Don’t ignore EU

Having been posted in Brussels for three years (1989-1992), I have always been a strong advocate of strengthening trade and investment relations between the Philippines and the European Union, and with good reason.

The EU has been one of our most important economic partners and indeed in some key areas, like investments, has been the fastest growing. Judging from the present growth of EU in trade and investments as well as grants, it has well exceeded my personal expectations.

The EU has similarly looked at the Philippines as a critical cog in its drive to strengthen ties with ASEAN. It has placed the Philippines on the priority path for an FTA and has granted GSP+ ( Generalized System of Preferences) benefits that have given our exporters a tremendous leg up on competition. Yet despite the obvious benefits that can be gained from enhanced economic relations, my European friends are disappointed at how the current administration seems to treat them with disregard.

Readers will recall that in September 2016, Digong reacted fiercely to a European Parliament resolution calling on him to “halt the current wave of extrajudicial killings”. The European Commission is, of course, more circumspect and made no such condemnation, but they have discretely expressed concern that the conduct of the anti-drug war may run afoul of the human rights standards set as a condition for preferential access to the EU market.

The abolition of the death penalty was also a condition to an eventual FTA, cemented by our accession to the Second Protocol of the International Covenant on Civil and Political Rights (ICCPR), which “prescribes a progressive obligation among nations to abolish death penalty and prevent its re- imposition”. I won’t pass judgement on the merits or righteousness of this conditionality – many other countries including the US do have them in various forms – but I think it is important to have an appreciation of what is at stake here to promote an informed debate on the issue of human rights and the reimposition of the death penalty.

Philippine exports to the EU of goods and services have doubled in the last seven years to €13 billion for goods and €3.3 billion for services. The Philippines has a trade surplus, thanks to GSP exports, which increased to € 1.6 billion, representing 3.1 percent of Philippine exports to the world.

With the grant of GSP to the Philippines, tariffs on over 6200 products have been eliminated. In the first half of 2015, a 27 percent growth in exports to the EU manifested a positive response from our exporters. Now, however, our exporters are understandably concerned about the GSP+ benefits being withdrawn because of how Europe might view the state of human rights and rule of law in the Philippines.

The EU is also the largest investor in the Philippines, accounting for a third of approved investments which supports over 500,000 quality jobs. In 2015 alone, the EU accounted for P90.6 billion or 37 percent of investments.

BPO revenues from European clients amounted to $2 billion in 2015 (a 16 percent increase) creating 110,000 jobs. The latest addition in the country is the MercedesBenz Group S e rvi ce s , a shared service of Daimler AG, based in Cebu. They are even speaking to Cebu universities to teach their employees the German language. It behooves the IT- BPO organization, as well as government, to focus on European potential to partially offset potential loss in the US market, assuming the imposition of a border tax on outsourcing as President Trump has threatened.

The EU is the largest host of migrant Filipinos, after the US, Saudi Arabia and the UAE. Of the total OFW remittances in 2015 of $25.8 billion – close to 10 percent of GDP - the EU is the second largest source accounting for 13.1 percent after the US. They are the fifth largest source of tourism, totaling 450,000 despite the fact that except for PAL, there are no direct flights between Manila and Europe. Once again, I strongly believe that a vigorous promotion campaign in Europe will generate more tourists even as the government improves infrastructure and the airlines provide more frequency and improve service and lower airfares.

The EU, jointly with member states, is the largest grant donor to the Philippines. To date, over a billion Euros has been granted to the Philippines to combat poverty and raise the standards of living for the poor. The EU strategy focuses on promoting two key areas: 1) the rule of law, and 2) inclusive growth through sustainable energy and job creation.

How Europe views the human rights situation in the Philippines becomes even more critical in light of the priority being given to relations with ASEAN. Anna Cecilia Malmström the EU Trade Commissioner said: “I am pleased to say that Asia will take center stage in our forward-looking program of multilateral and bilateral trade negotiations.” The EU will soon conclude an EU- Japan FTA and investment agreements with China and other partners. The EU- Singapore and EU-Vietnam FTA will enter into force soon. “I look forward to the Philippines’ chairing of ASEAN in 2017 and working with the Philippines toward an early conclusion of the FTA.” Indonesia, Malaysia and Thailand are on a similar track. It would be disastrous to our exporters if these countries gain preferential access even as we are losing ours.

In practice, the EU has preferred incentivizing gradual progress through dialogue and monitoring, rather than withdrawing preferences. The skepticism of Europeans must be proven wrong. It starts by deepening our engagement with the EU in dialogue on these issues as soon as possible. The reimposition of the death penalty is sure to be a key issue. I think we cannot afford to be cavalier about this very important relation. The stakes are too high.