ACTIVITY 7

1.) What are the five major trade agreements?

ASEAN Free Trade Agreement (AFTA)

The ASEAN Trade in Goods Agreement (ATIGA) aims to achieve

free trade in goods in the region, resulting in lower business
costs, increased trade, and a larger market and economies of
scale for businesses as a result of lower trade barriers and
deeper economic links between Member States. On 99.65% of
their tariff lines, Brunei, Indonesia, Malaysia, the Philippines, Singapore, and
Thailand have eliminated intra-ASEAN import duties through ATIGA. On 98.86
percent of their tariff lines, Cambodia, Lao PDR, Myanmar, and Vietnam have cut
their import tariffs to 0-5 percent.

AFTA was also created as a response to other emerging regional groupings, such as
the North American Free Trade Area (NAFTA) and the expansion of the European
Union (EU). It was also to leverage on the huge potentials and complementarities
that exist in the region in order to strengthen and deepen intra-ASEAN industrial
linkages including creating strong and competitive in small and medium enterprises.

The liberalisation of trade in the region through elimination of both intra-regional

tariffs and non-tariff barriers had contributed towards making ASEAN's
manufacturing sectors more efficient and competitive in the global market. As a
result, consumers are able to source goods from the more efficient producers in
ASEAN, thus creating a robust intra-ASEAN trade.

ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA)

The AANZFTA is a comprehensive and single-

undertaking free trade agreement that opens up
and creates new opportunities for approximately
663 million peoples of ASEAN, Australia and New
Zealand - a region with a combined Gross Domestic
Product of approximately USD 4 trillion as of 2016.
In line with the ASEAN Community Vision 2025 , the
AANZFTA aims for sustainable economic growth in the region by providing a more liberal,
facilitative and transparent market and investment regimes among the twelve signatories to the
Agreement.
Through the AANZFTA:

 tariffs will be progressively reduced from entry into force of the Agreement, and
eliminated for at least 90% of all tariff lines within specified timelines;
 movement of goods will be facilitated via a more modern and flexible rules of origin,
simplified customs procedures, and more transparent mechanisms;
 barriers to trade in services will be progressively liberalised allowing for greater market
access to service suppliers in the region;
 movement of business persons, those engaged in trade and investment activities, will be
facilitated; and
 covered investments will be accorded a range of protection, including the possibility of
dealing with disputes via an investor-state dispute settlement mechanism.

The twelve AANZFTA Parties include:

 Australia
 Brunei Darussalam
 Cambodia
 Indonesia
 Lao PDR
 Malaysia

 Myanmar
 New Zealand
 Philippines
 Singapore
 Thailand
 Viet Nam

Philippines-Japan Economic Partnership Agreement (PJEPA)

The PJEPA is the first bilateral free trade agreement of the

Philippines. It was signed in Helsinki, Finland by then President
Gloria Macapagal-Arroyo and former Prime Minister Junichiro
Koizumi on 9 September 2006.  The Philippine Senate concurred
with the ratification of the PJEPA on 8 October 2008 and the
Agreement officially entered into force on 11 December 2008.

Benefits from the implementation of the PJEPA

Upon the entry of force of the PJEPA in 2008, balance of trade gradually improved in
favor of the Philippines. Based on an 8-year average before and after the entry of force
of the PJEPA, trade balance improved by USD 32.2 billion from USD-7.51 billion pre-
PJEPA (2001-2008) to USD 27.64 billion post-PJEPA (2009-2016). Moreover, total
trade improved by 19% from USD 115.99 billion to USD 137.96 billion resulting to Japan
becoming the Philippines’ largest export market. In 2019, Japan remained to be the
Philippines’ major trading partner, ranking 2 nd out of 225 countries with total trade
amounting to USD 21.38 billion. It is the Philippines’ 2 nd export market (out of 220) and
2nd import supplier (out of 191).

In terms of investments, a 146.7% amounting to PHP260.81 million surge in approved

investments from Japan was recorded by investment promotion agencies (IPA) – from
PHP 117.83 million pre-PJEPA to PHP 438.64 million post-PJEPA. In 2019, Japan
ranked as the 4th largest contributor for approved foreign investments to the Philippines
amounting to PHP 19.89 million with the manufacturing, real estate activities, and
electricity, gas, steam and air conditioning supply industries contributing to the larger
part of investments form Japan.

The latest talks on the General Review were held during the 9th PJEPA Joint Committee
Meeting (JCM) and Sub-Committee Meetings last 15-17 April 2019 in Makati City, Philippines.
Eleven (9) Sub Committees convened back to back with the 9th JCM to discuss improvements
in implementation and operation and negotiate for improved market access: Trade in Goods,
Rules of Origin, Customs Procedures, Trade in Services, Investments, Movement of Natural
Persons, Intellectual Property, Government Procurement, and Competition. Additionally, (2) two
working groups were created to discuss the consideration to include E-Commerce and MSME in
the PJEPA.

European Union Generalized Scheme of Preferences (EU GSP)

EU’s GSP removes import duties from products coming into the EU

market from vulnerable developing countries. This helps developing
countries to alleviate poverty and create jobs based on international
values and principles, including labour and human rights.

Almost 50 years ago, the United Nations Conference on Trade and

Development asked developed countries to help developing countries integrate into the world
economy. The Generalised Scheme of Preferences (GSP) was born and today, about a dozen
countries have GSP mechanisms in place.

