IN less than a decade, Philippine bananas and canned pineapples may enter South Korea at zero duty, according to the Department of Trade and Industry (DTI).
DTI announced on Tuesday that Manila and Seoul have concluded talks on the Philippine-Korea Free Trade Agreement (FTA) which they expect to sign before February 2022.
Trade Secretary Ramon M. Lopez told reporters that Philippine bananas will start enjoying zero tariffs when entering Korea in five years, while canned pineapples will see zero duty in seven years.
“The final negotiations focused on market access for Philippine banana exports and for Korean automotive units and parts. The Philippines was also able to secure tariff elimination for bananas, which was previously excluded under the Asean-Korea FTA,” DTI said in a statement.
“Likewise, the discussions allowed for an improved tariff treatment for processed pineapples, as compared to the Regional Comprehensive Economic Partnership [RCEP] concessions,” it added.
With the conclusion of the trade negotiations for the Philippines-Korea FTA, Lopez said both governments will conduct “legal scrubbing” of the agreements.
After the signing of the trade pact, Manila and Seoul have agreed to continue negotiations for the “Chapters on Trade in Services and Investment no later than one year after entry into force of the Korea-Philippines Free Trade Agreement.”
The Korea-Philippines Free Trade Agreement negotiations covered Trade in Goods, Trade Remedies, Rules of Origin, Customs Procedures and Trade Facilitation, Economic and Technical Cooperation, Competition, and Legal and Institutional Issues.
“We would also like to thank Korea for accepting all our proposals under the Economic and Technical Cooperation Chapter, particularly on the inclusion of industrial development and agreeing to cooperate on addressing pandemics and other public health emergencies, among others. Both sides have also agreed to revisit discussions on Trade in Services and Investment Chapters a year after the entry into force of the FTA,” Lopez said at the virtual Joint Ministerial Statement on the Conclusion of the Philippines-Korea Free Trade Agreement Negotiations. Agriculture Secretary William D. Dar said the FTA augurs well for Filipino farmers as it will also allow other local farm products to enter South Korea at zero duty.
“We would like to extend our sincere appreciation to the South Korean government for granting duty-free market access to several Philippine farm products. These include banana, canned pineapples, okra, papaya, glass eels, refined coconut oil, cashew nuts, fruit juices,” he said in a statement.
“The recently concluded FTA with South Korea augurs goes well for Filipino farmers, particularly those planting banana, because this will give them duty-free market access over a five-year period from the current 30-percent tariff that will be gradually reduced by 6 percentage points every year, starting in 2022, down to zero on the fifth year or 2026.”
Negotiations for the trade deal commenced in June 2019 in Seoul, South Korea at the initiative of President Duterte. The Philippines and South Korea had set their sights on achieving a “comprehensive and future-oriented FTA.”
In November 2019, the Philippines and Korea signed the Early Achievement Package that confirmed the agreement of both sides to lock in the list of already offered at the time.
Taking off from the achievement package, the two countries finally resolved outstanding issues that led to the conclusion of the negotiations.
With the RCEP agreement complementing the bilateral FTA with Korea, Lopez said the trade value of Philippine exports to Korea will be substantially covered. Hence, it will make the Philippine exports competitive in the Korean market.
Once enforced, the FTA with South Korea will serve as an important vehicle for enhancing trade flows, and generating more investment and employment opportunities in the process.
Level playing field
The Pilipino Banana Growers and Exporters Association (PBGEA) welcomed the conclusion of the FTA, saying the eventual elimination of tariffs slapped by Seoul on Philippine bananas would level the playing field for the Philippines, which is now in competition with Vietnam and Cambodia.
PBGEA Executive Director Stephen A. Antig said his group is awaiting the full details of the tariff elimination on Philippine bananas, particularly the schedule of commitments, to take the necessary steps that will allow them to take advantage of the FTA’s benefits.
“What our members want to know is when the tariff reduction would start and how big it is going to be every year. Nonetheless, we thank the DTI, especially Sec. Lopez, Undersecretary [Ceferino] Rodolfo, Assistant Secretary Allan Gepty, for not giving in their pursuit of tariff elimination,” Antig told the BusinessMirror on Tuesday.
“Hopefully, we can achieve the same feat [in our talks] with Japan,” he added.
Antig also gave credit to PBGEA for being steadfast in its efforts to lobby for the reduction or elimination of South Korean tariffs on Philippine bananas, which started during the Arroyo administration.
“The [elimination of tariffs] would definitely improve our market position in South Korea. We just hope that the farmers in South Korea would not lodge a protest against this measure,” Antig said.
“It will give us some breathing room against our competitors in South Korea. However, [the elimination of tariffs] will not totally solve our problems. Generally, the reduction of tariffs will benefit South Korean consumers and indirectly benefit our industry since we will be able to sell more bananas. We must take note that the South Korean market can only absorb so much.”
Antig said price remains as the single biggest factor that would influence South Korea’s buying decisions.
He also noted that Vietnam and Cambodia have been continuously increasing their share in the South Korean banana market.
The country’s banana exports to South Korea in January to August declined by 41.81 percent to 1.586 million metric tons (MMT) from last year’s 2.726 MMT. Value of shipments plunged by 37.7 percent year-on-year to $725.337 million, based on latest government data.