Korea-Philippines FTA: More than just an economic pact

The signing of the Korea-Philippines Free Trade Agreement (FTA) was a significant milestone in the relationship of the two countries. It was inked on Sept. 7 on the sidelines of the 43rd ASEAN Summit held in Jakarta, in the presence of President Yoon Suk Yeol and President Ferdinand R. Marcos Jr. The two leaders held their second summit meeting following the one in Phnom Penh in November last year. Once brought into force, this pact will prove mutually beneficial for trade and investment. Yet, we have to recognize its significance in the broader sense and the promising future it holds for the Republic of Korea and the Philippines.

Certainly, this FTA is a major win for both countries in facilitating trade and economic growth. The level of anticipated market liberalization is remarkable. Korea and the Philippines will open up their markets 94.8 percent and 96.5 percent, respectively, for each other. High-quality tropical fruits, such as bananas, mangoes, pineapples and avocados, as well as other agro-fishery products are popular among Korean consumers. Increased access to the Korean market will naturally serve as an impetus to the Philippine government’s goal of uplifting the livelihood of Filipino farmers.

Lately, ensuring food security and stabilizing the agricultural sector have been gaining traction in the Philippines. Under the circumstances, rural development is one of the priority targets of the Korea International Cooperation Agency (KOICA) for its official development assistance (ODA) projects. With the signing of the FTA, Filipino farmers and the agro-business sector stand to reap greater benefits. This means a lot, as enhancing the living standards of farmers is essential in the Philippines’ goal of transforming itself into an upper middle-income country.

The agreement is also expected to boost the automotive industry and promote clean energy transition. Once enacted, tariffs on Korean cars will be eliminated, while tariffs on auto parts and electronic and hybrid vehicles will be gradually reduced within five years. With the FTA, bilateral trade relations will become even stronger and Korea may even rise above being the fifth largest trading partner of the Philippines in 2022.

The pact is not just mutually beneficial in terms of early harvest. It is also expected to lay a solid foundation for longer-term and future-oriented cooperation in key areas, including health security, climate action, critical raw materials and cultural exchanges, to name just a few. The Implementing Agreement, attached to the FTA, sets out the details for economic and technical cooperation in health care, innovation ecosystem, digitalization, e-commerce and the film industry.

In the broader scheme of things, the signing of the FTA comes at a very opportune moment. As the geostrategic center of gravity shifts to the Indo-Pacific, the ASEAN stands at its forefront. For Korea’s own Indo-Pacific Strategy, the ASEAN also takes center stage. The FTA is a testament to Korea’s resolve to endeavor together with our ASEAN partners in advancing core values such as freedom, peace and prosperity. This commitment and respect for ASEAN centrality was well reflected in the recent Joint Statement of the 24th ASEAN-ROK Summit on Cooperation on the ASEAN Outlook on the Indo-Pacific (AOIP).

With the signing of the Korea-Philippines FTA, Korea has now established 22 FTAs, both bilateral and regional, covering 59 countries. The Philippines is the fifth ASEAN member to sign an FTA with Korea after Singapore, Vietnam, Cambodia and Indonesia. Adding the Philippines among Korea’s FTA partners signifies our two countries’ firm belief in market economy and rules-based order.

We have to acknowledge that FTAs are not panaceas. Despite removal of tariffs and import quotas, there are also costs associated with complex customs and border procedures. Trade facilitation or “cutting red tape” can unlock further gains in trade and investment. In this regard, I commend the excellent job of the Anti-Red Tape Authority (ARTA) of the Philippines in keeping the regulatory procedures on a par with international standards and the growing demand for digitalization.

Korea and the Philippines are also well poised to cultivate a reinforcing partnership in the midst of disruptions of global supply chain. The Philippines can play a substantial role, given its large reserves of critical raw materials, particularly nickel and cobalt, which are necessary for manufacturing batteries that power electric vehicles and portable electronic devices. It is noteworthy that the Philippines and Korea are working closely in the Indo-Pacific Economic Framework for Prosperity (IPEF), the US-launched framework which aims, among other things, to address supply chain vulnerabilities.

The Irish economist and philosopher Edmund Burke once opined that free trade is not based on utility but on justice. In other words, in an increasingly unpredictable global economic landscape, free trade shouldn’t just be equated with profit; we should not lose sight of fairness and mutual benevolence. Filipinos, with their strong bayanihan spirit, can surely relate to this. This same sense of solidarity and cooperation is deeply embedded in the Korea-Philippines FTA.

There is immense potential for our two countries to explore and leverage each other’s unique strengths and resources. As the 75th anniversary of Korea-Philippine diplomatic relations draws nigh, Korea will continue to stand as a reliable partner of the Philippines in its journey toward a more prosperous future teeming with possibilities. Both sides will now have to put the pedal to the metal to bring this FTA up and running.

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Lee Sang-hwa is the Ambassador of the Republic of Korea to the Philippines.