Trade Negotiation Agenda: AEC
[+ APEC, Europe Strategy]
Building a Single Production Base
TECHNOLOGY & INNOVATION EXPO
& ENTREPRENEURSHIP CONFERENCE
Cebu, June 2015
Dr. Ceferino Rodolfo
Assistant Secretary
Department of Trade and Industry
Objectives of the Interaction
• Provide trade-context to the
Conference
• Validate level of awareness and
knowledge about the AEC
• Introduce other trade-related initiatives
Outline
• PH Trade Policy
• 4C for AEC: PH Game Plan
• Other Opportunities: EU GSP+
Diagnostic Questions
By 2015:
1. Will ASEAN be like the EU?
For instance, will ASEAN be like a customs
union? Will ASEAN have a single currency? will
there be an ASEAN Parliament? an ASEAN
Commission?
2. Will Indonesian coffee producers be able
to enter PH duty-free?
3. Will a Malaysian doctor be able to
practice medicine in PH w/o taking
licensure exam?
INTEGRATED INDUSTRY
& TRADE STRATEGY
International Trade
Negotiations
One Voice
One
Network
One Team
Advocacy & Communications
Industry Competitiveness
Philippines as a Trading Nation:
Top Markets (2013)
Non-FTA Partners
Source of basic data: Philippine Statistics Authority (PSA)
FTA Partners
ASEAN and Its Partners
ACFTA
(CHINA)
EIF
MS
ES
TT
2010
625M
US$ 4.0T
US$ 79B
EIF
MS
ES
TT
AANZFTA
(AUS-NZL)
Entry Into Force (EIF)
Market Size (MS)
Economy Size (ES)
Total Trade (TT)
AKFTA
(KOREA)
ATIGA
2010
1.81B
US$ 4.3T
US$ 76B
AIFTA
(INDIA)
AJCEP
(JAPAN)
EIF
MS
ES
TT
2005
1.97B
US$ 10.6T
US$ 319B
EIF
MS
ES
TT
2007
647M
US$ 3.5T
US$ 131B
2008
726 M
US$ 8.3T
US$ 262B
7
PH Trade Negotiation Agenda
WTO
 Implementation and monitoring of current obligations
 Attend to relevant trade disputes/cases (either as complainant,
respondent or third party)
 Contribute to the discussions on the DDA and abide by the
consensus; monitor and implement the Bali Package
APEC
 Maximize capacity building through economic and technical
cooperation
 Agenda for 2015 hosting – mainstream SMEs in Regional Economic
Integration
ASEAN
 Work towards the substantial compliance of ASEAN Economic
Community (AEC) 2015 commitments
 Implement and review existing ASEAN+1 FTAs
 Negotiate the Regional Comprehensive Economic Partnership (RCEP)
Bilateral
 Maximize current bilateral arrangements while actively pursuing
new partnerships (whether through FTAs or bilateral consultation
mechanisms) with strategic partners
Overview – PH & the ASEAN
ASEAN Economy has great
potential
• Ten member states at varying levels of
economic development
• Population of 608 million people
• Combined income (GDP) of US$ 2.3 trillion
• Total trade with the world of US$ 2.4 trillion
• Total intra-ASEAN trade of US$ 322 billion
• Track record of attracting investments
Source of data: World Economic Outlook October 2013 Database, International Monetary Fund
TradeMap, International Trade Center
ASEAN is one of the fastest growing
regions in the world
• Average GDP growth rate of 5.0 % in
2014 and 5.4 % in 2015
– Higher than projections for global
growth of 3.7 % in 2014 and 3.9 % in
2015
• US$ 322 billion intra-ASEAN trade and
growing
Slides from
Dr. Ciel Habito,
former NEDA DG
1. The Philippines is now in
a strong position for AEC.
The economy is in a “break-out” mode.
