While welcoming the resumption of negotiations between the Philippines and the 27-member bloc European Union (EU) for a free-trade agreement (FTA), Philippine business groups raised their concerns Wednesday to trade negotiators, such as stringent climate change requirements, working on Philippine reforms, among others.
Ahead of the resumption of talks, the Philippine Chamber of Commerce and Industry (PCCI) said the EU “must be realistic in its expectations of the Philippines.” In return, the Philippines’ trade negotiators, “while being able to leverage on our comparative advantages for a PHL-EU partnership, must ensure that the conditionalities imposed by the EU are justifiable under our level of development.”
“There are other areas of concern as well, for example, those that impose carbon emission standards that, for emerging economies, are barriers to attaining a higher level of growth,” PCCI President Enunina Mangio told the BusinessMirror in a Viber message on Wednesday.
This was the same sentiment expressed by Sergio R. Ortiz-Luis Jr., the president of Philippine Exporters Confederation Inc. (Philexport). He said in an interview with reporters Tuesday, “I know they’re planning to do a shielding on carbon [emissions]. Personally, I don’t agree. Because we’re a very small contributor of carbon emission here in the Philippines.”
The Philexport chief emphasized that developing countries find it difficult to catch up on these requirements.
On top of climate change issues, Ortiz-Luis said trade negotiators should look into the high shipment cost to Europe “and negotiate that some of the non-tariff barriers be dismantled” so that the Philippines will be on an equal footing with other Asian countries that trade with Europe.
Asked which are these non-tariff barriers, “Well some of them come from labor issues. For instance, you’re hearing about the question of mga slave labor coming from countries like that. And sometimes even climate change issues, carbon issues. They’re being brought to the table. And we developing countries are finding it hard to catch up on these.”
Shifting to domestic issues that must be looked into, Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI) President Danilo C. Lachica said, “We need to work on FTAs while continuing to work on reforms and domestic concerns.”
But Lachica highlighted that “FTAs are important for reducing trade barriers and promoting trade, inclusive of semiconductor and electronics products.”
Meanwhile, Ortiz-Luis emphasized that local port charges, such as those being imposed by the Philippine Ports Authority (PPA) are adding to the already high shipping costs that Philippine exporters are shouldering.
“Unfortunately, mahal na yung ginagawa ng shipping cost. Binabanatan pa tayo ng PPA dito. Yung local counterpart natin, pinagkakakitaan pa,” he said.
In November 2023, several business chambers, including the European Chamber of Commerce of the Philippines (ECCP) expressed concern over PPA’s proposed increase in storage charges for foreign containerized cargo, saying this will reduce the competitiveness of the Philippine market.
Ortiz-Luis also recognized that there are many protocols in a free trade agreement and “many of them are hard to comply with.”
With this, he underscored the importance of getting the private sector on board when negotiating trade deals. “That’s why we’re saying, the private sector should be involved…the players.”
The head of the umbrella organization of Philippine exporters shared, “In the past, we have had trade agreements that are laid down to us. And it’s too late to complain. So it’s important that the government should involve the players from the very start. So that hindi tayo nanghihingi ng support sa government later on.”
Through the government’s lens, the Department of Trade and Industry (DTI) Undersecretary for International Trade Policy Group (ITPG) said the trade negotiating team usually consults with stakeholders prior to the negotiation proper.
“We conduct consultations with stakeholders but renegotiation proper itself is being done with utmost confidentiality, thus, government negotiators lang,” DTI Assistant Secretary Allan Gepty told the BusinessMirror.
Gepty explained the process of negotiations towards finally inking the FTA. While he noted that it will be “difficult to give a definite timeline,” the Trade official said, “The goal is for us to conclude the negotiations the soonest possible time.”
“In any case, for purposes of timeline, we have to factor in that the Philippines may soon reach the upper middle income status, and eventually if this will be sustained consecutively for 3 years, then it will not qualify anymore under the EU GSP+. Hence, before this happens, we have to make sure that the FTA is already in place,” he told the BusinessMirror in a Viber message Tuesday.
To illustrate, the Trade undersecretary gave an overview of what happens during trade negotiations.
“Like any other FTA negotiations, we have to secure the necessary mandate, form the negotiating team, conduct series of consultations with all stakeholders, and then embark in a negotiation,” Gepty said.
“During negotiations consultations will continue, and once it is concluded, then signing can be done after securing the necessary signing authority,” he also noted.
Once the talks are done, he said the Department of Foreign Affairs (DFA) would evaluate and recommend if the FTA will be considered as an executive agreement or a treaty.
If it is a treaty, he said it would be subjected to ratification by the President and concurrence by the Senate. If it is an executive agreement, it will just be subjected to ratification.
“However, given the scope and levels of commitments aspired for in the PHL-EU FTA, it is likely that it will be subjected to Senate concurrence,” Gepty noted.
It is worth noting that the Regional Comprehensive Economic Partnership (RCEP) was ratified through Senate concurrence in February 2023.
The Trade official underscored the importance of the EU as the Philippines’s trading partner, adding that “EU has entrenched its economic engagements with the Philippines, and in the same manner, many of our stakeholders have established strong business relations with the EU.”
For instance, he said in 2023 EU was the Philippines’s 5th largest trading partner with $16.16 billion in total trade or 8.1 percent share of Philippine total trade. The bloc was also the Philippines’ 6th export market with $8.37 billion and 6th import supplier valued at $7.79 billion.
“At present, we are enjoying preferential market access via the EU Generalised Scheme of Preferences Plus [EU GSP+] and as far as utilization is concerned, we reached a record high of 77 percent in 2022, benefitting many Filipino companies, farmers, and workers in several sectors, including garments, food processing, fisheries, and agriculture,” Gepty said.
But given that EU GSP+ is a “unilateral arrangement” and is not permanent, Gepty underscored the need to ensure that an FTA be in place for the country’s stakeholders so that preferential market access is maintained.
He also noted that the EU’s foreign direct investments into the Philippines amounted to $29.16 million in 2022 and $63.99 billion in 2023, contributing to industry development, employment generation and economic growth.
“Like the EU, the Philippines aims for an ambitious, balanced, and comprehensive FTA. We are likewise guided by our Philippine Development Plan [PDP] for 2023 to 2028 which directs us to advance purposive, assertive, and forward-looking FTAs,” said Gepty.
“With the ultimate goal of effectively enhancing trade and investments, we expect the FTA to be comprehensive covering not just market access of goods, services, and investments but stable and predictable rules that are conducive for business. We also aim to make trade more inclusive and sustainable, ensuring that it will translate to concrete social, environmental, and economic benefits for all stakeholders,” the Trade official also noted.
Meanwhile, Ortiz-Luis also stressed the need for the Philippines to “catch up” by securing this free trade deal with the EU.
“Well, you know, we need all these bilateral trade talks, ‘no? Because among our neighbors, we have the JPEPA, we have the Asean, and lately the RCEP. The others have about 12, 13 [FTAs], I think. And so we really have to catch up,” the Philexport chief noted.
He cited that the Philippines’s garments industry, agricultural products, such as food items and furniture, among others, would stand to benefit from this trade deal.
Mangio, as the head of PCCI, a major business group in the country, emphasized that a free trade deal with the bloc could stretch the opportunities for the Philippine Business Process Outsourcing (BPO) industry.
“While it covered only 6,274 commodities [or 66 percent of EU tariff lines], reports from the DTI say our exports to the EU rose by 27 percent just one year after we were given the special incentive arrangement in 2014. The FTA should be able to expand on opportunities especially in services such as BPOs and KPOs [knowledge process outsourcing], digital commerce and agritechnology,” the PCCI head said.
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