The future is Europe
Iwas at the hall of the United Nations General Assembly in New York when I heard the news. Four Filipinos were injured and two Philippine vessels were damaged by two incidents of water cannon attacks recklessly and illegally committed by the China Coast Guard (CCG) near our Ayungin Shoal on March 5, 2024. Among the first to condemn Chinese aggression was the European Union (EU), through EU Ambassador Luc Veron. He called a spade a spade. He added: “The EU reiterates the call for all parties to abide by the legally binding 2016 Arbitration Award and #internationallaw to peacefully resolve disputes, guaranteeing safety in maritime waters.”
When I flew from the US to Belgium to attend the European Union Visitors Program (EUVP), I discussed defense, sustainability and trade with various stakeholders and was very pleased to experience firsthand that multiple players in the EU echoed a common sentiment towards the Philippines – that we have much to gain by bringing together the people of Europe and the Philippines.
In 2022, the EU was our fourth largest trade partner, with approximately $11 billion, or P611.38 billion, worth of EU imports from the Philippines and with a trade surplus in our favor. A considerable one out of four, or approximately 26 percent, of the Philippines’ total export products depend on the EU’s Generalized Scheme of Preference Plus (GSP+). GSP+ allows Philippine entrepreneurs to export to EU member-countries with zero tariffs for more than 6,200 products. It includes electronics such as digital monolithic integrated circuits, canned tuna, sardines, seaweed, coconut oil products and derivatives like copra oil, pineapples and rubber. The Philippines achieved its highest utilization rate at 77 percent in 2022, with a total trade volume of 2.93-billion euros or P178.03 billion. Ninety percent of total EU imports from the Philippines enjoy zero tariff because of GSP+.
Further, in contrast to our arrangement with the US GSP which expired in 2020 and remains unrenewed today, our trading privileges under the EU GSP+ was recently renewed by the EU Parliament and Council by four more years, meaning it lasts until the Year 2027. However, we enjoy incentives only as long as we satisfy strict criteria, including ratification and effective implementation of 27 international conventions in the fields of human and labor rights, environmental protection and climate action and good governance.
It also includes a Gross Domestic Product (GDP) ceiling or threshold, which the Philippines may cross soon as we become an upper middle-income economy. At the moment, the Philippines is the largest country by GDP in the EU GSP+, and the second largest GSP+ export country to the EU. While it’s a point of Filipino pride, it is accompanied by responsibilities inching us closer to GSP+ ineligibility. That means Filipino products in the EU could be more expensive; and 26 percent of all our exports could become less competitive, thereby affecting our entire economy’s trade portfolio. It may also debilitate our local industries. Without EU GSP+ benefits, our Filipino tuna exporters would have to pay tariffs at a hefty rate of 20 to 30 percent.
So what do we do now? Securing a Philippines-EU FTA is evidently vital for our national interests. It’s also beneficial for our EU patrons whose supply chains for Filipino-made products would not be disrupted. With an FTA, the economic benefits to both Filipinos and Europeans become guaranteed.
It seems the EU is already investing in Philippines-EU relations. For instance, at EUVP, I learned the details of EU’s Global Gateway’s Team Europe Initiative on Green Economy with a budget of a whopping 466-million euros or P28.21 billion. It is designed to assist the Philippines in its efforts to transition into a sustainable and circular economy, ensuring water supply and wastewater treatment, promoting energy efficiency and bolstering its renewable energy industry. Such initiative is particularly vital as its component projects include the generation of 2,500 green jobs in the Philippines, application of sustainable production practices through circular supply chain management by 6,000 micro, small and medium enterprises (MSMEs) and plastic waste recycling projects with at least 30 local government units.
It comes at an opportune time as Department of Finance Secretary Recto explores the potential fiscal and non-fiscal benefits of a carbon tax and emissions trading system, as our own Bangko Sentral ng Pilipinas enhances our Philippine Sustainable Finance guidelines and as we further liberalize our economy to allow advancements in a greener, healthier and more sustainable economy. Further, the EU’s Copernicus Program brings in the amount of 10-million euros or P605.28 million and its Copernicus satellites in a pioneering effort to create a data center mirror site for real time disaster preparedness and for climate mitigation. As one of the top disaster-prone countries in the world, the Philippines would greatly enhance its disaster resilience capabilities and, more importantly, lead to better decisions that could save lives.
Another exciting endeavor is the Digital Economy Package, with a budget of 20-million euros or P1.21 billion, which would aid in our efforts to ensure all Filipinos have access to the benefits of digital connectivity and make the Philippines a regional digital hub. Such favorable trade arrangements and investment initiatives contribute to both the EU and the Philippines’ respective aims in ensuring our people’s lives change for the better.
On our end, the legislative and executive branches have sent several delegations to the EU and its memberstates to secure better relations and explore NEW partnerships. President Marcos himself was just in Germany and the Czech Republic.
Coincidentally, after all my meetings in Brussels, I walked down a street called Rue de La Loi. Along my path was the famous “The Future is Europe” mural and, indeed, for the Philippines, it’s looking like Europe is the future.