PH-EFTA free trade agreement fuels PHL trade surplus

The Department of Trade and Industry (DTI) remains committed to boosting the Philippines’ strong foothold in the European region through the country’s Free Trade Agreement (FTA) with the European Free Trade Association (EFTA) Member States – Switzerland, Norway, Liechtenstein, and Iceland.

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The PH-EFTA FTA opens the gate for EFTA’s high-income market for premium and niche Philippine products when it entered into force in June 2018.

DTI Secretary Fred Pascual said, “We convey our utmost appreciation for Senator Legarda’s leadership in the Senate Committee on Foreign Relations during the ratification of the Philippines-European Free Trade Association Free Trade Agreement in early 2018. This agreement facilitates increased market access, reduction of non-tariff barriers, trade and sustainable development, and protection of intellectual property rights among others, which we see as crucial for the Philippine economy.”

The FTA with Switzerland, Norway, Iceland, and Liechtenstein is part of government efforts to tap non-traditional markets with high potential for growth in trade and investments and forms part of the broader strategy to gain a stronger foothold in the European market.  DTI further highlighted, “The EFTA countries have been the country’s steadfast partners. This important milestone in boosting our strong linkages in the European region was made possible by your Committee’s support in 2018”.

TRADE SURPLUS

Since the FTA entered into force on 1 June 2018, the Philippines was able to turn around its perennial trade deficit with EFTA. In 2019, the Philippines posted a trade surplus of USD 47.12 million. This surplus further grew to USD 101.49 million in 2020 and USD 129.89 million in 2021 despite the COVID19 pandemic.

Total trade between the Philippines and EFTA likewise increased by 2.40% from USD 802.150 million in 2018 to USD 821.407 million in 2019. This further improved by 16% from USD 821.81 million in 2020 to USD 953.58 million in 2021.

DTI Usec. Rodolfo stated, “The Philippine market does not compete and is complementary in nature to the EFTA market. As such, the Philippines was able to secure duty-free market access for all industrial and fisheries exports to EFTA and significant concessions on major agricultural products through the FTA, particularly those: (1) Philippine products to the EFTA Member States, such as desiccated coconut, prepared or preserved pineapples, and raw cane sugar; and (2) with high potential export interest.”

With the FTA in place, in 2020, around EUR 24.84 million worth of Philippine agricultural and industrial products were able to enter the EFTA market with reduced or zero tariff rates. These Philippine products include tunas, desiccated coconuts, fruits and nuts, processed foods and other food preparations, pasta, malt products, vacuum cleaners, new pneumatic tires, and hairdressing apparatus.

On the investment front, Switzerland has been the country’s major partner in EFTA and a regular source of foreign investments in the European Region. From 2018 to the 3rd Quarter of 2022, IPA-approved Swiss investments totaled PhP 1.40 billion (or USD 25.865 million) in the following sectors: manufacturing, real estate activities, administrative and support activities.

From 2018 to the 2nd quarter of 2022, investments from Norway, Iceland, and Liechtenstein also amounted to Php 229.4 million (or USD 4.23 million) in the country’s financial and insurance, manufacturing, administrative, transportation, and storage sectors.

DTI conveyed that along with the PH-EFTA FTA, recent economic reforms, such as the opening of 100% foreign capital in renewable energy projects, will pave the way for more investments from EFTA to the Philippines, particularly in the energy sector.

FTA REVIEW

During the Inaugural Joint Committee Meeting which was hosted by the EFTA Member States on 10 January this year, the Philippines and the EFTA States officially assessed the implementation of the FTA.

The Joint Committee Meeting (JCM) with the Philippines marks EFTA’s first engagement for this year. This was co-chaired, on behalf of the EFTA Member States, by Swiss State Secretariat for Economic Affairs Minister Karin Buechel and DTI Undersecretary Ceferino S. Rodolfo.

Over the 5 years of implementation, both sides have confirmed that the FTA is working well and has no critical implementation issues to date. The preferential utilization rates for the Philippines and EFTA Member States were reported at 31% and 30% for 2020, respectively.

Both sides are determined to further improve their respective utilization rates. A key highlight of the meeting was the official preview of the PH-EFTA FTA online interactive web tool that will help Philippine and EFTA exporters maximize their preferences under the FTA.

Undersecretary Rodolfo said, “We are privileged to be the EFTA’s first recipient partner of this online web tool to promote the PH-EFTA FTA. This will really benefit the Philippines and EFTA business community.”

Anchored in the FTA implementation, the Philippines and EFTA Member States had a constructive dialogue on trade and sustainable development, during which we had the opportunity to highlight the Philippine government’s initiatives on the implementation of international labor and environmental conventions, including the Philippines’ domestic policies on freedom of association, gender equality, sustainable management of forests and climate change.

DTI Usec. Rodolfo further remarked, “This FTA certainly promotes international trade while contributing to the objective of sustainable development, all the while ensuring that labor rights and environmental protection will not be sacrificed in the name of trade and investments.”

Prior to the convening of the Joint Committee, the Sub-Committee on Trade in Goods (TIG) met to discuss the technical operationalization of the TIG Chapter of the FTA, including market access, customs, rules of origin, and trade facilitation.

The Philippine side was led by Bureau of International Trade Relations Director Angelo Benedictos and the EFTA side was represented by Swiss Federal Office for Customs and Border Security Deputy Head Meinrad Muller, on behalf of the EFTA Member States.