Annual Investment Growth
We Have Bounced Back
Source: ADB, PSA
Gross Domestic Capital Formation
Average Annual Growth Rate (%), 2004-2009
2013> 11.7
2010-13> 10.6
Philippine Trade with
ASEAN Partners
 With Thailand
Top imports: Motor vehicles, electronics,
petroleum and chemicals
Top exports: Motor vehicle parts, electronics &
electricals, and minerals
 With Singapore
Top imports: Electronics, machinery and
petroleum
Top exports: Electronics & electricals, machinery,
and petroleum
 With Malaysia
Top imports: Electronics, petroleum and chemicals
Top exports: Electronics, coconut oil, petroleum
Philippine Trade Deficit with ASEAN
In US$ Million
2012
2011
2010
2009
(4,307) (5,601) (3,947) (5,124)
2008
(7,543)
(2,051) (3,622)
(791) (3,404)
(4,645)
- Without oil & rice
(1,716) (3,265)
594 (2,465)
(3,010)
- Without oil, rice &
petrochemicals
(1,095) (2,658)
1,102 (2,219)
(2,705)
(554) (2,105)
1,808 (1,638)
(2,291)
PH Trade Deficit with
ASEAN
- Without oil
- Without oil, rice,
petrochemicals &
automotives
Source: NSO (processed by BITR)
PHL IMPORTS of:
Shift in countrysourcing for
Passenger Cars maybe trade
diversion?
20
Slide No. 20
Cars (HS 8703), US$'000
Share of suppliers
Thailand
Japan
Indonesia
Korea
Germany
USA
Cars, gas engine >1500cc
to 3000cc (HS 870323),
US$'000
Share to total Cars
Share of suppliers
Thailand
Indonesia
Japan
Republic of Korea
Germany
USA
2001
146,249
2011
1,253,746
12%
46%
1%
3%
6%
11%
41%
20%
19%
9%
3%
2%
36,193
25%
1%
0%
42%
3%
20%
16%
962,172 2
77%
46%
21%
13%
11%
3%
2%
PH Game Plan - 4Cs for AEC
• Comply with Commitments
• Enhance Competitiveness
• Intensify Communications
• Promote Collaboration
Compliance
The vision of an ASEAN Community
Three communities
SocioCultural
PoliticalSecurity
Economic
• Based on three
“communities”
• 2003: ASEAN Leaders
resolved to establish an
ASEAN Community by
2020
• 2007: ASEAN Community
target advanced to 2015
The ASEAN Community Blueprints
(2007 – 2015)
Illustrative Commitments (1)
• On Free Flow of Goods
– Eliminate Tariffs on all products, except . . . (2010)
– Implement National Single Window (2008); creation
of ASEAN Single Window (2015)
• Free Flow of Services
– Schedule at least 70% foreign equity participation
for all services sectors (2015)
– On Financial Services: substantially remove
restriction for Insurance, Banking & Capital Markets
(subject to negotiated pre-agreed flexibilities)
25
Illustrative Commitments (2)
• Free Flow of Investments
– Organize two inbound and outbound investment
missions
– Organize seminar on investment protection and
settlement of disputes
• Free Flow of Capital
– Greater harmonization in capital market standards
– Allow greater capital mobility, guided by the following
principles: ensuring capital account liberalisation
consistent with member countries’ national
agenda and readiness of the economy
26
Illustrative Commitments (3)
• Free Flow of Skilled Labor
– Facilitate issuance of visas and employment
passes for ASEAN professionals and skilled labor
who are engaged in cross-border trade or
investment related activities (according to
prevailing regulations of the receiving country)
– Develop core competencies (concordance of
skills and qualifications) for job/occupational
skills required in all services sectors by 2015
27
AEC Scorecard Phase I-III (2008-’13)
ASEAN
Member
State
Brunei
Cambodia
Indonesia
Laos
Malaysia
Myanmar
PH
Singapore
Thailand
Vietnam
Implemented
Not
Implemented
Ongoing
Implemented
Ahead
Total*
Implementation
Rate**
297
290
289
287
307
294
48
56
58
57
44
51
18
17
18
16
20
17
71
72
72
74
69
72
434
435
437
434
440
434
86.8%
84.6%
84.1%
84.2%
88.1%
85.9%
302
47
19
71
439
87.2%
304
307
307
38
43
41
19
20
16
69
69
73
430
439
437
89.5%
88.4%
88.7%
Source: ASEAN Secretariat
Where are we now
• 439 total number of measures
• 234 total priority measures
• 30 measures are either not delivered or ongoing
• 15 measures can be implemented with only
national-level action, 15 measures require
regional collaboration
Strategy: Focus on national measures
• 15 measures require individual-country implementation
= 7 measures on trade in services liberalization (AFAS)
= 4 measures on customs and trade facilitation
= 2 measures on air transport (MAAS)
= 2 measures on protocols and agreements not ratified
Strategy: Cooperate in regional
initiatives
• 15 measures may only be considered implemented if all the
ten ASEAN members are able to implement
= 10 measures on customs and trade facilitation
(incl. NSW/ASW)
= 2 measures on standards and conformance
= 2 measures on investment facilitation
= 1 measure on energy cooperation
Trade in Goods
As of 2010, all duties have been eliminated on agricultural and
industrial products
Except for: live swine, live chicken, meat of swine, meat of
chicken, manioc (cassava) and sweet potatoes, maize,
rice and sugar
Duties maintained at 5% beyond 2015 for (1) Live swine; (2)
Live chicken; (3) Meat of swine; (4) Meat of chicken,
turkeys, ducks, geese and guinea fowls; (5) Manioc
(cassava) and sweet potatoes; and (6) Maize.
