Philippines and South Korea Sign Free Trade Agreement27/09/2023 49
The signing of a historic free trade agreement (FTA) between the Philippines and South Korea marks a significant milestone in their relationship. This agreement, which was formalized during the 43rd ASEAN Summit in Jakarta, Indonesia, has the potential to strengthen economic ties and foster closer cooperation between the two nations.
The Philippines and South Korea have signed an FTA with the goal of enhancing relations between the two nations further. The FTA was signed on the sidelines of the 43rd Association of Southeast Asian Nations (ASEAN) Summit in Jakarta, Indonesia, with both Philippine President Ferdinand Marcos Jr. and South Korean President Yoon Suk-yeol in attendance.
The Philippines and South Korea boast a longstanding diplomatic history that traces its roots back to the 1960s. Over the years, their relationship has grown significantly, fostered by cultural exchanges, a flourishing tourism industry, and robust economic collaboration.
South Korea has consistently ranked as among the Philippines’ top trading partners and a prominent source of foreign direct investment. While previous agreements existed between the two nations, none matched the comprehensiveness of this groundbreaking trade deal.
What are the key provisions of the FTA?
Within the scope of the FTA, both countries have committed to making substantial tariff concessions. South Korea will remove tariffs on approximately 94.8 percent of Philippine products, while the Philippines will reciprocate by abolishing tariffs on about 96.5 percent of South Korean products.
The FTA encompasses a comprehensive array of provisions, covering areas such as the trade in goods, trade remedies, rules of origin, customs procedures, trade facilitation, economic and technical cooperation, competition, and legal and institutional matters.
In terms of the Philippines’ priorities within the FTA, they are focused on enhancing market access for key products, such as bananas, processed pineapples, various fruits, industrial goods, and a diverse range of services. Notably, bananas had been excluded from the ASEAN-Korea FTA, making them a focal point in the Philippines’ negotiations with South Korea.
For South Korea, a significant victory in the FTA was the elimination of tariffs on many automotive units and components. This development opens opportunities for South Korea’s auto industry to expand its presence in the Philippines, which has historically had a limited footprint in this sector.
Apart from tariff reductions, the FTA includes provisions for capacity building and technical cooperation between South Korea and the Philippines. These cooperative initiatives encompass various industries, including (but not limited to):
- Smart farming;
- Film production; and
- Electric vehicles (EVs).
Furthermore, the Philippines has successfully advocated for increased collaboration in addressing public health emergencies within the final agreement.
Under the FTA, both the Philippines and South Korea are poised to enhance their cooperation in areas such as vaccine production and defense industries, reflecting their commitment to jointly addressing global challenges.
What is the expected impact on the private sector?
The newly signed FTA between the Philippines and South Korea holds great significance for the two nations involved and their private sectors and specific industries poised for growth.
Indeed, this new bilateral deal opens a new era for businesses and private enterprises operating in the Philippines and South Korea. The below-mentioned industries stand to benefit the most from the Philippines-South Korea FTA:
- Automotive industry: With the elimination of tariffs on many auto units and parts, South Korea’s auto industry gains a competitive advantage in the Philippines. This presents opportunities for South Korean automakers and suppliers to expand their presence, fostering economic growth in both countries.
- Agricultural sector: For the Philippines, the FTA opens doors to improved market access for agricultural products, such as bananas, processed pineapples, and various fruits. Filipino agricultural producers can expect increased exports and enhanced competitiveness in South Korea’s market.
- Information technology (IT) and electronics: These sectors are traditionally strong drivers of South Korea’s economy. The reduction of trade barriers creates favorable conditions for South Korean IT and electronics companies to explore new opportunities in the Philippines, potentially leading to increased investments and technological exchange.
- Services industry: The FTA encompasses a variety of services, and both countries aim to benefit from enhanced cooperation in this sector. This can lead to greater access for South Korean service providers in the Philippines and vice versa, spanning areas like finance, telecommunications, and professional services.
- Smart farms and EVs: The agreement includes cooperation in emerging sectors like smart farms and EVs. This paves the way for joint ventures, technology transfers, and investment opportunities, fueling innovation and growth in these forward-looking industries.
As we look to the future, the Philippines-South Korea FTA serves as the cornerstone of deeper trade, business, and investor collaboration between these two nations. Beyond the economic advantages it brings, this agreement signifies a shared commitment to common values and aspirations in frontier technology and the green economy.
Source: ASEAN Briefing
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