Overview of EU-RP Economic Relations

Overview of EU-RP Economic Relations

EU negotiating mandate for the ASEAN-EU FTA

Main principle: most comprehensive and ambitious degree of liberalization in goods, services and investments

FTA as venue to tackle provisions not ready for multilateral discussion and consensus (e.g. competition policies,government procurement, investments, trade facilitation)

Recognizes divergent characteristics of parties (EU and ASEAN, and within ASEAN)

EU negotiating mandate for the ASEAN-EU FTA

Nature and Scope of Agreement Trade in goods Services Public procurement Trade and Competition Intellectual, Industrial and Commercial Property Rights Capital payments and movement Customs and trade facilitation Trade and Sustainable Development Transparency in trade regulations

Institutional Framework and Final Provisions

Nature and scope of EU mandate on ASEAN-EU

FTA Trade in goods Removal of import duties and charges for both sides within ten years

(with transitional period for ASEAN Members) Longer time period for minimal number of sensitive products Removal of all NTBS,; Harmonization of SPS Rules of origin, penalties for violation With provisions for for possible safeguard measures and other trade

remedies such as anti-dumping and countervailing measures Key features: principle of frontloading of liberalization commitments

and parity with other ASEAN trade partners


FTAServices Progressive and reciprocal liberalization of trade in

services, with possible flexibilities for ASEAN members

FTA NOT to includeNational marine cabotage lawAir services including domestic and international transportation

EC to have parity with other countries that have FTAs with ASEAN


FTATrade and Competition Address anti-competitive behaviourLegal framework, transparency and

enforcement of competition rules Customs and Trade FacilitationRules, requirements, formalities, procedures

for exports, imports and goods in transit To cover customs enforcement of IPR

protection


FTAIntellectual, Industrial and Commercial PropertyRules to protect and enforce IPR,

especially geographical indicationsCapital Movement and Payments Full liberalization of current payment

and capital movement (with exceptions for domestic sensitivities and in cases of serious monetary and forex difficulties, supervision of tax)


FTAPublic Procurement Transparency in procurement procedures Inclusion of challenge proceduresProgressive liberalization of procurement

markets at the national, regional and local level, including in public utilities in priority sectors


FTATrade and sustainable development Standards based on principles of sustainable development

(e.g. labor standards, environmental considerations) Provides for monitoring of social and environmental

impact of the agreement

Transparency in regulations Consultations with stakeholders “in advance of the

introduction of regulations with an impact on trade” Publication and public consultations on rules with impact

on international trade in goods and services


FTAInstitutional Framework Creation of Trade Commission to

monitor FTA Conclusion of FTA subject to the

conclusion of the Partnership Cooperation Agreement of the EU with ASEAN Members.

EU Country Strategy Paper for the Philippines

2002-20061. Focus on health sector 2. Trade and Investment 3. Good governance2007-20131. Delivery of basic services, meeting the MDG2. Improved trade and investments flow3. Good governance and reforms4. Peace in Mindanao

Overview of RP-EU Relations: Trade in Goods

The EU is one of the Philippines’ major trading partners. It accounts for 14% of the market for Philippine exports in 2004 (EU Webpage)

Philippine exports to EU represents only .7% of EU market. Philippine imports represents only .5% of EU to the world exports.

More than two thirds (76.43%) of Philippine exports to EU are electronic products. Other exports include clothing and textiles, coconut oil, woodcraft and furniture, among others. (NSCB)


In 2006, Philippine merchandise exports to EU countries were at US $ 8.55 billion, while imports were at US $ 4.28 billion. Hence, the Philippines has a positive trade balance of US $ 4.26 billion with EU.

Among EU countries, the Philippines has a negative trade balance with Denmark, Finland, Ireland, Sweden, Spain, Austria and France.


