Phl pivots to non-traditional markets

NEW ALLIES, BETTER TRADE?

The Philippines has embraced a new chapter of its relations with China, welcoming a more reciprocal trade with the world’s second largest economy.

Traders from China and the Philippines are seemingly back on their usual commerce after years of lackluster and mostly one-sided trade due to territorial disputes between the two countries.

Ramon Lopez, head of the Philippine Department of Trade and Industry (DTI), is pleased with how things are developing between the two nations in just a year and a half in office of the Duterte administration.

“I am generally very satisfied considering the immense improvements in the overall exports performance compared to previous years,” Lopez told The STAR.

He cited the country’s recent robust export figures, which he said averaged a 12 percent growth from January to October as compared to negative figures in previous years.

“Satisfying also to note that this growth came from a more diversified market base, pulled up mainly by China and Hong Kong, due to much improved bilateral relationship,” he said.

In the first 10 months of 2017, the combined markets of China and Hong Kong emerged as the leading destination of Philippine merchandise exports.

Shipments to these markets accounted for 24.31 percent of total exports during the 10-month period and saw a year-on-year increase of 22.1 percent in value.

“We have a good relationship with them before and our trade is balanced before our relationship got strained. But even then, we continued to import, but they slowed down their import from us,” Lopez said.

But following efforts of the current administration to renew ties with China, Lopez said trade between the two nations is back to normal, with “them buying from us without any hesitation and limitations.”

“We are more optimistic towards stronger relationship with China as they also committed to encourage more imports and help balance our trade. We have seen this happening based on our export numbers and pending purchase orders they issued in our favor. They are also holding for the first time next year an Import Promotion Fair to help balance their trade with many other countries,” Lopez said.

Aside from China, the Philippines has also made significant strides this year to boost trade with Russia another non-traditional market.

In February, the Philippines and Russia held their inaugural Joint Commission on Trade and Economic Cooperation wherein they tackled economic

cooperation initiatives in areas such as trade, investments, iron and steel and aviation industries, peaceful use of nuclear energy, higher education, energy, information and communications technology, intellectual property, agriculture, transportation, science and technology, tourism, and labor.

This was followed a month after by President Duterte’s State Visit to Russia, during which he was accompanied by a large business delegation.

Russia has already committed to import $2.5 billion worth of Philippine agricultural products.

“With Russia, they are starting to buy more, and talks continue to finalize purchase agreements for other products,” Lopez said.

But while the country’s focus has somehow shifted to its new-found allies, the Philippine trade environment continued to benefit from its existing partners.

Earlier, fears arose that the country’s push to revitalize its relationship with China and open up to markets like Russia would affect its existing ties with traditional allies like the US and the European Union (EU).

Lopez, however, has been consistent in assuring the international business community that the Philippines “remains a friend to everyone” despite the administration’s move to open up to non-traditional markets.

Last June, the US approved the Philippines’ application to expand its current General System of Preferences (GSP) coverage to include travel goods.

The travel goods inclusion was seen as a big boost to the local manufacturing industry and to the economy as a whole as it is expected to create 70,000 new jobs.

Meanwhile, the Philippines’ bid to secure a free trade agreement (FTA) with the US got a big lift during US President Donald Trump’s visit in Manila last month as he welcomed the suggestion and said “they will consider exploratory talks on FTA.”

The country will push for duty free access of garments, textiles, wrist watches and agriculture products to the US for the potential bilateral FTA with the world’s largest economy.

For the EU, Lopez said there has been a steady increase in the number of local players that are utilizing the GSP Plus, a program that allows the country to export 6,274 eligible products duty-free to the EU market.

The alleged cases of extrajudicial killings in the country as part of President Duterte’s drug war, however, has put at risk the country’s GSP Plus privileges.

The country’s beneficiary status under the GSP Plus necessitates the implementation of the 27 international treaties and conventions on human rights, labor rights, environment and governance.

Results of the latest review is expected to come out soon and the DTI is confident the EU would not remove the current set of trade privileges enjoyed by the Philippines as the government has already sent a clear message that there are no human rights violations in the country.

Moving into 2018, Lopez said the Philippines would continue to strengthen trade with existing partners while pursuing at the same time new partners to further diversify markets.

He said some of the new deals being looked at are potential FTAs with Mexico and Chile.

“We see more expansion of trade with non-traditional markets like China, Russia, and Middle East, and more vibrant exports to EU with GSP Plus and US with GSP, as well as Japan and ASEAN and its FTA partners,” Lopez said.

“New FTAs with European Free Trade Association (EFTA) or the four European nations composed of Norway, Switzerland, Iceland and Liechtenstein will likewise encourage us to increase trade in that region. EFTA has been signed and up for ratification in the Senate,” he added.

Lopez said should Australia and Korea open up more their markets for Philippine bananas and pineapples, then the country could also expect to increase trade with these countries.

“On a macro level, we hope we can sustain a more competitive forex, allowing a gradual peso depreciation that will encourage more investments and enlarge our production base. More competitive forex can enhance manufacturing base as it can serve as a natural protection against imports while conversely making our exports more competitive,” he said.

“The overall trade deficit is structural in nature due to years of stronger growth in consumption versus the build up of manufacturing base, thus the demand exceeds domestic supply and so we tend to import more. It may take years of restructuring the production base but we see the start of the correction as we see now manufacturing growth rates like the recent 9.4 percent and this is stronger than latest consumer growth. Also, recent imports are getting to be more capital equipment and intermediate products which are then used in domestic production,” Lopez added.