Overview of EU-RP Economic Relations

1. Overview of EU-RP Economic Relations

2. EU negotiating mandate for the ASEAN-EU FTA • Main principle: most comprehensive and ambitious degree of liberalization in goods, services and investments • FTA as venue to tackle provisions not ready for multilateral discussion and consensus (e.g. competition policies,government procurement, investments, trade facilitation) • Recognizes divergent characteristics of parties (EU and ASEAN, and within ASEAN)

3. EU negotiating mandate for the ASEAN-EU FTA Nature and Scope of Agreement • Trade in goods • Services • Public procurement • Trade and Competition • Intellectual, Industrial and Commercial Property Rights • Capital payments and movement • Customs and trade facilitation • Trade and Sustainable Development • Transparency in trade regulations • Institutional Framework and Final Provisions

4. Nature and scope of EU mandate on ASEAN-EU FTA Trade in goods • Removal of import duties and charges for both sides within ten years (with transitional period for ASEAN Members) • Longer time period for minimal number of sensitive products • Removal of all NTBS,; Harmonization of SPS • Rules of origin, penalties for violation • With provisions for for possible safeguard measures and other trade remedies such as anti-dumping and countervailing measures • Key features: principle of frontloading of liberalization commitments and parity with other ASEAN trade partners

5. Nature and scope of EU mandate on ASEAN-EU FTA Services • Progressive and reciprocal liberalization of trade in services, with possible flexibilities for ASEAN members • FTA NOT to include National marine cabotage law Air services including domestic and international transportation • EC to have parity with other countries that have FTAs with ASEAN

6. Nature and scope of EU mandate on ASEAN-EU FTA Trade and Competition • Address anti-competitive behaviour • Legal framework, transparency and enforcement of competition rules Customs and Trade Facilitation • Rules, requirements, formalities, procedures for exports, imports and goods in transit • To cover customs enforcement of IPR protection

7. Nature and scope of EU mandate on ASEAN-EU FTA Intellectual, Industrial and Commercial Property • Rules to protect and enforce IPR, especially geographical indications Capital Movement and Payments • Full liberalization of current payment and capital movement (with exceptions for domestic sensitivities and in cases of serious monetary and forex difficulties, supervision of tax)

8. Nature and scope of EU mandate on ASEAN-EU FTA Public Procurement • Transparency in procurement procedures • Inclusion of challenge procedures • Progressive liberalization of procurement markets at the national, regional and local level, including in public utilities in priority sectors

9. Nature and scope of EU mandate on ASEAN-EU FTA Trade and sustainable development • Standards based on principles of sustainable development (e.g. labor standards, environmental considerations) • Provides for monitoring of social and environmental impact of the agreement Transparency in regulations • Consultations with stakeholders “in advance of the introduction of regulations with an impact on trade” • Publication and public consultations on rules with impact on international trade in goods and services

10. Nature and scope of EU mandate on ASEAN-EU FTA Institutional Framework • Creation of Trade Commission to monitor FTA • Conclusion of FTA subject to the conclusion of the Partnership Cooperation Agreement of the EU with ASEAN Members.

11. EU Country Strategy Paper for the Philippines 2002-2006 • Focus on health sector • Trade and Investment • Good governance 2007-2013 • Delivery of basic services, meeting the MDG • Improved trade and investments flow • Good governance and reforms • Peace in Mindanao

12. Overview of RP-EU Relations: Trade in Goods The EU is one of the Philippines’ major trading partners. It accounts for 14% of the market for Philippine exports in 2004 (EU Webpage) Philippine exports to EU represents only .7% of EU market. Philippine imports represents only .5% of EU to the world exports. More than two thirds (76.43%) of Philippine exports to EU are electronic products. Other exports include clothing and textiles, coconut oil, woodcraft and furniture, among others. (NSCB)

13. Overview of RP-EU Relations: Trade in Goods In 2006, Philippine merchandise exports to EU countries were at US $ 8.55 billion, while imports were at US $ 4.28 billion. Hence, the Philippines has a positive trade balance of US $ 4.26 billion with EU. Among EU countries, the Philippines has a negative trade balance with Denmark, Finland, Ireland, Sweden, Spain, Austria and France.

14. Overview of RP-EU Relations: Trade in Goods

15. Overview of RP-EU Relations: Trade in Goods

16. EU-RP Trade Relations: GSP GSP - products of interest to the Philippines pineapples, bananas, papayas, coffee, coconut, essential oils, articles of apparel and clothing accessories, textile fibers, ceramic products, glass and glassware, furniture, musical instruments, toys and games, electrical machinery and parts, and motor vehicles. 8715 00 Baby carriages and parts thereof NS 8716 Trailers and semi-trailers, other vehicles not mechanically propelled; Value of GSP exports to EU is 584 million Euro. The Philippines GSP utilization rate is only 47%.

17. Overview of RP-EU Relations: Trade in Goods

18. Overview of RP-EU Relations: Trade in Goods • Meanwhile, the most important sources of imports from the EU are Germany, Ireland, United Kingdom, France and Belgium • The Philippines imports electronic products, industrial machinery and equipment, medicinal and pharmaceutical products, transport equipment, telecommunication equipment and electrical machinery from the EU.

