The incident took place a day after President Arroyo ordered the Philippine National Police (PNP) to mount a renewed campaign against kidnapping.
Pangasinan police director Senior Superintendent Rodolfo Mendoza said the suspected members of the Bagis Gang were riding in a Mitsubishi L-300 van from Baguio City when police flagged down the vehicle for inspection at 2:45 p.m.
Mendoza said the suspects opened fire but died in a volley of return fire from elements of the regional mobile and intelligence groups.
He said patrols and a checkpoint were set up near the town after his men had received information that members of the Bagis Gang, which included former Marines and guerrillas of the communist Cordillera Peoples Liberation Army (CPLA), were targeting the vice mayor of the town.
Killed in yesterdays shootout were former Marine Rolando Franco and ex-CPLA fighter Dante Ngawit. Identities of the 10 other men are still being established.
Franco had been listed by police as one of the most wanted men in Tarlac.
No member of the police team was hurt during the 20-minute firefight.
Recovered from the suspected kidnappers were three M-16 rifles, two M-14 rifles, a carbine rifle, a caliber .45 automatic, bullets and several vehicle license plates.
Mendoza said the Bagis Gang is based in Baguio City and operates in the provinces of La Union, Pangasinan and Tarlac.
The other day, the President vowed to meet a new round of kidnappings with more intense focus and counterforce.
A spate of abductions has added to the countrys image of lawlessness with armed Muslim groups and criminal gangs staging kidnappings for ransom and communist insurgents active in the countryside.
Police arrested 230 members of kidnap for ransom syndicates last year.
"Root out terrorism, work with the international community. Return the reputation of Manila and the Philippines as a welcoming and safe place in which to live and do business," she urged the law enforcers. With Christina Mendez, Myds Supnad