PHILIPPINES-JAPAN FTA Doing Business in Free Trade Areas PHILIPPINES-JAPAN FTA November 7, 2012 DIRECTOR SENEN M. PERLADA Bureau of Export Trade Promotion Department of Trade and Industry

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. 2

Reasons for Philippine Engagement in FTAs Maintain competitiveness Cross-border industrial complementation Sustain inflows of investments Mutual support on issues of common interest 3

Existing PH FTAs ASEAN Free Trade Area ( AFTA) ASEAN-China Free Trade Area (ACFTA) ASEAN-Korea Free Trade Area (AKFTA) ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEPA) Philippines-Japan Economic Partnership Agreement ( PJEPA) ASEAN–India Free Trade Area (AIFTA) 4

Major Benefits of Free Trade Agreements 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). 5

Philippines-Japan Merchandise Trade (Values in US$ Billion) 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 6

Japan as a Market for PH Exports(% share) 2010 2011 Total PH exports US$51.50B Total PH exports -US$48.30B *China includes Hongkong.

Exports of Selected Product Groups PH-Japan, 2011 US$ 8,886.14 M PH-Japan, 2010 US$ 7,841.29 M

Japan as a Supplier of PH Imports(%share) 2010 2011 Total PH imports US$54.93 Total PH imports US$60.49B *China includes Hongkong.

Imports of Selected Product Groups PH-Japan, 2011 US$ 6,516.38 M PH-Japan, 2010 US$ 6,744.36 M

PJEPA and AJCEPA Complementary agreements providing options to businessmen 11

The Philippines Japan Economic Partnership Agreement (PJEPA) ENHANCING MARKET ACCESS FOR PH EXPORTS 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 12

The Philippines Japan Economic Partnership Agreement (PJEPA) 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.

Tariff Elimination on PH Exports to Japan The 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 Garments Furniture Metal manufactures Minerals Certain jewelry items Chemicals Coconut ,papayas, mangoes Shrimps and Prawns Lobsters Gradual (B3 –B15) 888 (9%) Tuna(fresh, frozen) Processed vegetables Processed Fruits Small banana varieties Footwear Carpets and other textile floor Coverings Prepared/Preserved fish Leathergoods Phased reduction / TRQ/ 316 (4%) Fresh pineapples Fresh bananas Poultry Meat Cuts Cane sugar Cane molasses Ice cream Renegotiation 269 (2.9%) Motor vehicles 14

The ASEAN – Japan Economic partnership Agreement ( AJCEPA) ENHANCING MARKET ACCESS FOR PH EXPORTS 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.

More choices in sourcing imported inputs ENHANCING MARKET ACCESS FOR PHILIPPINE 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

Enhanced market access in Japan for Philippine exports… Examples of PJEPA & AJCEPA Benefits for Philippine Business Sector MFN AJCEPA PJEPA Lauryl alcohol Glycerol Other plastic packaging materials Epoxide resins 4.7 5 3.9 3.1 Copper foil, backed with refined copper Copper foil, backed with copper alloys Scrap, powders of other base metals 3 2.5 / 3 Other non-wired glass 4.2 Chemicals & Plastics Metals Glass

Examples of PJEPA & AJCEPA Benefits for Philippine Business Sector MFN AJCEPA PJEPA Frozen poultry meat cuts Yellowfin tunas Shrimps and prawns Smoked fish 3 3.5 1 10 7.3 0 (TRQ) 0.6 Fresh Mangoes Fresh pineapples 17 In Quota =0 (1,600 MT in 2012) Refined coconut oil Crude coconut (copra) oil 4.5% or 5 yen/kg whichever is greater; Other plywood and veneered panels Builders' woodwork 3.9 Resource and agro-based products

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_767 http:// www.tariffcommissiion.gov.ph/eo_905 http//www.tariffcommission.gov.ph/eo_852

Thank you… 20