The Philippines is hoping to conclude talks on the Philippines-European Union free trade agreement (PH-EU FTA) by 2027 to unlock more than US$8 billion in untapped potential exports to the EU market and to avoid any possible disruptions should the Philippines graduate from the EU Generalised Scheme of Preferences Plus (EU GSP+), according to a trade official.
Allan Gepty, undersecretary for international trade of the Department of Trade and Industry (DTI), in a recent public consultation on the resumption of the PH-EU FTA negotiations stressed the importance of the timely signing of the agreement because the Philippines may no longer be eligible for the EU GSP+ program in a few years.
Gepty said the target year for sealing the FTA with the EU is 2027, before the current administration’s term ends.
More importantly, he added, “It is imperative for us to conclude in as soon as possible time our free trade agreement with the European Union so that there will be no disruption when it comes to our exports that enjoy preferential arrangement under the EU GSP+.”
He continued: “We’re working hard to finish this the soonest possible time, but more than that we have an inherent pressure to conclude this ASAP given that as we move forward we’re also hitting the upper middle-income status.”
Gepty explained that under EU GSP+ rules, “if for three consecutive years you have been under the upper middle-income status then you will not qualify anymore for this preferential arrangement. So that is an added pressure point aside from the target to finish it before the end of the term of the President.”
The executive said the hope is to conclude the PH-EU FTA by 2027 and have the accord in effect the following year. He said that if the signing is delayed even as the Philippines’ per capita income continues to climb, it is possible to experience a trade disruption.
We have about three years to negotiate, Gepty said, adding that if no FTA is made after this period, many major exports and industries in the Philippines would be affected since around 23% to 28% of total Philippine exports to the EU utilize the EU GSP+.
Another urgent reason to have the FTA concluded is because a study by the International Trade Centre has estimated that the EU represents some $8.3 billion in untapped export potential for the Philippines, Gepty said.
“The point is that the EU is a major market. There are a lot of opportunities for our stakeholders, and while we are in surplus, the fact remains that there is still untapped export potential,” Gepty stressed.
The European Union is one of the Philippines’ biggest trade and investment partners. The regional bloc is the country’s fifth largest trading partner, sixth biggest export market, and top six import source, according to the DTI. In terms of investment, Germany ranks as the third leading source of FDI for the Philippines while Sweden comes in at 10th place.
Negotiations for a Philippines-EU trade and investment agreement were launched in December 2015. The second round of negotiations took place in February 2017, but the talks were put on hold until the announcement in March 2024 that negotiations will resume.
The EU is seeking to build bilateral trade agreements with Association of Southeast Asian Nations (ASEAN) members to serve as building blocks toward a future region-to-region agreement between the EU and the ASEAN.
