Trade
Fast-tracking a Philippine–EU free trade agreement
Author: Stacey Nicole M Bellido, Philippine Foreign Service Institute
The Philippines is at a critical juncture in its economic relations with the European Union over free trade agreement (FTA) negotiations. As the economic consequences of pandemic grip the world, the Philippines should seize this opportunity to revive negotiations and secure a Philippine–EU FTA to help drive a long-term and sustainable economic recovery.
The European Union is the largest foreign investor in the Philippines and the country’s fourth largest trading partner. In 2018–19, the Philippines’ total trade with EU member states accounted for almost 10 per cent of the Philippines’ total trade.
The Philippines currently enjoys a major incentive to trade with the European Union under the Generalized Scheme of Preferences Plus (GSP+). This preferential arrangement grants Philippine exports full duty-free entry to the European Union covering two-thirds of all EU tariff lines. In return, the Philippines must effectively implement its commitments to international conventions on sustainable development and good governance.
Philippine exports to the European Union grew by 27 per cent one year after gaining GSP+ status in 2014. This translated into significant socioeconomic benefits for local and rural communities, reflected in the increase of over 200,000 jobs in the agriculture and manufacturing sectors. The political conditionality of maintaining GSP+ status is meant to acknowledge the Philippine government’s upholding of international commitments on human and labour rights, environmental protection and good governance.
Earlier this year, the EU Delegation to the Philippines shared that it prioritises the GSP+ over the prospective Philippine–EU FTA as the governing platform for economic cooperation with the current Philippine administration. Compliance with GSP+ commitments remains modest at best due to prevailing concerns over human rights violations and a shrinking democratic space in the Philippines. GSP+ privileges are also set to expire by the end of 2023. The Philippines must act boldly to move negotiations forwards if a Philippine–EU FTA is to be reached in the next few years.
Formal negotiations for a Philippine–EU FTA began in 2015. Both parties have met only twice to discuss the FTA. Negotiations have stalled for three years due to Philippine President Rodrigo Duterte’s hostility towards the European Union and EU concerns over Philippine GSP+ commitments.
President Duterte has repeatedly lambasted the bloc for meddling in the Philippines’ internal affairs. The European Union has been openly critical of the administration’s ‘war on drugs’ and has strongly supported a probe into human rights violations in the country. Bilateral relations are strained further by President Duterte himself, who has rejected EU aid packages, shunned invitations to multilateral forums and threatened EU ambassadors with expulsion. Reviving the stalled negotiations is as much a political matter as it is an economic one.
There are two main incentives for the Philippines to realise a bilateral FTA with the European Union. First, the Philippines already has one foot in the European market through the GSP+ and an existing FTA with European Free Trade Association (EFTA) states (Iceland, Liechtenstein, Norway and Switzerland). Second, a Philippine–EU FTA would put the Philippines on an equal footing with other ASEAN countries aggressively pursuing closer economic ties with the European Union.
The Philippine–EFTA FTA builds on the gains of the GSP+. It promises increased market access to all industrial, fishery and agricultural Philippine exports to EFTA states. It allows investments and technological know-how from these highly developed states to flow into the Philippine economy. The agreement would significantly expand the Philippines’ foothold in the European market while giving it access to EFTA’s wide network of preferential trade agreements outside the European Union.
Without prioritising a Philippine–EU FTA, the Philippines will continue to lag behind its ASEAN counterparts. Singapore and Vietnam have brand new FTAs with the European Union, and Indonesia is working hard to follow suit. An EU–ASEAN FTA, the ultimate objective, will be a step closer to realisation with a Philippine–EU FTA on the table.
The Philippines should ripen domestic conditions that allow for a Philippine–EU FTA to materialise. Key structural reforms should be considered, such as accelerating the Corporate Recovery and Tax Incentives for Enterprises (CREATE)…
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
Trade
WTO ministerial trading in low expectations and high stakes
The WTO’s 13th Ministerial Conference is set to focus on e-commerce transparency, investment facilitation, and admitting new members. However, progress may be hindered by disputes, especially regarding fisheries subsidies.
The World Trade Organisation’s 13th Ministerial Conference
The World Trade Organisation’s (WTO) 13th Ministerial Conference is set to take place in Abu Dhabi on 26–29 February, with expectations of deals on electronic commerce transparency, investment facilitation for development, and the admission of Timor Leste and the Comoros as WTO members. Despite these positive developments, the expectations are relatively modest compared to promises made at the 12th Ministerial Conference, which included addressing fisheries subsidies and restoring a fully functioning dispute settlement mechanism by 2024.
Challenges in Dispute Settlement and Agricultural Trade Reform
However, challenges remain, especially in the deadlock of dispute settlement since December 2019 due to a US veto on the appointment of Appellate Body judges. Progress in restoring the dispute settlement mechanism has stalled, and discord continues regarding India’s grain stockholding policy as a potential illegal subsidy. Restoring a fully functioning dispute settlement mechanism hinges on addressing US concerns about perceived bias against trade remedies in relation to China’s state subsidies.
Geopolitical Tensions and the Future of Trade Relations
The likelihood of reaching agreements amid geopolitical tensions between Western democracies and China appears slim, with issues surrounding subsidies and global supply chains causing rifts in trade relations. As nations focus on self-reliance within the global value chain, opportunities for trading face obstacles. Advocacy for open markets and addressing protectionist sentiments remains crucial for fostering resilience to external shocks and promoting economic growth.
Source : WTO ministerial trading in low expectations and high stakes
Trade
Getting Vietnam’s economic growth back on track
Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.
Vietnam’s Economic Roller Coaster
After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.
Trade Performance and Monetary Policy
Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.
Challenges and Prospects
Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.
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