The South Korea-Philippines Free Trade Agreement (FTA) has finally become a reality. The Ministry of Trade, Industry, and Energy announced on the 7th that the South Korea-Philippines FTA has been officially signed. The goal of this agreement is to have it take effect in the first half of next year. With this, South Korea is confirming its efforts to build economic ties with more countries, becoming one of the nations that has concluded FTAs with 59 countries and 22 agreements worldwide.
On this day, Ahn Deok-geun, Director-General for Trade Negotiations, signed the South Korea-Philippines FTA with Alfredo Espinosa Pascual, the Secretary of the Philippines Department of Trade and Industry, at the ASEAN Summit held in Jakarta, Indonesia.
It is worth remembering that the basic principles of this agreement were agreed upon between the two sides in October 2021. Subsequent negotiations took place to discuss detailed schedules for tariff elimination and reduction, agricultural safeguards implementation procedures, and the operation of a joint committee.
In June of last year, legal review work to give legal meaning to the South Korea-Philippines FTA agreement text began, and the final English version was confirmed. Domestic procedures, such as translation and review by the legislative branch, were completed in July.
From May to October 2022, work was also conducted to assess the economic impact of the South Korea-Philippines FTA. This allowed all necessary domestic procedures to be completed, leading to the official signing phase.
The Philippines is a signatory to multilateral FTAs such as the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN Free Trade Area. In addition, the bilateral South Korea-Philippines Economic Partnership Agreement (EPA) has been in effect since 2008. As a result, this marks South Korea's second bilateral FTA with the Philippines.
South Korea has been expanding its multilateral FTAs with ASEAN countries, including the South Korea-ASEAN (ASEAN) FTA and RCEP. Through the South Korea-Philippines FTA, South Korea has established FTA relationships with five ASEAN countries, including Singapore, Vietnam, Cambodia, and Indonesia. Trade with these countries accounted for 91% of South Korea's total trade with ASEAN as of 2022.
The Philippines has a population of approximately 110 million people and a consumption share of 705% of GDP. Trade between South Korea and the Philippines amounted to $17.5 billion as of last year, making South Korea the 5th largest trading partner among ASEAN countries. South Korean exports were $12.3 billion, ranking 3rd among ASEAN countries, and imports were $5.2 billion.
Furthermore, the Philippines is rich in resources such as nickel and cobalt, which South Korea has designated as its top ten strategic deep-sea minerals. This is one of the important factors that significantly increases cooperation potential and potential in the future.
Through the South Korea-Philippines FTA, both countries have eliminated 94.8% of tariffs. South Korean automobiles and automobile parts are major beneficiaries, and the Philippines is the largest importer of automobiles among ASEAN countries. With this agreement, the 5% tariff on South Korean automobiles is immediately eliminated, and tariffs on automobile parts are expected to be phased out within 3-30% over the next five years. As a result, South Korean automobiles are expected to significantly enhance their competitiveness in the Philippine market.
The 5% tariff on environmentally friendly electric and hybrid vehicles is also expected to be eliminated within five years, and processed foods, ginseng, peppers, pears, mackerel, and more will see their tariffs eliminated. This is expected to promote the export of major agricultural and fisheries products from South Korea to the Philippine market.
Tariffs on agricultural and fisheries products have been maintained at the level set in existing multilateral FTAs such as the South Korea-ASEAN FTA and RCEP. However, for bananas, which the Philippines pays attention to, tariffs will be eliminated for five years, allowing for agricultural safeguard measures to prevent a surge in imports.
The South Korea-Philippines FTA includes an economic and technical cooperation agreement and an implementation agreement. Through this, both countries plan to expand cooperation in various fields such as healthcare, rare metal processing, innovative ecosystems, cultural industries, movies, and e-commerce. By laying the groundwork for such forward-looking economic cooperation, we will ensure that the people and companies of both countries can quickly reap the benefits.
The South Korea-Philippines FTA is expected to further develop economic relations between the two countries and enhance the competitiveness of domestic industries and exports. This agreement is expected to have a positive impact on both countries' economies and bring mutual benefits. We will make every effort to obtain parliamentary consent and complete the necessary procedures for the implementation of the South Korea-Philippines FTA in the first half of next year.
A Free Trade Agreement (FTA) is an international agreement aimed at liberalizing and reducing regulations in trade between countries. The goal of an FTA is to reduce or eliminate tariffs on imported goods, thereby promoting trade activity and economic growth. FTAs are considered an important tool for strengthening economic relationships between countries and emphasizing cooperation among trade partners.
Let's take a closer look at the key features and workings of FTAs.
#1. Establishment of Free Trade Areas
FTAs designate specific regions as free trade areas where trade in goods and services can occur freely with reduced or eliminated tariffs and non-tariff barriers. This provides businesses with access to larger markets and offers consumers a variety of products at lower prices.
#2. Reduction of Tariffs and Non-Tariff Barriers
One of the most critical aspects of FTAs is the reduction or elimination of tariffs and non-tariff barriers. Tariffs are taxes imposed on imported goods, and FTAs reduce or eliminate these tariffs, making trade easier. Non-tariff barriers include technical regulations, standards, and import licenses, which are also reduced or removed through FTAs.
#3. Rules and Regulations
FTAs establish rules and regulations to ensure fair competition in international trade. These rules can cover intellectual property rights, environmental protection, labor standards, and more, regulating trade activities between participating countries and promoting cooperation. These regulations aim to prevent unfair competition in international trade and ensure that all countries benefit.
#4. Inclusion of Investment and Services Sectors
FTAs not only cover trade in goods but also extend to investment and services sectors. This promotes foreign investment attraction and facilitates the international provision of services. Particularly, by relaxing regulations in the services sector, FTAs offer opportunities for companies from various industries to enter international markets.
#5. Elimination of Trade Barriers in Specific Sectors
FTAs often focus on reducing trade barriers in specific industries or sectors. This can apply to sectors such as agriculture, automobiles, pharmaceuticals, and more, facilitating trade activities in those areas.
#6. Benefits and Challenges
FTAs offer a wide range of benefits, including increased trade activity, economic growth, and access to a broader range of products and services. However, as markets open up, competition can intensify in some sectors, and concerns about environmental protection and labor regulations may arise when certain regulations are relaxed.
#7. Examples of FTAs
One of the most well-known FTAs is the North American Free Trade Agreement (NAFTA), which liberalized and integrated trade between the United States, Canada, and Mexico. The European Union (EU) has also signed numerous FTAs with various countries and regions, promoting trade and economic cooperation.
FTAs serve as powerful tools for enhancing economic relations and international trade. They are an integral part of economic integration and prosperity in the global trade landscape. However, careful negotiation and regulation are necessary, taking into account the differences and interests of participating countries, to successfully conclude and implement these agreements.