Rice duty at 40% until 2014; 35% by 2015
Sugar Duty: 18% (2013) ; 10% in 2014; 5% in 2015
32
Movement
of
Skilled
Labor
Free flow of skilled labor
ASEAN Mutual Recognition Arrangements for:
1.
2.
3.
4.
5.
6.
7.
Engineering Services
Nursing Services
Architectural Services
Surveyors
Medical Practitioners
Dental Practitioners
Accountancy Services
Tourism
Professionals would still need to take qualifying
exams in other countries.
Ensure Neighbors’ Compliance !
• Bilateral actions to ensure access for Filipino
exporters
• Address unfair trade practices by exporters
from other Asean countries
Competitiveness
Competitiveness
• Focus of AEC Gameplan is Competitiveness
• PH is well-positioned
to take advantage of
the AEC
• Government Programs
are in-place;
implementation is
being fast-tracked
Competitiveness
• Ease of Doing Business
- Global Competitiveness Index (WEF): PH ranks 52nd (2014), 33
notch improvement since 2010
• Industry Development Program
- PPP-based Industry Roadmaps (21 completed; 5 on-going;
others to be crafted)
- Comprehensive National Industrial Strategy, will include
agriculture and services
- Manufacturing Resurgence Program (Php6.4B, 10 agencies)
• MSME Development
• National and local-level convergence to assist MSMEs
Support for MSMEs
• SME Roving Academy
• Shared Service Facilities
• Product Development and
Design Services
• Export Pathways Program –
RIPPLES
• Trade Fairs and Exhibitions
• Industry Clusters (NICCEP)
Industry Development Strategies
• Sustain growth in existing revenue streams (IT-BPO,
semicon electronics, infrastructure)
• Pursue SME countryside growth (coffee, cocoa,
processed food, coco coir, etc.)
• Develop new revenue streams (clinical services,
animation, software and game development, etc)
• Recapture sectors (apparel, footwear, travel goods,
auto & parts, electronic manufacturing)
• Revisit backbone sectors(copper downstream,
c
chemicals,
iron and steel, etc)
NICCEP Industry Clusters
NICCEP covers priority industries in the country
chosen after a series of consultations.
Luzon - Milkfish, Dairy, Coffee, Bamboo, Tourism, ICT,
Health & Wellness and Wearables & Homestyles
Visayas - Gifts, Decors & Housewares, Tourism, ICT, and
Health & Wellness
Mindanao - Banana, Mango, Coconut,
Seaweeds, Wood, Mining, Tourism, ICT,
Rubber, Poultry, Tuna, Oil Palm, and Cacao
With the AEC, PH businesses can . .
.
