PHILIPPINES-JAPAN FTA

DIRECTOR SENEN M. PERLADABureau of Export Trade PromotionDepartment of Trade and Industry

Doing Business in Free Trade Doing Business in Free Trade AreasAreas

November 7, 2012

What is an FTA?

Agreement between two or more countries to eliminate or reduce tariffs and other requirements of commerce that restrict trade between them.

Reasons for Philippine Engagement in FTAs

Existing PH FTAs

1.1. ASEAN Free Trade Area ( AFTA)ASEAN Free Trade Area ( AFTA)

2.2. ASEAN-China Free Trade Area (ACFTA)ASEAN-China Free Trade Area (ACFTA)

3.3. ASEAN-Korea Free Trade Area (AKFTA)ASEAN-Korea Free Trade Area (AKFTA)

4.4. ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)

5.5. ASEAN-Japan Comprehensive Economic Partnership Agreement ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEPA) (AJCEPA)

6.6. Philippines-Japan Economic Partnership Agreement ( PJEPA)Philippines-Japan Economic Partnership Agreement ( PJEPA)

7.7. ASEAN–India Free Trade Area (AIFTA)ASEAN–India Free Trade Area (AIFTA)

FTAs increase competitiveness of PH exports because of zero or lower duties to be paid by importers of PH products.

Lowers cost of production of products with imported components from FTA partner economies.

Facilitates technology transfer and capacity building through FDI (Foreign Direct Investments).

Enhances market access for PH services ( e. g. tourism and travel related services, engineering and agricultural design, maritime services)

Simplifies requirements for entry of business visitors, intra corporate transferees, investors, natural persons supplying professional services ( including nurses and certified caregivers).

Major Benefits of Free Trade Agreements

Year Total Trade

Exports to Japan

% Share to Total Exports

Imports from Japan

% Share to Total Imports

Balance of Trade

2007 14.14 7.30 14.47 6.84 12.32 0.46

2008 14.31 7.71 15.70 6.60 11.64 1.11

2009 11.57 6.21 16.15 5.36 12.45 0.85

2010 14.58 7.84 15.23 6.74 12.28 1.10

2011 15.40 8.89 18.40 6.52 10.77 2.37

Philippines-Japan Merchandise Trade(Values in US$ Billion)

Japan as a Market for PH Exports(% share)

2010 2011

*China includes Hongkong.

Total PH exports -US$48.30B Total PH exports US$51.50B

Exports of Selected Product Groups

PH-Japan, 2010US$ 7,841.29 M

PH-Japan, 2011 US$ 8,886.14 M

Japan as a Supplier of PH Imports(%share)

2010 2011

*China includes Hongkong.

Total PH imports US$60.49BTotal PH imports US$54.93

Imports of Selected Product Groups

PH-Japan, 2010US$ 6,744.36 M

PH-Japan, 2011 US$ 6,516.38 M

PJEPA and AJCEPAComplementary agreements providing options to businessmen

PJEPAPJEPA AJCEPAAJCEPA

The Philippines Japan Economic Partnership Agreement (PJEPA)

PJEPA is the most comprehensive bilateral economic agreement of the Philippines with another country. It covers Trade in Goods, Services, Customs Procedures, Investments, Intellectual Property, Mutual Recognition , Movement of Natural Persons, Cooperation, Competition, improvement of the Business Environment.

PJEPA levels the playing field with other countries, including ASEAN markets that have bilateral EPAs with Japan already in place

The agreement entered into force on Dec.11,2008

ENHANCING MARKET ACCESS FOR PH EXPORTS

Tariffs on eighty one percent (81%)of export products were removed immediately. Tariffs on the remaining products will be reduced or removed over a period of three to fifteen years.

Tariff Rate Quotas on agricultural products such as fresh pineapples, cane molasses, poultry meat cuts.

The Philippines Japan Economic Partnership Agreement (PJEPA)

Tariff Elimination on PH Exports to Japan

Tariff Elimination Schedule for Phil.

exports

Tariff lines

Sample Products

Immediate Elimination ( A- zero duty as of Dec.2008)

7, 476(81.2%)

Electronics GarmentsFurnitureMetal manufacturesMinerals

Certain jewelry itemsChemicalsCoconut ,papayas, mangoesShrimps and PrawnsLobsters

Gradual (B3 –B15) 888(9%)

Tuna(fresh, frozen)Processed vegetablesProcessed FruitsSmall banana varieties

FootwearCarpets and other textile floorCoveringsPrepared/Preserved fishLeathergoods

Phased reduction / TRQ/ 316(4%)

Fresh pineapplesFresh bananasPoultry Meat Cuts

Cane sugarCane molassesIce cream

Renegotiation 269(2.9%)

Motor vehicles

The PJEPA

The ASEAN – Japan Economic partnership Agreement ( AJCEPA)

Essentially the same Philippine tariff commitments as in PJEPA.

Longer tariff elimination schedules for some products as compared to the PJEPA. Under the PJEPA tariffs on 127 lines will be eliminated immediately but under the AJCEPA it will take five years.

Implementation began in July 01 ,2010 under the

ambit of ASEAN.

ENHANCING MARKET ACCESS FOR PH EXPORTS

The AJCEPA

Integrates the Philippines into a regional market with a population of more than 700 million.

Manufacturing inputs from other ASEAN countries and Japan are considered “originating” and may be used to qualify for passing the ROO and getting AJCEP preference.

More choices in sourcing imported inputs

ENHANCING MARKET ACCESS FOR PHILIPPINE EXPORTS

Sector

MFNAJCEP

APJEP

A

Lauryl alcoholGlycerolOther plastic packaging materials Epoxide resins

4.75

3.93.1

0000

0000

Copper foil, backed with refined copper Copper foil, backed with copper alloysScrap, powders of other base metals

33

2.5 / 3

000

000

Other non-wired glass 4.2 0 0

Meta

lsC

hem

icals

&

Pla

sti

cs

Gla

ss

Examples of PJEPA & AJCEPA Benefits for Philippine Business

Enhanced market access in Japan for Philippine exports…

Examples of PJEPA & AJCEPA Benefits for Philippine Business

Sector

MFN AJCEPA PJEPA

Frozen poultry meat cutsYellowfin tunasShrimps and prawnsSmoked fish

33.51

10

03.50

7.3

0 (TRQ)0.600

Fresh MangoesFresh pineapples

317

017

0In Quota =0(1,600 MT in

2012)

Refined coconut oilCrude coconut (copra) oil

4.5% or 5 yen/kg

whichever is greater;

0 0

Other plywood and veneered panels Builders' woodwork

3

3.9

0

0

0

0Resou

rce a

nd

ag

ro-b

ased

pro

du

cts

Important PJEPA and AJCEPA References

Text of the AJCEPA :http://www.aseansec.org/agreements/AJCEP/Agreement.pdf

Schedule of Commitments:http://www.aseansec.org/22572.htm (refer to the section on Annex 1 - Schedules for the Elimination or Reduction of Customs Duties)

Text and schedules of the PJEPA : http://www.dti.gov.ph (I’m an Exporter Section)

Japan Import Duties under PJEPA: http://www.customs.go.jp/eng

Philippine Tariffs:http://www.tariffcommission.gov.ph/eo_767http:// www.tariffcommissiion.gov.ph/eo_905http//www.tariffcommission.gov.ph/eo_852

Thank you…