Philippine Trade with EU countries, 2006 (in million US $)

Countries

Exports

Imports

Balance

Austria 53.48 58.19 -4.7 Belgium 734.00 264.24 469.76

France 215.27 336.19 -120.9

Germany 1,781.28 1,368.07 413.21

Luxemberg 2.47 .97 1.50

The Netherlands 4,769.19 409.46 4,359.72

Denmark 23.18 55.93 -32.74

Finland 46.35 124.70 -78.34

Ireland 96.70 884.56 -787.86

Sweden 27.06 123.00 -95.94

United Kingdom 484.09 366.02 118.07

Greece 14.09 5.86 8.22

Italy 198.44 164.52 33.92

Portugal 15.09 12.23 2.87

Spain 87.33 112.63 -25.30

Slovenia 3.11 1.91 1.20


EU Markets for Philippine Exports, 2006

55%

21%

9%

6%

3%

2%

4%

The NetherlandsGermanyBelgiumUnited KingdomFranceItalyOthers

EU-RP Trade Relations: GSP

GSP - products of interest to the Philippines pineapples, bananas, papayas, coffee, coconut, essential oils, articles of

apparel and clothing accessories, textile fibers, ceramic products, glass and glassware, furniture, musical instruments, toys and games, electrical machinery and parts, and motor vehicles. 8715 00 Baby carriages and parts thereof NS 8716 Trailers and semi-trailers, other vehicles not mechanically propelled;

Value of GSP exports to EU is 584 million Euro. The Philippines GSP utilization rate is only 47%.


EU Markets for Philippine Exports, 2006

55%

21%

9%

6%

3%

2%

4%

The NetherlandsGermanyBelgiumUnited KingdomFranceItalyOthers


• Meanwhile, the most important sources of imports from the EU are Germany, Ireland, United Kingdom, France and Belgium

• The Philippines imports electronic products, industrial machinery and equipment, medicinal and pharmaceutical products, transport equipment, telecommunication equipment and electrical machinery from the EU.


EU Sources of Philippine Imports,

6%

8%

31%

10%

21%

9%

15%

BelgiumFranceGermanyThe NetherlandsIrelandUnited KingdomOthers

Philippines Top Exports to EU

Crude and Refined Coconut oil - Netherlands, Italy Skipjack and bonito - Germany, UK and North Ireland Tuna - Germany, Netherlands, Sweden, Finland, UK and North

Ireland Dessicated Coconut - UK and North Ireland, Belgium, Frace Pineapple (juice, prepared) - Netherlands, Belgium, UK and North

Ireland, Italy, Spain, Banana chips and crackers - Germany Seaweeds - Belgium, France, Spain, Abaca - UK and North Ireland

RP Top Agricultural Imports from EU

Based on value from 1994-2006 Food preparations Sugar Whey Fungicide Malt Preparations for the manufacture of lemonades or other beverages Unmanufactured tobacco Prawn feeds Pig fat

Overview of RP-EU Relations: Investments

The EU has been increasing its investments in the Philippines over the last decade (1990-2003)

• EU FDI accounts for 27% of total FDI in the Philippines• EU portfolio investment accounts for 41% of total portfolio

investments in the country .

Latest average yearly EU investment in the country is at EU 389 million (1998-2003)

EU members with big aggregate FDIs in the Philippines from 1996-2007 (cumulative) are the Netherlands, France, Italy, Germany and Sweden.


0102030405060708090

100

(in billion pesos)

FranceGermany

Italy

The Netherlands

Sweden

Approved EU FDI In the Philippines by Country of Investor, 1996-2007


EU investments are in a broad range of economic interests: such as information technology and services, processed foods and beverages, tourism, infrastructure and utilities, chemical based consumer products, agriculture products and allied services, among others

Overview of RP-EU Relations: Labor Markets

In 2006, Europe accounted for: • 7.5% of total deployed OFW around the world• .15% of total OFW remittances

The United Kingdom and Italy are two of the top ten OFW destinations, absorbing 3.2% and 2.1% of total rehires and newly hired OFW also in 2006.

Overview of RP-EU Relations: Labor Markets

0

10

20

30

40

50

60

in

Asia

Middle East

EuropeAmericas

Africa Oceania

Share of Regions to Total OFWs and Total OFW Remmitances, 2006

Share to total remmitances, 2006 Share to total OFWs

What are the motivations for forming an FTA?

