The recently signed Free Trade Agreement (FTA) between South Korea and the Philippines will boost trade in goods and services between our population and the 51 million-strong, $1.67 trillion South Korean economy. A good article explaining the background can be found in a September article in this publication which I recommend you read here: https://mb.com.ph/2023/9/8/zero-tariffs-on-agri-industrial-goods-target-to-start-in-2024
A bilateral free trade agreement is an instrument that sets special conditions to spur trade between states. A multilateral trade agreement, on the other hand, is between a group of nation-states or territories.
One of the salient points of the agreement is progressive reductions in tariffs charged by South Korea on many agricultural products such as bananas over the next five to seven years. This makes these products competitive against those from other sources. As fresh fruit is a necessary part of global diets in the health-conscious post-pandemic era, I foresee increased demand from South Korea and many other countries for our locally produced tropical fruits. This also opens more doors for durian, avocado, and soursop and their derivative products such as food supplements.
Another industry that may potentially benefit from this Free Trade Agreement is our manufactured products and mineral-based industries. South Korean industry needs metals for developing products in the aerospace, electric vehicle, and related sectors such as renewable energy. This can help develop our minerals industry by pushing the processing of these raw materials into products ready for inclusion in industrial processes and value chains.
A big part of our production of these agricultural and mineral products are in Mindanao.
Achieving this FTA is a watershed moment for the country as it opens doors for many local companies and sheds light on other FTAs we have with other countries and groups. What can be done to further boost trade with the rest of the world?
The first is innovative agricultural technology. Beyond machines and computers, it covers management techniques to goad the plant into producing more at a level of quality that meets market requirements. A higher volume of high-quality fruits means more farm income.
Another is financing. With the entry of digital banks, there is a potential to better avail of financing to execute technology that will redound to increased quality and yields. Having both will enable to acquisition of the means to improve yields and reduce costs despite climate and other challenges.
Another step is the branding of our products to enable positive market differentiation and quality assurance. Our mangoes for example are the world's sweetest, enabling a huge following across the globe.
For the minerals sector, we should promote advanced processing such as integrated steel mills to produce semi-processed and processed materials that can easily be turned into industrial products. These are potential job generators, especially in the countryside. These will also reduce our dependence on imported materials that we use in daily economic activities, such as steel reinforcing bars and galvanized iron sheets for construction and housing. With the recent passage of Executive Order 18 creating the green lanes for strategic investments, I see more metal manufacturing companies taking roots in the country.
Another is to promote more shipping enterprises to give our exporters options to ship their products. Yet another is promoting electronic commerce channels that will encourage inclusivity by promoting small-volume trade from small and medium-size companies.
In the end, the various trade agreements will do well to spur the necessary trade and investments that will help secure the economic future of the next generations.