’No strong case for RP-US free trade pact’
Manila Times, Saturday, March 11, 2006
‘No strong case for RP-US free trade pact’
Angelo S. Samonte
The conclusion of an RP-US free trade agreement (FTA) will drastically impact on the country’s agriculture because it is labor intensive and employs large number of people, according to a recent paper published by De La Salle University experts.
While the paper indicated that the Philippines is no longer an agricultural country, since only 20 percent of it Gross Domestic Product (GDP) comes from this sector, an FTA will still have an impact because 67 percent of the poor are mostly in agriculture.
Agro-processing employs 6.2 million workers, based on the study.
The major hurdles in agriculture are a tight credit market, the emergence of competitors, and backwardness in sanitary pythosanitary (SPS) standards and technology.
”RP-US FTA should increase investments for industry upgrading.
But can the FTA make the Philippines an export platform to East Asia of US agro-based firms?” the paper challenged.
It added that there’s no strong case for the RP-US FTA, except for the major Philippine challenge such as US market diversion from low cost suppliers such as China to RP and the high cost of non-participation for the Philippines.
”There will be a trade diversion in US market away from the Philippines if competitor countries such as Thailand sign a similar agreement with the US. There will be a commodity overlap,” the paper said.
Although an FTA will impact the agriculture sector, it could help the country’s business process outsourcing (BPO) and call center industries because of good labor quality in the Philippines, affinity with the US culture, sufficient infrastructure and strong government support.
Another beneficiary would be the tourism industry but the government must address quality and cost of transportation, security and accommodation.
The automotive industry will also be a loser because the Philippines does not produce much vehicle compared to China and Thailand, according to the paper.
The RP-US FTA, which was initiated by the US few years ago, is now being revived by the government and the private sector as the country’s neighbors started to talk with the US to conclude the same agreement.
A Thailand-US FTA is expected to be signed in the middle of this year.
Singapore is the only Asian country which clichéd an FTA with the US.
In 2004, the US had 16 percent share in the Philippine imports and an 18 percent share in Philippine exports.
The Philippines got a small portion of US trade, posting only 1.1 percent of 2003 US exports; 0.8 percent of its imports.
However, the country is now wedded to East Asian countries and considers China and Japan as other major markets.
