KOREAN cars and auto parts and Philippine bananas and canned pineapples will be among the first products that can enjoy free tariffs with the newly signed free trade agreement (FTA) between Seoul and Manila.
Korean-made products, which have become popular due to K-Dramas such as ginseng, processed food, pearl and mackerel may soon be more affordable and accessible in the Philippines with the new FTA.
On Thursday, the Philippine-Korea FTA was signed by trade ministers Ahn Duk-geun and Trade Secretary Alfredo Pascual at the sidelines of the Asean Summits in Jakarta. President Ferdinand R. Marcos Jr. and South Korean President Yoon Suk Yeol witnessed the historic signing.
The Korean Embassy in Manila said under the FTA, Korea would open 94.8 percent of its market to the Philippines, while the Philippines would allow Korean products to enter 96.5 percent of the Philippine market.
By “achieving a high level of liberalization,” Korean-made cars and green cars can be exported to the Philippines at zero tariff rates.
The Philippines is the top car importer among Asean countries. Japan-made cars like Toyota, Mitsubishi and Isuzu are the dominant brands last year in the $36.6 million car market.
Korean cars Hyundai and KIA have so far only cornered 2.5 percent of the Philippine car market as of 2022. Under the Economic Partnership Agreement (EPA) between the two countries, the tariff rate on Korean cars and car parts have been lowered to 5 percent, but passenger cars are still being imposed 20 percent tax.
Upon entry into force of the agreement, the Philippines will remove the tariffs on Korean cars. Tariff on car parts as well as eco-friendly vehicles like electric and hybrid cars will be removed within five years.
Parliaments of both countries need to ratify the FTA to implement it.
This is the second bilateral FTA of the Philippines with another country. The first one is with Japan in 2008. Manila has multilateral FTAs such as the Asean Free Trade Area (AFTA) and Regional Comprehensive Economic Partnership (RCEP).
Korea, on the other hand, now has 22 FTAs with 59 countries. This is the fifth FTA with a key member of Asean, its third largest export destination.
Aside from cars, the FTA will also pave the way for the removal of tariffs of Korean agricultural and fishery products within 15 years.
Tariffs on Philippine bananas, on one hand, will be removed within five years.
“However, the safeguard measure will be implemented to avoid a surge in imports, if required. Based on recent import volumes, measures can be taken to re-impose the tariff of up to 30 percent if imports exceed the annual threshold, beginning in the first year of the FTA (for 10 years),” the Embassy added.
The signing of the FTA “created a foundation” for both countries to explore on other economic cooperation such as vaccine, climate change and culture with the adoption of the agreement of economic and technical cooperation in the FTA.
“Based on this groundwork, the mutually-beneficial bilateral discussions will be pursued through a variety type of cooperation in promising areas, including healthcare, rare metal processing, innovation ecosystem, culture industry, film, e- commerce and intellectual property rights,” it added.
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