What was seen as an easier to conclude bilateral free trade agreement with South Korea has turned out to be more contentious and difficult.
This developed as the both the Philippines and Korea could not yet see a resolution to their different positions in terms of market access for Philippines’ tropical fruits and the demand for South Korea for preferential tariffs to its automotive products.
Board of Investments Managing Head Ceferino S. Rodolfo said they are now looking a new target of completion of the FTA negotiations by the first quarter of 2021 after failing earlier targets.
“Hopefully, we could finish all negotiations by the first quarter of next year,” said Rodolfo.
He explained the delays have been caused by the differences in market access for Philippine agriculture sector and the request for South Korea for their industrial and automotive products.
The Philippines would like South Korea to trim the 5 percent, if not zero, the current 30 percent tariff applied on its agricultural exports, mostly bananas and mangoes.
For its part, South Korea wanted the Philippines to abolish the 5 percent tariff on cars to be at par with the Japanese cars imported from Asean countries, which are applied zero rate at present.
South Korea also wanted the Philippines to extend preferential duty treatment for South Korean car parts. Negotiators are considering this proposal for as long as South Korean vehicle assemblers invest in the Philippines to do manufacturing work. There was no clear commitment though if South Korean car firms would invest in car manufacturing in the Philippines. Korea has also included many auto parts and other industrial products.
Trade negotiator and Trade and Industry Assistant Secretary Allan Gepty said until there is a convergence on positions at acceptable schedule both parties could not yet conclude the negotiations.
Rodolfo, who is also the Philippines lead trade negotiator, also said that there had been changes in South Korea’s official trade negotiator assignments and the travel restrictions that started early this year due to the COVID-19 pandemic.
According to Rodolfo, South Korea’s original lead trade negotiator Deputy Minister for Trade Negotiations Yeo Han Koo was reassigned to the Blue House to become the South Korean President’s secretary on Southeast Asia Policy, similar to the ‘Go East Policy” of Taiwan.
Rodolfo said that the reassignment of the South Korean trade negotiator is good for the Philippines because “someone with good knowledge of the Philippines is in that kind of a position” but, such movement has also affected the flow of the FTA negotiations.
Also compounding the issue is the COVID-19 pandemic, which caused difficulties in their meetings.
He, however, said that both countries are catching up by conducting two online meetings already to make up for the delays. During their virtual meeting last week with the new South Korea trade negotiator, Director-General for trade policy for Asia Lee Hyuk, both parties agreed to meet second week next month.
Both parties failed to meet their target to sign the deal before the ASEAN-Korea Meeting held in Seoul in November last year as they could not agree to tariff cuts on products that the Philippines would like Korea to reduce rates, particularly bananas and other agricultural products.
The Philippines was hoping to narrow the widening trade gap with South Korea with the forging of a bilateral FTA. 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 data.
The balance of trade is heavily in favor of South Korea having exported $11.31 billion to the Philippines in 2017 or 33.68 percent higher than the previous $11.31 billion. Comparatively, Philippine exports to South Korea declined nearly 40 percent to $2.6 billion, from $4.33 billion.
If signed, the FTA with South Korea will be the country’s third bilateral trade deal after the Philippines-Japan Economic Partnership Agreement in 2008 and the Philippines FTA with EFTA States Iceland, Liechtenstein, Norway and Switzerland on June 1, 2018.