The EU has been discussing FTAs with various ASEAN countries for quite some time, has concluded one with Singapore, has finished negotiations with Vietnam and hopes to finalize negotiations in other ASEAN countries, including the Philippines, soon.
According to WTO data, a total of 395 FTAs were in effect globally in January 2015 and the agreements reach every corner of the planet. Including the agreements currently under negotiation, there are more than 600 agreements and it is estimated that at the end of 2015, FTAs will account for 60% of global trade. FTAs have thus become the ‘new normal’ in international commerce.
ASEAN has been particularly active in negotiating and entering into FTAs. The ASEAN FTA was established about 20 years ago and has steadily developed into an increasingly integrated Free Trade Area. In the past decade, ASEAN has established a number of FTAs with external trading partners to boost trade integration and economic growth.
To date, ASEAN has FTAs in force with China, India, Japan, Korea and a joint agreement that includes Australia and New Zealand. There are ongoing discussions for FTAs, on either a bloc or bilateral basis, with many more, including the EU.
The Philippines is involved in FTA negotiations with the European Free Trade Association (EFTA); the negotiations are quite advanced covering Norway, Iceland, Liechtenstein and Switzerland. Discussions with the EU are ongoing with the ‘scoping exercise’ well advanced.
The European Chamber of Commerce of the Philippines (ECCP) organized last week an exciting dialogue between Philippine and EU competition policy experts. Participants enjoyed the presentations of DOJ ASec. Sy, Head of the Office for Competition, ‘Mr. Competition’ Tony Abad and EU Competition Expert TiinaPitkanen.
It became clear during the discussion that an FTA with the EU would not fly without a c competition legislation; we are happy to note that the President signed the Philippine Competition Act into law a few weeks ago.
In media discussions TiinaPitkanen outlined that, in terms of the progress on the EU-Philippines FTA, they are just at the tail end of the scoping stage, and formal negotiations have yet to be launched. The European business community looks forward to the launch and fast conclusion.
We are happy to note that the incoming EU-Head of Delegation, Franz Jessen, is coming in from Vietnam where he succeeded to finalize the FTA negotiations before he was transferred to Manila. His expertise should help to drive things forward here. It is hoped that the negotiations can be finalized with the Aquino Administration so that we don’t have to start from scratch again.
It’s important to be aware of the Top 10 issues faced by companies wishing to utilize FTAs:
1. Information gathering –finding out what applicable FTAs are in place
2. Understanding FTA legal text – what does the legalese mean?
3. Cost benefit analysis – is it worthwhile to utilize the FTA, or even possible to quantify the benefit?
4. Understanding the Rules of Origin
5. Application of Rules of Origin – do you qualify for FTA preferences?
6. Mapping commercial supply chain realities to FTA ‘assumptions’
7. Getting documentation in place from different company departments
8. Approval from government authorities – what, who and when?
9. Defense against government post-verification challenges
10. Keeping up-to-date with existing and future opportunities.
Despite the many opportunities on offer, the above listing makes it clear that benefiting from FTAs is not a walk in the park. Particularly in the light of increasingly complex international supply chains, FTA texts are often inadequate when dealing with the realities of modern business.
It appears that more effort is required to ensure that the efforts made by governments in negotiating the FTAs are not undone by red tape and administrative difficulties. Often unnecessary obstacles go against the underlying principles of FTAs and create barriers for preferential treatment, rather than facilitating and encouraging market access.