Consistent with the country’s commitment to the ASEAN Free Trade Agreement (AFTA), tariffs for manufactured products in the so-called Common Effective Preferential Tariff’s (CEPT) Inclusion List were already brought down to zero to five percent as of 2002. The Philippines is also in pace with its obligation to liberalize trade with the rest of the world under the World Trade Organization’s Most Favored Nation (MFN) scheme.

After about a decade of progressively fulfilling commitments under AFTA and WTO, the government is still riding the tide of globalization of trade. In fact, it is joining the rest of the ASEAN bloc in further liberalizing the flow of merchandise, and eventually, services with key partners outside the region. To cite a first example, there are very preliminary discussions on the creation of a US-ASEAN Free Trade Agreement (FTA), said to follow the US-Singapore FTA model. Also on the drawing boards are ASEAN’s planned closer economic partnerships with China and Japan.

ASEAN-China FTA
At the 8th ASEAN Summit in Cambodia late last year, President Gloria Macapagal-Arroyo signed together with fellow ASEAN leaders a framework agreement with Premier Zhu Rongji of China for the creation of the world’s biggest free trade area by the year 2010. This ASEAN-China FTA would encompass a total combined market of 1.7 billion people and US$1.2 trillion total foreign trade. The Philippines’ participation in this FTA is seen to benefit the country via access to the vast opportunities in investment and trade with China.

The government believes that the opening of the Chinese economy should not be seen purely as a threat, but as an opportunity as well. Thus, the government encourages the private sector to join its vigorous pursuit for this China market. Increasingly affluent sectors of the Chinese population, such as those ecozones along the coast of China reportedly enjoying a per capita income much higher than that of the Philippines by a factor of two or three, undeniably constitutes a promising market for Philippine products and services.

As early as last year, the Philippines was already benefiting from the giant’s awakening, with exports to China doubling in 2002 to reach US$1.35 billion from US$792.8 million in 2001. Encouraged, the government has joined hands with the private sector to market Philippine products to China. First of these “marketing efforts” is the country’s recently-held four-day “Solo Exhibition” dubbed as “Philippines - China: Ties that Bind” in Shanghai, China.

Philippines-Japan EPA
The government is also set to forge stronger economic ties with Japan. During the President’s recent and very successful trip to Japan, she signed an agreement with Prime Minister Junichiro Koizumi to accelerate negotiations for a Philippines-Japan Economic Partnership Agreement (EPA).

The planned pact is called the Economic Partnership Agreement and not a Free Trade Agreement because it has broader objectives, not limited to tearing down trade barriers. The planned Japan-ASEAN Economic Partnership Agreement is preceded by and will be patterned after the Japan-Singapore Economic Partnership Agreement which was signed by Prime Minister Koizumi and Singapore Prime Minister Goh Chok Tong in January 2002. The objectives of the agreement are to reduce economic borders and promote economic partnership and linkages between the two countries not only on trade and investment but also in financial services, information and communications technology, and human resource development.

The Philippines-Japan EPA clearly presents opportunities for the country to access the Japanese market. For one thing, Philippine agricultural products are in demand in Japan. Moreover, the country is a reliable supplier of raw materials, intermediate goods, and components to Japan’s manufacturing sector. Also, the country can support Japan’s ageing population with its young, educated, English-proficient workers. As such, there is a great opportunity for the two countries to complement each other.

In a recent meeting with Nippon Keidanren - an elite group of businessmen from Japan, a select group of Filipino businessmen indicated that they were very much in favor of this planned EPA with Japan, adding that they envision the EPA to be very comprehensive, with every sector covered including agriculture. It was also pointed out that major concerns Filipinos want to see resolved in the EPA are mobility in service, especially in the medical profession. The Japanese delegation, for their part, said that they were also supporting the ASEAN-Japan Comprehensive Economic Partnership as a means to build comprehensive partnerships and a web of bilateral frameworks between Japan and the region. The Japanese also share the Filipinos’ belief that capacity-building is one of the big cooperative measures the two countries can undertake.

Safety Nets, Proactive Stance
The country’s trade liberalization efforts have seen not a few local industries clamoring for protection as they are overwhelmed by the anticipated, if not already felt, adverse effects of foreign competition. To address these, the government has invoked certain protocols provided for in the AFTA agreement in an attempt to rescue economically strategic industries or products which are being threatened by intense competition from imports, and are believed to need more time to be more competitive.

Executive Order 161 has attempted to implement what seems to be a balancing act-type of solution for the domestic plastics and petrochemical sector. The government is also making sure that its interests alongside that of other developing countries are well-represented in the multilateral trade negotiations in the World Trade Organization. More recently, the government has maintained the country’s Most Favored Nation (MFN) rates at 2002 levels holding off as much as possible the scheduled tariff reductions not only in light of uncompetitive domestic industries but the looming budget deficit as well.

Within the last five years, the government has also successfully installed what seems to be a complete set of legislative safety nets that will accord certain industries some latitude for adjustment. These are the Anti-Dumping Act, the Safeguard Measures Act, and the Countervailing Duties Act. Skeptics, however, observe that the response to petitions under these laws have been slow and tedious. The Philippines is also in several bilateral talks to consummate a proactive policy when it comes to issues on gaining access for its products in other markets. A case in point is the country’s tuna industry, which has had problems accessing the US and European markets. The Philippine government also went to WTO consultations on the issue of Australia’s ban on fresh bananas from the Phililppines.

Going with the Flow
The Philippines’ credo when it comes to foreign trade is simple enough — that the country is not left behind in global economic integration. As such, local industries can only hope and pray that all the government’s efforts toward free trade indeed provide wider market access for them. In this regard, the government’s continued support and encouragement to build more competitive domestic industries will play an ever crucial role for the country to be able to thrive in this shaping free trade milieu.