Canada Free Trade Agreement (CFTA)

An intergovernmental trade agreement

signed by Canadian Ministers that
entered into force on July 1st, 2017. Its
objective is to reduce and eliminate, to
the extent possible, barriers to the free
movement of persons, goods, services, and investments within Canada and to
establish an open efficient, and stable domestic market.
The CFTA covers most of the service economy, which accounts for 70 per cent of Canada's
GDP. Coverage was extended to the energy sector for the first time, accounting for roughly nine
per cent of Canada's GDP.
Its objective is to reduce and eliminate, to the extent possible, barriers to the free
movement of persons, goods, services, and investments within Canada and to establish
an open efficient, and stable domestic market.

2.) How can exporters maximise FTA benefits?

Parts might cost

50% or more of a
company's
revenue if it's a big
deal. As a result,
it's not
unexpected that in
the last ten years,
sourcing from low-
cost nations has
become such a
significant business strategy. According to Aberdeen Group, 60% of manufacturers have turned to China
as the cornerstone of their low-cost sourcing strategy, and this level of spending has nearly quadrupled
in the last four years, from 21% to 39%.

Maintaining a competitive edge in market pricing requires the capacity to outsource product and skilled
trade labor at a fraction of the cost.

To achieve the next level of savings from a low-cost country sourcing strategy, progressive-
thinking companies are using trade agreements to reduce landed costs through duty reduction.
The U.S. is party to many bilateral and multilateral trade agreements, including Australia,
Bahrain, Chile, Israel, Jordan, Morocco, Peru, Oman, Singapore, Canada, Mexico and, most
recently, South Korea and Colombia.
However, there are a number of complexities and costs associated with capturing the benefit of
trade agreements. First, companies must be able to accurately track purchased parts
information such as the country of origin, as well as special program or trade program
indicators. This information is sourced from the supply base, and companies need tools to solicit
for each trade agreement and collaborate with suppliers to improve accuracy and timeliness.
Finally, companies must be able to collect the duty savings “post transformation” by qualifying
each saleable good against the country’s rules of origin. Failure to do so runs the risk of being
noncompliant and can lead to fines and other penalties.
Supply chains are set up to run efficiently, meaning shorter lead times, optimal safety
stock and low-cost sourcing. As a result, a company could source one product from
many countries to achieve varying degrees of each. Understanding where a part came
from dictates which FTA programs are eligible.

Data visibility can be achieved by creating a representation of your purchased part

information. GTM solutions allow you to keep separate information for each part with
respect to an individual supplier.

This information is often constructed from purchase orders and can automatically build
the relationships between parts and suppliers. With this baseline, you know all parts by
supplier as well as the applicable FTAs and can easily create supplier solicitation
campaigns and build a request without rekeying any part information.

Add new FTAs by building on your base portfolio: Companies can rapidly support new
trade programs by building on the existing infrastructure and business data of available
FTAs in the base portfolio. Often, the only primary difference between FTAs is the rule-
of-origin content. The bill of material integration and supporting business data can be
fully reused.

Solutions that have a multi-FTA qualification engine should provide rules of origin as
plug-ins. Plug-ins are purely content that tell the engine how to analyze the bill of
material for preferential status. They also don’t require a company to upgrade its
software to support additional FTAs. This allows for flexibility to start small and add
FTAs as time progresses, and scalability to support more as your market reach grows.

3.) Which are the significants FTAs entered into by Philippines?

The EFTA States, Iceland,

Liechtenstein, Norway and
Switzerland, signed a Free Trade Agreement (FTA) with the
Philippines in Bern, Switzerland, on 28 April 2016. The EFTA-Philippines FTA
entered into force on 1 June 2018 for the Philippines, Norway, Liechtenstein
and Switzerland and on 1 January 2020 for Iceland.
As a broad-based agreement, the FTA covers trade in goods, trade in services, investment,
competition, the protection of intellectual property rights, government procurement, and trade and
sustainable development. In the area of trade in goods, EFTA abolishes all customs duties on
industrial products as of the entry into force of the Agreement, whereas the Philippines will gradually
lower or abolish its duties on the vast majority of such products.

The FTA provides the Philippines duty-free market access for ALL industrial and
fisheries tariff lines upon entry into force of the FTA. PH also secured tariff concessions
on substantially all PH agriculture exports to EFTA (e.g., frozen tuna/mackerel, canned
pineapple, crude coconut oil, fresh/dried bananas). In addition, the PH also gained
significant concessions on our agricultural exports, particularly those that are currently
being exported to the EFTA Members States, or those with high potential export
interest, including those that are being sold to its neighboring European countries, which
can alternately be exported to the EFTA countries.

The FTA also features liberal rules of origin. For instance, the PH may qualify for zero
tariffs for preparations of meat/fish, even if the meat or fish is imported. PH garment
exports may also claim preferential tariffs even if textiles used are imported and only cut
and sew processing is done in the country.

Philippine service suppliers who want to enter the EFTA market can benefit from the
commitments made by EFTA in all modes of supply. Commitments in cross border
supply and movement of natural persons present opportunities for both skilled workers
and professionals, particularly architects and engineers.  For movement of natural
persons, the entry and temporary presence of intra-corporate transferees (covering
executives/managers and specialists) and business visitors will be allowed, and in some
cases, the application of the economic needs tests will be waived. Switzerland in
particular added an additional category of personnel in the form of installers and
maintainers and includes the contractual requirement to develop local skills through
training in the Philippines.