More sectors eyed to be included for lower tariffs under PH-EU free trade agreement — DTI

The Philippines will negotiate for the inclusion of more sectors for lower tariffs or preferential trade arrangements as the country and the European Union (EU) are set to start discussions for a potential free trade agreement (FTA), Trade Secretary Alfredo Pascual said Tuesday.

“We’ll negotiate for more sectors to be covered for [preferential] tariff arrangements,” Pascual said at a press briefing in Makati.

This developed after European Commission President Ursula von der Leyen announced that the EU and the Philippines are relaunching negotiations for an FTA as both parties will work on setting the “right conditions.”

The resumption of FTA discussions between the Philippines and the EU is targeted to begin before the year ends, which would cover the identification of the deal’s scope. 

But as far as scope is concerned, Pascual said: “At the minimum, we’d like the inclusion of benefits under GSP+ to be carried over to the FTA.”

The EU’s Generalized System of Preference Plus (GSP+) is a preferential trade arrangement that grants developing countries, including the Philippines, reduced or zero tariffs on exports to the EU market.

For the Philippines, the arrangement grants the country zero duties on 6,274 locally-made products, as long as the country meets the requirements regarding human and labor rights, the environment, and good governance.

As to what more sectors are eyed to be covered under preferential trade schemes, Trade Undersecretary Ceferino Rodolfo said, “We are adding digital trade, energy, and critical minerals.”

Rodolfo added the FTA with the EU will also cover “more discussions on trade and sustainable development and making sure we have mechanisms for entry of our garments and wearables to the rules of origin.”

The exploratory FTA talks between the Philippines and the EU began in 2013, while the launching of negotiations was announced in December 2015.

The first FTA negotiations were held in Brussels, Belgium in 2016, followed by second round negotiations in Cebu, Philippines in 2017. FTA talks have been idle since.

As to the GSP+ renewal, which will expire in December, the EU Commission has proposed to extend the trade arrangements for another four years.

In March, Pascual floated the possibility of resuming FTA talks with the EU as the government is working towards making the country an upper-middle income economy.

The World Bank still classifies the Philippines as a lower-middle income country as its gross national income (GNI) per capita of $3,950 in 2022 fell within the bracket for lower-middle income economies of $1,136 to $4,465.

Despite this, Philippines remains on track to move up to upper-middle income economy status by 2025, according to National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan.

Wearables sector to benefit most

Rodolfo said that the wearables sectors —clothing, footwear, textile, bags — would be the primary sector that would benefit from an FTA with the EU.

"The average tariff for wearables is 12%. It’s a bit high. That's why we foresee that under an FTA, with a more liberalized rules of origin, one of the sectors that will have a surge, primary sector would be garments and wearables,” the DTI official said.

“Of course, there are also other sectors, in particular in the agricultural sector. If you look at the value profile of most advanced economies, the highly protected sectors would be the resource base. So in particular agriculture, and then the garments are highly protected,” Rodolfo said.

At the same briefing, Confederation of Wearable Exporters of the Philippines (CONWEP) executive director Maria Teresita Jocson-Agoncillo said that an FTA with the EU would translate to an increase of 300% in the value of wearables exports to the European market.

“We’re doing $200 million now for the European market. So easily, we can move forward to $600 million in the first two years… It can push to $800 to $1 billion performance… the fourth or the fifth year,” Jocson-Agoncillo said.

“We can employ about 120,000 to 250,000 new jobs,” she said.

Pascual added that an FTA with the EU will also translate to decrease in the cost for exporters, which would compel companies to expand capacity and therefore “you have to create jobs.”

“It will attract more investments from EU… given there will be preferential arrangements in products coming from here,” the Trade chief said. — RSJ, GMA Integrated News