19. Overview of RP-EU Relations: Trade in Goods

20. Philippines Top Exports to EU • Crude and Refined Coconut oil - Netherlands, Italy • Skipjack and bonito - Germany, UK and North Ireland • Tuna - Germany, Netherlands, Sweden, Finland, UK and North Ireland • Dessicated Coconut - UK and North Ireland, Belgium, Frace • Pineapple (juice, prepared) - Netherlands, Belgium, UK and North Ireland, Italy, Spain, • Banana chips and crackers - Germany • Seaweeds - Belgium, France, Spain, • Abaca - UK and North Ireland

21. RP Top Agricultural Imports from EU Based on value from 1994-2006 • Food preparations • Sugar • Whey • Fungicide • Malt • Preparations for the manufacture of lemonades or other beverages • Unmanufactured tobacco • Prawn feeds • Pig fat

22. Overview of RP-EU Relations: Investments The EU has been increasing its investments in the Philippines over the last decade (1990-2003) • EU FDI accounts for 27% of total FDI in the Philippines • EU portfolio investment accounts for 41% of total portfolio investments in the country . Latest average yearly EU investment in the country is at EU 389 million (1998-2003) EU members with big aggregate FDIs in the Philippines from 1996-2007 (cumulative) are the Netherlands, France, Italy, Germany and Sweden.

23. Overview of RP-EU Relations: Investments

24. Overview of RP-EU Relations: Investments EU investments are in a broad range of economic interests: such as information technology and services, processed foods and beverages, tourism, infrastructure and utilities, chemical based consumer products, agriculture products and allied services, among others

25. Overview of RP-EU Relations: Labor Markets In 2006, Europe accounted for: • 7.5% of total deployed OFW around the world • .15% of total OFW remittances The United Kingdom and Italy are two of the top ten OFW destinations, absorbing 3.2% and 2.1% of total rehires and newly hired OFW also in 2006.

26. Overview of RP-EU Relations: Labor Markets

27. What are the motivations for forming an FTA?

28. What are the expectations for forming an FTA? Philippines Greater market access? • But EU tariff rates are already low for many of RP exports • Possible market access through GSP, which the Philippines now already enjoys • Greatest block to market access are subsidy protection to EU agricultural producers, which will most likely not be covered by the FTA

29. What are the expectations for forming an FTA?

30. What are the expectations for forming an FTA? Philippines Harmonization of SPS and NTBs? • SPS and NTBs, and not tariffs, are the biggest block to RP exports to EU • Harmonization requires substantial investment in RP capability to adopt and implement SPS and NTBs

31. What are the expectations for forming an FTA? Philippines Increased EU investments in the Philippines? Some of the “requirements” to create an investment friendly Philippines ?: • Liberalization of services industry • Liberalization of restrictions on foreign ownership of lands and corporations • Laws to protect interest of foreign investors (concerns over judicial decisions over Fraport case, Manila Hotel, etc)

32. What are the expectations for forming an FTA? Europe • Part of objective of consolidating commercial presence in Asia, especially in the services sector • More stable and predictable policy and economic environment for its investment interest, especially since EU is increasing its investments in the country • A way to address important obstacles to trade and investments in the Philippines such as regulations on foreign ownership, restrictions in services sector, policies supporting and protecting some sectors and industries • Support to trade and investment flows is a key feature of EU country strategy for the Philippines

33. FTA Areas The ASEAN EU Vision group identified the following areas of focus for the FTA: • Trade and investment facilitation and cooperation • Standards and conformity assessment • Development of efficient services sector • Institutional cooperation

34. FTA Areas Specific sectoral cooperation: Agriculture, fisheries, forestry, sustainable tourism, science and technology, information and communication, intellectual property rights, finance cooperation, mining and energy, transport, manufacturing, cooperation development, competition policy, education

35. Summary of findings Potential gains of increased market access to EU goods market is limited due to the fact that tariffs on RP exports are already generally very low, and is contingent on Philippine sector’ level of competitiveness; Problem of domestic subsidy , which is one of the most important blocks to RP exports, will not likely be comprehensively addressed by ASEAN-EU FTA Most important focus of ASEAN EU is promoting and protecting its investments in the region For RP, this implies the need for (1) liberalization of services sector, (2) removal of restrictions to investment, particularly on foreign ownership and (3) creation a policy environment that safeguards interest of foreign investors

36. Areas of work and intervention for CSOs in ASEAN-EU FTASubstance and Process Substance • Monitoring and impact assessment of EU investments and interest in the Philippines • Policy advocacy to safeguard national capability to regulate foreign investments. This will involve involve advocacy to protect economic provision in the Philippine Constitution, monitoring of related proposed legislation and adminsitrative issuances etc. • Monitoring and impact assessment of EU-RP trade in goods • Monitoring and engagement on ASEAN-EU FTA provisions related to trade facilitation, competition policy, government procurement, intellectual property rights protection

37. Areas of work and intervention for CSOs in ASEAN-EU FTASubstance and Process Process • Advocacy for stakeholder awareness on the proposed provisions/modalities of ASEAN-EU FTA. ASEAN EU is programmed to start discussion on modalities this year (at least four meetings are scheduled from now until December, two of which will be held in Bangkok and Manila, in April and June, respectively) 2. Advocacy for Philippine government to consult with stakeholders on need and decisions to be part of ASEAN-EU before participating in modalities discussion and negotiations

38. Thank you!