[Sejong=Asia Economy Reporter Kwon Haeyoung] The Free Trade Agreement (FTA) between Korea and the Philippines has been finalized.
Yeo Hangoo, Director-General of Trade Negotiations at the Ministry of Trade, Industry and Energy, and Ramon Lopez, Secretary of Trade and Industry of the Philippines, declared the conclusion of the FTA negotiations between the two countries on the 26th and signed a joint declaration. It has been 2 years and 4 months since negotiations began in June 2019.
With this FTA agreement, Korea has established its fifth bilateral FTA with ASEAN countries, following Singapore, Vietnam, Malaysia, and Cambodia.
The government expects that this FTA will further expand Korea's New Southern Policy FTA network and create a complementary effect with the Regional Comprehensive Economic Partnership (RCEP), a multilateral framework in which both countries participate. Improved access to the young, dynamic, and high consumption potential Philippine market is also anticipated.
The Philippines has a population of approximately 110 million, with the economically active population aged 13 to 34 accounting for one-third of the total. Additionally, private consumption accounts for about 70% of the Gross Domestic Product (GDP), making it a market with high consumption potential.
Through this FTA, Korea will ultimately eliminate tariffs on 94.8% of all items, and the Philippines on 96.5%. Previously, under the Korea-ASEAN FTA and RCEP, the Philippines had eliminated tariffs on 89.2% of all items and 92.7% of import value. This FTA negotiation has opened an additional 7.3 percentage points of items and 4.9 percentage points of import value.
In particular, the short-term tariff elimination on automobiles (5% tariff) and auto parts (3-30%), which were not opened under the existing Korea-ASEAN FTA and RCEP, has greatly improved export conditions for key items of Korean companies.
Specifically, not only the immediate elimination of tariffs on trucks and passenger cars but also the elimination of tariffs on eco-friendly vehicles such as electric and hybrid cars within five years secures competitiveness in major automobile exports. The foundation for expanding exports of small and medium-sized enterprises’ products was also established by eliminating tariffs over 15 years on plastic products (5%), stationery (5%), and processed foods (5-15%). Meanwhile, for agricultural, fishery, and forestry products, most were allowed within the scope of the existing Korea-ASEAN FTA, maintaining the current level of openness.
Regarding the banana market, which the Philippines requested Korea to open, safeguard measures for agricultural products were established to prevent a sudden surge in banana imports. For ten years from the first year of FTA enforcement, if imports exceed the annual quota based on recent import volumes, tariffs of up to 30% can be re-imposed.
Additionally, the two countries expanded cooperation by officially stipulating collaboration in areas of recent global interest such as international public health emergencies and pandemics, vaccines, and climate change. Furthermore, to enhance corporate convenience, product-specific rules of origin (PSR) were established for all items.
The two countries agreed to promptly proceed with domestic procedures for legal review and signing, aiming to formally sign the Korea-Philippines FTA agreement as soon as possible.
Meanwhile, Director-General Yeo also signed the Korea-Cambodia FTA on the same day. The two countries had finalized negotiations and signed a joint declaration in February, and held a signing ceremony in line with the Korea-ASEAN Summit.
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