Motivations for forming an FTA

Philippines Europe • Expanded export opportunities for

goods and labor • Harmonization of Sanitary and

Phytosanitary measures and Non-trade barriers (SPS and NTBs)

• Increased EU Investments in the Phili ppines

• Access to ASEAN markets • Protection of investment interest

in RP and Asia

What are the expectations for forming an FTA?

Philippines Greater market access? • But EU tariff rates are already low for many of RP exports• Possible market access through GSP, which the Philippines

now already enjoys • Greatest block to market access are subsidy protection to EU

agricultural producers, which will most likely not be covered by the FTA


Profile of Philippine Export Trade with EU Number of tariff lines accounting for 95% of total tariff lines exported to EU (in HS 2 digit level)

43

Number of tariff lines accounting for 95% of total tariff lines exported to EU (in HS 6 digit level)

214

Simple MFN Av erage of traded tariff lines

6.3

Weighted MFN Average of traded tariff lines

1.7

Percent of export tariff lines with duty free imports

56.8

Percentage of value of products exported at zero tariffs

89.6

Source: Tari ff Profile of the Philippines, WTO


Philippines

Harmonization of SPS and NTBs?• SPS and NTBs, and not tariffs, are the

biggest block to RP exports to EU• Harmonization requires substantial

investment in RP capability to adopt and implement SPS and NTBs


Philippines Increased EU investments in the Philippines?Some of the “requirements” to create an investment friendly

Philippines ?:• Liberalization of services industry • Liberalization of restrictions on foreign ownership of lands and

corporations• Laws to protect interest of foreign investors (concerns over judicial

decisions over Fraport case, Manila Hotel, etc)


Europe• Part of objective of consolidating commercial presence in

Asia, especially in the services sector• More stable and predictable policy and economic

environment for its investment interest, especially since EU is increasing its investments in the country

• A way to address important obstacles to trade and investments in the Philippines such as regulations on foreign ownership, restrictions in services sector, policies supporting and protecting some sectors and industries

• Support to trade and investment flows is a key feature of EU country strategy for the Philippines

FTA Areas

The ASEAN EU Vision group identified the following areas of focus for the FTA:

• Trade and investment facilitation and cooperation

• Standards and conformity assessment• Development of efficient services sector• Institutional cooperation

FTA Areas

Specific sectoral cooperation:

Agriculture, fisheries, forestry,

sustainable tourism, science and technology, information and communication, intellectual property rights, finance cooperation, mining and energy, transport, manufacturing, cooperation development, competition policy, education

Summary of findings

Potential gains of increased market access to EU goods market is limited due to the fact that tariffs on RP exports are already generally very low, and is contingent on Philippine sector’ level of competitiveness;

Problem of domestic subsidy , which is one of the most important blocks to RP exports, will not likely be comprehensively addressed by ASEAN-EU FTA

Most important focus of ASEAN EU is promoting and protecting its investments in the region

For RP, this implies the need for (1) liberalization of services sector, (2) removal of restrictions to investment, particularly on foreign ownership and (3) creation a policy environment that safeguards interest of foreign investors

Areas of work and intervention for CSOs in ASEAN-EU FTA

Substance and Process Substance1. Monitoring and impact assessment of EU investments and interest in

the Philippines2. Policy advocacy to safeguard national capability to regulate foreign

investments. This will involve involve advocacy to protect economic provision in the Philippine Constitution, monitoring of related proposed legislation and adminsitrative issuances etc.

3. Monitoring and impact assessment of EU-RP trade in goods 4. Monitoring and engagement on ASEAN-EU FTA provisions related

to trade facilitation, competition policy, government procurement, intellectual property rights protection

Areas of work and intervention for CSOs in ASEAN-EU FTA

Substance and Process

Process1. Advocacy for stakeholder awareness on the proposed

provisions/modalities of ASEAN-EU FTA.

ASEAN EU is programmed to start discussion on modalities this year (at least four meetings are scheduled from now until December, two of which will be held in Bangkok and Manila, in April and June, respectively)

2. Advocacy for Philippine government to consult with stakeholders on need and decisions to be part of ASEAN-EU before participating in modalities discussion and negotiations

Thank you!

Documents

Overview of EU-RP Economic Relations