Arab News | 14 October 2018
Philippines, US to discuss free trade agreement in November
The move toward starting talks comes after both sides resolved issues around a trade and investment framework agreement, including those related to e-commerce
Manila primarily looks to revive its footwear and garment industry as duty-free goods under the FTA
MANILA: The Philippines and the US have announced that they will start free trade negotiations in November in an effort to bolster bilateral economic ties.
The agreement, if inked, will be the second such US engagement in with an ASEAN-member nation, the first being with Singapore.
A Free Trade Agreement (FTA) with the US will give the Philippines another opportunity to attract investors and become a prominent business hub in the region, said Gamaliel Pascual, a former investment banker and consultant on international business and finance.
However, entering into an FTA will also pose a great challenge for the Philippine Government to show its political will to do things with transparency and accountability.
The Philippines and the US have already resolved issues related to the Trade and Investment Framework Agreement before commencing formal talks, confirmed Philippine Trade Secretary Ramon Lopez.
The move comes amid uncertainty over security ties between the two countries as the administration of President Rodrigo Duterte pursues an independent foreign policy.
“For the Philippines, a free trade agreement with the US would upgrade the current Generalized System of Preferences scheme wherein the US reviews zero-tariff privileges given to more than 3,000 Philippine products every three years,” an earlier report said.
An FTA will give Philippines a more permanent trading arrangement with the US, according to Lopez.
Lopez said he aims to “push footwear and garments as duty-free goods under the FTA” as Manila looks to revive its garments industry which has suffered greatly since 1995 as a result of the phaseout of the Multi-fiber Arrangement (MFA).
The MFA was an international trade agreement on textiles and clothing that imposed quotas on the amount of clothing and textile exports from developing countries to developed countries. The system guaranteed the Philippines markets for its exports of textiles and garments.
“We used to have that quota with the US, (which) was already removed, so we want to bring back ... the garments industry,” Lopez said.
But for Pascual, as the Philippines enters into a free trade negotiation with the US it should start off by looking at America’s existing bilateral trade agreements with Mexico and Singapore.
He pointed out to Arab News that both agreements explicitly state that anyone who wants to trade with America must conduct themselves according to the US Foreign Corrupt Practices.
Pascual said a US-Philippines FTA will most likely follow the same template as the trade agreements with Mexico and Singapore.
“The expectation is that this is not an ordinary FTA because if you look at the two templates, it’s having the same transparency and accountability as in the US in terms of doing business. That’s the treaty requirement we are looking at here,” Pascual said.
The FTA, he continued, will give the Philippines another chance to become a prominent investment destination as it used to be back in 1950, 1965, and 1971.
“Here’s another chance because the US is again changing its focus. It’s another cycle, the opportunity to attract and be prominent as an investment destination.” But, he stressed, the Philippines Government must be prepared and willing to do things exactly the way they do things in the West.
“So the country has a choice. The US is, you want to say, imposing the Western way of doing business. And in the Western way of doing business (you have to follow) the standards, transparency, (and) accountability when you’re filing for a business permit.”
When completed, that’s already a treaty obligation, Pascual said of the FTA.
“So as I know, when you break a contract you get into a worse position so it’s better not to sign the treaty in the first place (if we do not have the political will),” he continued.
But, he added: “If you show the political will, you can expect direct foreign investments like Singapore. Because up to now Singapore still gets 80 percent of all direct foreign investments into ASEAN ... simply because they follow transparency and accountability.”
If that happens, “then we will do very well as a country,” Pascual added.