• invest in other ASEAN countries
• attract investments from other ASEAN firms;
or global firms that are targeting the ASEAN
market
• directly export to other ASEAN countries
• indirectly export by being part of the regional
value chain
• tap the growing domestic market & leverage
economies of scale to be more competitive in
ASEAN
Communication
Doing Business in Free Trade Areas
(DBFTA)
• Nationwide advocacy program since 2010
- 480 sessions
- 52,490 participants
- 15,204 participating companies
Sectors Covered
• Goods: Food including coffee and bangus;
furniture, jewelry, metalworking, packaging and
paints, among others
• Services: Cold chain, chemical engineering,
creative industries (design), dermatology, education
services, franchising, guidance counselling, ICT,
logistics, optometry, printing, software development,
among others
Success Story: Big Glory Bay
Salmon
• Started with tuna in 2003; and
expanded to salmon in 2009
• Imports raw king salmon from
New Zealand (AANZFTA)
• Exports smoked salmon to:
–
–
–
–
–
–
Japan (PJEPA)
Thailand & Singapore (AFTA)
South Korea (AKFTA)
Australia (AANZFTA)
Hong Kong (possible AHKFTA)
US
• Possible expansion in 2015 to
include other seafood
Collaboration
Active Collaboration at all levels
• Country-to-Country
Collaboration
• Public – Private
Collaboration (including
Academe)
• Inter-agency coordination
(e.g. thru CAEC)
• Collaboration across PH
Regions
PHL-Indonesia Collaboration
• Market access for PHL producers and service
providers (e.g. opening of Bitung Port; exclude PHL
from flour import quota regulation)
• Jointly developing key sectors for greater global
market presence:
• Coordination of supply chain gaps (and securing
raw materials) for PH industrial users - copper;
carrageenan
• Investment cooperation for industrial
development (e.g. palm oil, shipbuilding,
geothermal, steel, cacao & chocolate production,
BIMP-EAGA projects)
Example of SME Integration in
the Global Value Chain: Coffee
•
Convergence Program: from
beans to cup to cafes
– DA: coffee seeds & varieties
– DTI: Shared Service Facilities for
coffee cooperatives
– DOST: equipment fabrication /
packaging
– TESDA: Barista training
– DPWH: farm-to-market roads
– Local Government: infrastructure
& cross-cutting support (e.g.
promo)
•
Major market for PH coffee beans:
Singapore, Malaysia, Indonesia,
China, Japan, Korea, and US.
•
But specialty coffee for local cafes is
a viable option.
Convergence for Coffee
Example: Engineered Bamboo
• Convergence Programs
– DA – bamboo plantations
– DTI / DOST – Shared Service Facilities &
technology for manufacturing and
processing engineered bamboo planks
– DPWH – farm-to-market roads
– Local Government – infrastructure & crosscutting support (e.g. promo); initially spur
demand through government procurement
mechanisms
•
Markets for articles of bamboo
(basketwork/ furniture): US, Japan, EU,
Australia, Singapore, Brunei, Malaysia
•
Collaboration across
Regions e.g. CAR
and Central Visayas
Example: FabLab in XXX
(leveraging technology for SME growth)
• BFB 3.2 3D Printer (Desktop 3D
Printer)
•
Roland Versa CAMM VS-640
(Print & Cut Machine)
Arduino Micro-controllers
at the Fablab
Laser cutting machine &
pre-fab housing
Upcycling plastic materials
Program
Convergence
• DTI - NICCEP & SSF
• DOLE - Integrated
Livelihood Program
• DOST - SET-UP
• DSWD / DOT / DPWH ONE STEP
• TESDA
• DA
• LGUs
Institutional mechanisms to
promote collaboration
•
•
•
•
Inter-agency – Committee on the ASEAN Economic
Community (CAEC)
Private Sector – ASEAN Business Advisory Council
(ABAC), business chambers,
Labor, academe and Civil Society organizations
Synergies with Industry Development Council
(IDC), Export Development Council (EDC), National
Competitiveness Council (NCC), MSME
Development Council (MSMED Council)
--- and their local counterparts
e.g. Regional & Provincial
Development Councils
Levels of Economic Integration
Economic Union
Common market status plus harmonization of fiscal & monetary policies
Common Market
Customs union status plus free movement of labor & capital
Customs Union
Free trade among members and adopt common external trade
policies
Free Trade Area
All trade barriers in Goods & Services removed among
members but each retain own barriers with the
Rest of the World (ROW)
Preferential Trading Area
Lower trade barriers among members
59
AEC is an “FTA-plus” arrangement
Economic Partnership Agreement (EPA)
Conventional areas of goods and services;
plus other areas such as investments, government procurement,
competition, intellectual property, etc.
Free
Trade Area
Free
Trade
Area
-All trade barriers in Goods & Services removed among
-All
tradebutbarriers
Goods
& with
Services
members
each retainin
own
barriers
ROW
removed among members but each
retain own barriers with ROW
60
Other Trade Policy initiatives:
APEC Hosting, EU GSP+
AEC is just one of the Market
Access initiatives of PH Gov’t.
1) Europe
EU
– EU GSP+ application
– Scoping negotiations
EFTA
– Joint Declaration of
intention to forge
close cooperation
– Formal negotiations
2) Asia
– RCEP negotiations
– PJEPA General Review
– AEC - ensure market
access
3) US – through TPP
– Bilateral technical
consultations with the
existing members
--------------------------------------
• Bilateral cooperation
What is the DTI priority during PH
APEC hosting?
