The country’s free trade agreement (FTA) utilization rate under the Philippines-Japan Economic Partnership Agreement, or PJEPA, is ‘alarmingly low’ at 16.6 percent. This, according to a study published by state think-tank Philippine Institute for Development Studies (PIDS).
Enforced in December 2008, the PJEPA is the Philippines’ first bilateral trade agreement. It is undergoing review after about a decade of implementation.
The authors, PIDS Senior Research Fellow Francis Mark Quimba, PIDS Supervising Research Specialist Maureen Ane Rosellon, and PIDS Research Specialist Sylwyn Calizo, Jr., said it is essential to maximize the trade agreement as it will “pave the way for negotiations of subsequent trade agreements”.
The study noted that FTAs “provide a means to reduce barriers in the cross-border flow of goods, services, as well as capital”. These trade agreements also indicate the “continuing interest of economies to establish formal partnerships”. In the Philippines, these are considered a testing ground “through which liberalization can be gradually undertaken”, with vulnerable sectors given the opportunity to mitigate its adverse impacts.
The Philippines has nine FTAs, both bilaterally and as a member of the Association of Southeast Asian Nations (ASEAN).
Citing various studies, the authors said the low FTA utilization rate can be attributed to factors such as “lack of information or knowledge about FTAs, procedural delays, administrative and compliance costs, and availability of other incentives schemes”.
To address this, the study called on the government to “ensure that importers have all the available information related to importation under PJEPA and all the other FTAs”, especially the micro, small, and medium-sized importers and those in rural areas.
The authors noted that this might be a challenge for the government due to limited resources; thus, it should “partner with business groups and organize information sessions and workshops to specifically increase the capacity of importers to utilize FTAs”.
They also recommended revisiting FTA agreements to “pursue further tariff reduction in goods that still have room for tariff reduction”.
Moreover, the study found that the ASEAN FTA and ASEAN-Australia-New Zealand FTA have higher utilization rates for some of the country’s import partners. The authors said it would be wise to compare them with PJEPA to identify strategies that can improve the latter’s utilization.
The study also said that there is a need for continuous monitoring of these trade agreements' utilization. However, with data only available for three years, the authors noted that government agencies should continuously work with the Philippine Statistics Authority and the Tariff Commission to process the importation data vis-à-vis tariff data.
“This indicator should be closely monitored as it is the first indicator measuring the benefit from FTAs,” they said. PIDS
Utilization under JPEPA is ''alarmingly low'': state think-tank
