Philippine Exporters to Benefit from South Korea FTA Tariff Cuts
Philippine-Korean Free Trade Agreement Set to Boost Exports This Month
Philippine exporters shipping to South Korea could see notable benefits as early as this month, with the anticipated implementation of the Philippine-Korean Free Trade Agreement (FTA).
Trade Undersecretary allan B. Gepty announced that the final step, an executive order from President Ferdinand Marcos Jr., is expected to be issued in December. This follows the completion of legal procedures by both countries, with South Korea confirming its readiness on november 18th.
“The President will (have to) approve it. The executive order is scheduled to be issued in December,” Gepty told reporters during the National Exporters Week.
The DTI aims to have the FTA in force before the end of the year, allowing Philippine businesses to capitalize on reduced tariffs instantly. Gepty highlighted that tariff cuts will begin upon implementation, with further reductions scheduled for January.
“It will be a big help because there will be tariff cuts. Once it enters into force, there will be reductions already… in january there will be another cut,” Gepty explained.
Beyond the executive order, the Bureau of Customs will issue a customs memorandum order to implement the FTA’s tariff commitments. Both parties will then formally notify each other of the FTA’s entry into force.
boost for Banana Exports and FDI
Calixto V. Chikiamco, President of the Foundation for Economic Freedom, believes the FTA will be particularly beneficial for Philippine banana exporters.
“Our bananas suffer from a higher tariff compared with Central American exports into the South Korean market,” Chikiamco noted.
South Korea is a major market for Philippine bananas, accounting for $164.54 million in exports last year, representing 13% of total fresh banana exports.
Chikiamco also anticipates the FTA encouraging foreign direct investment (FDI) in the Philippines.
“thus, it may cause an increase in FDI to utilize the country’s plentiful labor force to export to Korea,” he said.
However, he emphasized the need to address infrastructure challenges like ports and energy to attract investors seeking to manufacture in the Philippines for the Korean market.
The FTA, signed in September 2022, will eliminate tariffs on 96.5% of goods from South Korea and 94.8% of Philippine products. This includes the removal of tariffs on 1,417 agricultural goods and 9,747 industrial goods upon implementation.
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