Free trade deal with Japan underutilized, says PIDS

More than a decade after its enforcement, the utilization of the country’s free trade agreement (FTA) with Japan was found to be “alarmingly low” compared with other FTAs, a new study by the Philippine Institute for Development Studies (PIDS) showed.

In a report, the state-run think tank said the utilization rate of the Philippines-Japan Economic Partnership Agreement as of 2018 was only 16.6 percent, significantly lower compared with the use of other trade pacts such as the ASEAN FTA and ASEANAustralia-New Zealand FTA (AANZFTA) which had utilization rates of as much as 92 percent in some signatory countries.

The country’s first bilateral trade agreement, enforced in 2008, is set for another general review this year.

Leading up to the general review, several rounds of negotiations have been carried out in a bid to increase improved market access for agricultural products such as tropical fruits and specialized rice.

Japan, meanwhile, is seeking lower tariffs for automobiles to allow their vehicles to compete with South Korean cars.

PIDS attributed the weak utilization of the PJEPA to lack of information, procedural delays, administrative and compliance costs.

It urged the government to partner with business groups to organize information sessions meant to increase the capacity of traders to utilize FTAs.

PIDS said attention should also be given to micro, small and medium-sized businesses located in rural areas to enable them to explore benefits in the use of FTAs.

Other than reducing tariff and non-tariff barriers in the crossborder flow of goods, services, and capital, FTAs also give an indication on the continuing interest of economies in establishing formal partnerships.

Citing data from the Trade department, PIDS said around 40.9 percent of Philippine exports in 2018 went to its FTA partners.

Once the country implements the ASEAN-Hong Kong (AHKFTA), 14 percent more of outbound shipments will be absorbed under this trade pact.

The Philippines is party to nine FTAs, with the other sole bilateral FTA being the European Free Trade Association (EFTA). The rest were regional trade pacts with ASEAN and other countries.