors from Southeast Asia and Central America.
Bananas
Bananas from the Philippines enter South Korea at 30-percent tariff, and exporters are seeking for the reduction of this rate to 5 percent, if not zero, under the FTA.
On the other hand, bananas from Vietnam will begin enjoying duty-free privilege to South Korea by 2024. Further, bananas from Peru are taxed zero tariff at present, and those originating from Central American countries will enjoy the same preferential treatment by 2021.
“The FTA, once enforced, will be an important vehicle for improving the balance of trade with South Korea through enhanced trade flows, facilitating the movement of natural persons and generating more investment opportunities and, by extension, job generation possibilities,” the trade chief said in a statement on Tuesday.
Manila and Seoul, in April, agreed to negotiate a bilateral trade deal to enhance economies ties, as well expand trade and investment activities between them. They set November as the target date to conclude negotiations, in time for the commemorative summit between the Association of Southeast Asian Nations (Asean) and South Korea, but disputes on tariff reduction schedule, among others, prevented them from doing so.
Bilateral trade
Last year bilateral trade with South Korea improved 8.83 percent to $13.7 billion, from $12.79 billion in 2017, according to data from the Philippine Statistics Authority (PSA).
However, PSA data also reported this improvement was largely brought about by the increased volume of imports from South Korea. Imports from this trading partner swelled 33.68 percent to $11.31 billion, from $8.46 billion.
On the other hand, exports to South Korea last year declined nearly 40 percent to $2.6 billion, from $4.33 billion in 2017, according to PSA records.
If signed, the FTA with South Korea will become just the country’s second bilateral trade deal next to the Philippines-Japan Economic Partnership Agreement that entered into force in 2008. The Philippines is also seeking trade deals with the United States and the European Union, but efforts to pursue these are gaining little to no progress at the moment.
Lopez, along with President Duterte and several Cabinet members, was in Busan to participate in the commemorative summit between the Asean and South Korea, where Duterte signed bilateral agreements on education, tourism, social security and fisheries.
Image credits: Asean-ROK Commemorative Summit via AP