Philippines-Korea free trade deal takes effect December 31

MANILA, Philippines — The Philippines-Korea Free Trade Agreement (FTA), which is seen to significantly enhance market access for Philippine products in the Korean market, will take effect on Dec. 31.

In a statement, the Korean embassy in Manila said the FTA would enter into force “a year ahead of schedule” and on the 75th anniversary of diplomatic ties between the Philippines and South Korea and the strategic partnership celebrated in October.

“The FTA will unlock significant opportunities for both countries. By fostering deeper trade and investment ties across key sectors such as industry, agriculture, infrastructure and energy, the agreement will pave the way for economic growth,” the embassy said.

With the FTA’s comprehensive scope covering 97 percent of imports, Philippine products like bananas and pineapples are expected to gain improved access to the Korean market.

Korean businesses are likely to invest significantly in the Philippines, focusing mainly on advanced manufacturing areas like automobiles, electronics and renewable energy.

“The FTA marks a major leap forward in bilateral relations, signaling a fresh chapter of cooperation between the two nations. With a detailed framework that covers 97 percent of imports, this agreement is anticipated to open doors to significant trade and investment opportunities in diverse sectors like agriculture, industry, infrastructure and energy,” the embassy said.

It added that the FTA would serve as a “catalyst for shaping the future of both countries,” fostering collaboration in areas such as health care, carbon reduction, innovative technologies and electric vehicles.

Korean Ambassador Lee Sang-hwa underscored the importance of the FTA to the two countries’ ties.

“The entry into force of the Korea-Philippines FTA marks the dawn of a new era in our strategic partnership,” Lee said.

“The Korean government will actively collaborate with the Philippine government to ensure that the FTA realizes its maximum potential in strengthening economic ties and fostering deeper cooperation between our two nations,” he added.

Lee cited the dedication shown by the two countries, resulting in the FTA’s prompt launch.

“The FTA’s prompt launch is a clear indication of our shared commitment,” he said.

The Philippines-Korea FTA was signed on the sidelines of the 43rd ASEAN Summit in Jakarta, Indonesia on Sept. 7 last year, with both President Marcos and South Korean President Yoon Suk-yeol in attendance.

The Senate ratified the deal last September.

South Korea has consistently ranked among the Philippines’ top trading partners and a prominent source of foreign direct investment.

While previous agreements existed between the two nations, none matched the comprehensiveness of this groundbreaking trade deal. Within the scope of the FTA, both countries have committed to making substantial tariff concessions.

South Korea will remove tariffs on approximately 94.8 percent of Philippine products, while the Philippines will reciprocate by abolishing tariffs on about 96.5 percent of South Korean products.

The FTA encompasses a comprehensive array of provisions, covering areas such as the trade in goods, trade remedies, rules of origin, customs procedures, trade facilitation, economic and technical cooperation, competition and legal and institutional matters.

In terms of the Philippines’ priorities within the FTA, the country focused on enhancing market access for key products such as bananas, processed pineapples, various fruits, industrial goods and a diverse range of services.

For Philippine bananas, tariffs shall decrease by six percent by the end of the year and an additional six percent at the start of 2025, giving the commodity greater market access in South Korea, according to the Department of Trade and Industry (DTI).

The FTA will grant preferential duty-free entry on 11,164 tariff lines from the Philippines, accounting for $3.18 billion or 87.4 percent of South Korea’s imports from the Philippines.

“One of the major beneficiaries of the FTA is the banana industry as the tariff rate for bananas will be reduced to zero in five years,” DTI Undersecretary Allan Gepty said.

At present, bananas from the Philippines that enter South Korea are imposed a 30-percent tariff.

Beyond enhanced market access for Philippine goods in the South Korean market, Gepty said the FTA also provides a mechanism for economic cooperation in key areas such as creative industries, innovation and manufacturing.

Last week, the National Economic and Development Authority Board, chaired by Marcos, approved the issuance of an executive order for the implementation of tariff commitments under the Philippines-South Korea FTA.

For South Korea, a significant victory in the FTA is the elimination of tariffs on many automotive units and components. This development opens opportunities for South Korea’s auto industry to expand its presence in the Philippines, which had a limited footprint in this sector.

Apart from tariff reductions, the FTA includes provisions for capacity-building and technical cooperation between the Philippines and South Korea. — Louella Desiderio