The Board of Investments (BOI) targets to conclude by end June this year all discussions and resolve divergent issues of the free trade agreement (FTA) with South Korea.
Trade and Industry Undersecretary Ceferino S. Rodolfo said that this timeframe is critical because the Philippines will be holding national elections in May 2022.
Once all issues are concluded in June, Rodolfo said that it the text will undergo a legal scrubbing by the government and signing by DTI Secretary Ramon M. Lopez by October already. Getting an executive concurrence from President Duterte will follow that could take another 1 or two months or from November to December. Once signed by the President, the FTA deal will have to be presented to Congress for ratification.
“By the time, these processes are completed it would be election time already,” he said.
The presidential election is scheduled in the first week of May 2022.
So far, Rodolfo said that the initial substantive differences are expected to be completed in June this year. So, it is now time to resume negotiations on the remaining issues particularly on the market access for goods.
Already, a bilateral meeting is set by the Philippines next month, April, to map out a way forward.
What was seen as an easier to conclude bilateral free trade agreement with South Korea has turned out to be more contentious and difficult. Both parties originally set the signing of the trade pact in November 2019, but failed.
Aside from market access issues, South Korea had also changes in trade officials handling the FTA talks.
On market issues, 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 for its 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.
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.