Maximizing RP’s FTAs

A study by the Asian Development Bank (ADB) two years ago noted that the Philippines does not maximize its free trade agreements (FTAs) with partner countries.

That study estimated utilization rate of FTAs by certain countries: China 45% vs. the Philippines’ only 28%. Other countries in the region have higher utilization rate as that of RP’s, like Japan, Thailand and Malaysia.

The Philippines is a member of the 10-member-countries, Association of South East Asian Nations (ASEAN), which has a regional Asean FTA (AFTA). The country also has a bilateral FTA with Japan, the Japan-Philippines Economic Partnership Agreement (JPEPA). And a regional FTA via ASEAN with Australia, New Zealand, China, Japan, and S. Korea.

The purpose of FTA is to hasten trade liberalization on a bilateral (country to country) or multilateral (groups of country) basis. Trade liberalization via commitments at the World Trade Organization (WTO) is slow and will remain slow in the coming years. Thus, bilateral and regional FTAs will pick up the slack. The relevant news report today is here.

When a country liberalizes trade, it is given a wide market for its exports through significantly reduced, if not abolished, tariffs with partner countries. The same way, it opens up its economy to its partner country/ies so that local consumers and importers will have a huge choice for consumer and capital goods materials at significantly reduced prices due to low or abolished import taxes.

If businesses can get their capital goods, intermediate products and raw materials, as well as various consumer items at low prices, then it makes them more competitive through lower production costs and lower consumption expenditures.

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