“In closing, we cannot overstate the importance of
getting SME support for further global trade
liberalization. SMEs are the most in opposing
trade because they cannot feel the positive
effects of FTAs owing to rules and processes that
are too cumbersome for small businesses. SMEs
must feel they can benefit from FTAs. Thus, it is
incumbent for us in APEC to provide a platform
for SMEs to benefit more from FTAs.”
Sec. Gregory L. Domingo,
APEC Ministerial Meeting, 8 Nov 2014, Beijing
MSME Agenda
• Needs of the Micro & Small may be
different from the Medium-sized firms
• Global Value Chains most relevant for the
Medium-sized firms
• Micro and Small as direct exporters
• MSMEs front and center of APEC Agenda
– MSMEs account for more than 90% of total
establishments in APEC region
– Not a “by-the-way” in the regional integration,
but should be the focus
Ministers Responsible for Trade
• APEC Action Agenda for Global SMEs (including artisanal)
1.
2.
3.
4.
5.
6.
Simplify and streamline ROO procedures and documentary
requirements
Timely and accurate information on tariffs, trade procedures
and requirements (APEC TR)
Widen base of Authorized Economic Operators (AEO) and
trusted trader programs (TTP) to include SMEs
Widen options on financing for SMEs
Expand SME internationalization through ICT and ecommerce
Strengthen institutional support for SMEs.
• Adopt a common goal by November 2015.
EU GSP+
Comparison of tariff lines between
General GSP and GSP+
• Offers zero duties
to products from
countries which
implement 27
international
conventions on
human rights,
labour rights and
sustainable
development
TOTAL
Agri
Fish Textiles Others
General GSP
6,209
866
293
1,125
3,925
-Zero duty
2,442
38
1
0
2,403
-Non-zero duty 3,767
828
292
1,125
1,522
GSP+
(zero duty)
918
293
1,125
3,938
GSP Instrument
6,274
GSP+ presents unique opportunity
• GSP+ will eliminate duties on 61% of
PH products eligible under the General
GSP
• PH can grab market share from GSPgraduated/non-GSP+ eligible countries
– Malaysia already graduated from GSP;
China, Indonesia, Thailand and Vietnam
are not eligible for GSP+.
GSP+ potential benefits
• GSP+ could increase PH exports to EU by €611.8
M, representing around 11.96% expansion over
2012 Philippine exports to the EU worth €5,114 M
• Product sectors with the highest projected
increases:
–
–
–
–
–
animal or vegetable fats and oils (€231.2 M)
prepared foodstuffs (€151.2 M)
textiles and garments (€79.7 M)
footwear, headwear, umbrellas (€28.5 M)
chemical products (€17.1 M).
• The projected increase in exports could translate
to 267,587 additional jobs in both the agriculture
and manufacturing sector
Maximizing EU GSP+ Benefits
1. Maximize utilization by current exporters
2. Capture Investment-driven trade opportunities
 Investors from countries whose products are
currently facing definitive anti-dumping duties in the
EU
 Investors from ASEAN (GSP graduates: Thailand and
Malaysia; and non GSP+ eligible: Vietnam and
Indonesia)
Example of Products facing definitive EU antidumping duties
Product
14%
Tariff Rates
AntiDumping
(China)
48.5%
2.7%
2.5%
44.7%
58.9%
MFN
Bikes
(complete)
Solar Panels
Chamois
Leather
GSP+
0%
0%
0%
Summary
4Cs for AEC: PH Gameplan
• Comply with Commitments
• Enhance Competitiveness
– the most important issue, w/
or w/o AEC
• Intensify Communications
• Promote Collaboration
PH is well-positioned in the ASEAN
• No surprises in January 2016
• ASEAN is the most dynamic sub-region in the most
dynamic region (Asia) in the World
• PH is among the fastest growing countries in the
ASEAN.
• PH, Indonesia and Vietnam already account for more
than 60% of ASEAN’s population.
• PH has youngest workforce with 23.3 y.o. median age,
second to Lao PDR
• Consistent upward trajectory of PH in terms of score
and global competitiveness ranking
Trade Negotiation Agenda: AEC
[+ APEC, Europe Strategy]
Building a Single Production Base
TECHNOLOGY & INNOVATION EXPO
& ENTREPRENEURSHIP CONFERENCE
Cebu, June 2015
Dr. Ceferino Rodolfo
Assistant Secretary
Department of Trade and Industry