The Philippines is a sovereign island country in South-East Asia that turned into a constitutional democracy in 1986. They are a member of ASEAN, gathering 10 country members that are aiming at unifying their economies in December 2015 by the completion of the ASEAN Economic Community (AEC), thus allowing for the free flow of goods, services, investment capital and skilled labour in a market with over 600 million people. Although much remains to be done towards that completion, the political dynamic remains committed.

The Philippines is the 30th largest economy in the world and generated a GDP almost $330 bio in 2015.  The population reached 101 million inhabitants at the end of 2015. The World Bank Report on “Doing Business is ranking the Philippines on the ease of doing business as number 103 out of 189 countries in 2015, showing that the country has many reforms to do if its wants to raise the development ladder and attract foreign direct investors.

With bilateral trade in goods amounting to €12.5 billion in 2014, the EU ranked as the Philippines’ fourth largest trading partner, while the Philippines was EU’s sixth largest trading partner in the region. When considering trade in services, the Philippines’ economic share in services accounts for 49,8% of the country’s GDP. The services sector employs more than three quarters of the total workforce in the country’s National Capital Region. When it comes to EU-Philippines Trade in Services, the surplus is to the advantage of the Philippines, totalling €178 million. EU-Philippines two-way trade in services grew by 14% to a total value of €2.6 billion in 2012. Philippine services exports to the EU expanded by 24% to reach a record high of €1.4 billion while services imports from the EU improved by 5% to €1.2 billion. Philippine services exports to the EU remain dominated by transportation (31% share or €437 million; mostly sea transport), travel/tourism services (28% or €394 million), and ‘other business services’ (26% or €367 million) – which includes BPO’s. Exports of communications services (5% or €76 million) and IT services (5% or €64 million) are also growing in importance.

Philippines is a member of the Asian Nations (ASEAN) which consists of nine more countries. ASEAN is the third largest economy in the region and the Philippines with a population of over 100 million, is the second biggest market in ASEAN. When completed , the ASEAN Economic Community will constitute the third largest market in the world, with over 600 million potential consumers. Ensuring better access for EU exporters to the dynamic ASEAN market is a priority for the EU. ASEAN market is a priority for the EU. ASEAN would rank as the EU’s fourth largest trading partner, after the United States, China and Switzerland. In 2015, bilateral trade in goods and services between the EU and ASEAN reached over 280 billion euro.

EU- Philippines Trade Negotiations – Background

Negotiations for an EU- Philippines Free Trade Agreement were launched on 22 December 2015. The aim is to conclude an agreement that covers a broad range of issues, including tariffs, non-tariffs barriers to trade, trade in services and investment, as well as trade aspects of public procurement, intellectual property, competition and sustainable development.

  • See link to sector specific issue concerning the Telecommunications Sector.
  • See link to sector specific issue concerning Financial Services revised.
  • See link to sector specific issue concerning Financial Services.
  • See link to ESF response to DG trade Questionnaire on the EU – Philippines FTA here
  • DG Trade website 
  • Link to CIA Fact book on Philippines.

The second round of negotiations between the EU and the Philippines took place in February 2017. Negotiations have since been put on hold by the EU because of the human rights violations perpetrated by President Duterte in its war against the drugs. In July 2023, the EU and the Philippines announced their intention to begin technical discussions with a view to potentially resuming negotiations over a free trade agreement (FTA).

On 18th March 2024, the EU and the Philippines announced the resumption of the talks. The next round is expected to tale place in September 2024.

The Position Paper setting the ESF priorities for the EU-Philippines FTA has now been finalised and can be found here. the Executive Summary is copied here below.

Executive Summary:

  • The European Services Forum strongly supports the negotiations towards an ambitious EU-Philippines Free Trade Agreement and welcome the resuming of the talks.
  • The EU is Philippines’s fourth largest trading partner, but bilateral trade does not match the importance of the two partners. EU-Philippines FTA will contribute to increase bilateral trade.
  • Bilateral trade in services between EU and Philippines in 2022 amounted to €6.6 bn, with EU exports amounting for €3.1 bn and imports amounting to €3.5 bn. In 2022, EU services exports to Philippines are dominated by the category digital services (34%),“Other business services” (26.5%), transportation (25.6%) and interestingly Construction services (15.3%). Philippines is only the 33rd EU trading partner of the EU in services trade.
  • ESF takes note that Philippines has signed bilateral FTAs, notably with Japan and more recently with EFTA countries, plus the ones through the ASEAN, and is currently negotiating, in addition of the EU, with negotiations with Canada, Chile and Mexico, and also joined the RECP. ESF calls upon the negotiators to do their utmost so that the European services companies will obtain at least the parity with the best FTA signed by Philippines but considers that so far, the level of commitments remains rather low and call for more market access in trade in services.
  • At the end of the Uruguay Round, Philippines GATS commitments were very weak. And this remains today the only bidding elements towards the European Services companies. The FTA must seriously improve market access to EU service businesses.
  • ESF is closely monitoring developments around the Philippines Constitution and the Foreign Investment Act (FIA), which keep significant restrictions and burdensome regulatory requirements on market entry and foreign equity participation in several services sectors. We urge EU negotiators to include improvements into the FTA.
  • The FTA should improve the mobility of European businesspeople to Philippines.
  • Given the growing exchange of data between EU and Philippines due to the active BPO sector, the FTA should include strong provisions in the Digital Trade Chapter, including on cross-border data flows. The FTA should also include a strong Horizontal Chapter on Disciplines for Domestic Regulation, rules on State-Owned Enterprises.
  • Given the strong interest of services companies in public procurement both for services contracts and works/infrastructure contracts, ESF calls for a comprehensive market access to public procurement for services in the FTA negotiations, with substantive coverage of public institutions and entities.
  • On Trade and Sustainable Development, ESF encourages the EU to negotiate similar level of commitments with Philippines than the ones negotiated with the most recent EU agreements in the region.
  • Philippines did not take any GATS commitments in many services sectors. ESF goes into the details of all services sectors in the last section of this Position Paper, makes some comments and recommendations for the consideration of the negotiators (in sectors like professional and business services, telecommunication and digital services, courier and express, distribution services, insurance and financial services, transport services, etc).

See updated statistics of EU trade in services with The Philippines (2023) here

https://www.esf.be/new/wp-content/uploads/2024/09/Importance-of-Services-Trade-bewteen-the-EU-and-Philippines-Janvier-2024-1.pptx

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