As the Philippines seeks to secure free trade agreements with several trading partners, these deals should not only address the removal of trade barriers but also include provisions for building supply capacity, according to the International Trade Centre (ITC).

While trade agreements are reached to remove barriers, such as tariffs, between two parties, the ITC said that they should also include measures to ensure that the domestic export industry can meet the demand of an open market.

For instance, it stated that exporters should be given sufficient support under a trade deal to meet the importing country's regulations.

“This approach helps exporters adapt to new standards and maintain market access while enhancing their competitiveness and sustainability practices,” the ITC said in a report.

The report, which examines the relationship between climate change and trade in the Philippines, states that the European Union (EU) and other high-income economies are implementing environmental measures that will have a direct impact on market access and export supply chains.

“This will require the Philippines to develop strategies for sectoral planning and investment

to remain competitive, considering this emphasis on sustainability,” it read.

While the Philippines and the EU are still negotiating a free trade agreement (FTA), the ITC has stated that the 27-member bloc is already engaged in capacity-building efforts for sustainable development in the country.

It recalled that in 2023, the EU announced a green economy initiative for the Philippines, with a budget of €466 million, or approximately ₱31.22 billion.

The EU stated that this investment aims to support the country on its path to a sustainable future through a transition to a circular economy and the generation of green energy, thereby further strengthening the capacity of local industries.

The latest round of negotiations between the Philippines and the EU involved discussions on trade and sustainable development—a key environmental provision.

The Philippines could tap into a similar model of building supply capacity with its FTA negotiations with Canada, the United Arab Emirates, Chile, and even the United States.

As global demand for sustainable production increases, the report emphasized the urgency for the Philippines to strengthen its local industries to harness the green wave.

It stated that the government could invest in renewable energy, improve energy efficiency, and promote sustainable agricultural practices to reduce emissions.

The ITC report cited the Promotion of Green Economic Development (ProGED) program of the Department of Trade and Industry (DTI) as the ideal program in this pursuit.

ProGED assists micro, small, and medium enterprises (MSMEs) in adopting climate-smart and environment-friendly strategies, enhancing their competitiveness through the green value-chain approach.

With the Philippines expected to benefit from the growing global green market, the report urged the government to engage in discussions about new market regulations and requirements.

“Participating in World Trade Organization (WTO) discussions enables advocacy for equitable trade practices and provides a platform to challenge measures that could unfairly affect developing countries,” the report read.

Further, the government should also participate in international standard-setting to help ensure that the development of environmental standards and measurement methodologies is fair for its circumstances.

The ITC said the Philippines may participate through the DTI’s Bureau of Philippine Standards, which serves as the national standards body.