The South Korea-Philippines Free Trade Agreement (FTA) is set to take effect on December 31, 2023, marking a significant step forward for trade relations between the two countries. This new treaty will eliminate tariffs on thousands of products, facilitating smoother economic exchanges and potentially boosting both nations' economies.
According to the South Korean Ministry of Trade, Industry and Energy, the agreement will abolish tariffs on 94.8% of products from the Philippines and 96.5% of items marked "Made in Korea". This landmark deal is particularly beneficial for South Korean automobiles, which currently face a 5% import tax imposed by the Philippines.
Minister Cheong In-kyo explained during a briefing session held by the ministry, "Manila currently imposes a 5% tax on imported Korean vehicles, which will be abolished immediately for combustion engine cars and trucks, with gradual tariff reductions also planned for hybrid and electric vehicles over the next five years." This move is expected to significantly lower consumer prices for South Korean made cars and trucks within the Philippines, making them more accessible to Filipino consumers.
On the import side, the South Korean government will also benefit from this agreement, as it plans to reduce tariffs on bananas imported from the Philippines, which currently stand at 30%. This tariff reduction will be phased out completely over five years, allowing even more Philippine bananas to flood the South Korean market. It is worth noting, the majority of bananas imported to South Korea are sourced from the Philippines.
The signing of this FTA is noteworthy as it marks South Korea's fifth bilateral trade agreement with a member of the Association of Southeast Asian Nations (ASEAN). It reflects both countries' intentions to deepen their economic ties and provide mutual benefits through enhanced trade.
Trade between South Korea and the Philippines was valued at approximately $13.65 billion, with South Korean exports to the Philippines reaching around $9 billion. This agreement is expected to facilitate growth in this trade relationship and create new opportunities for industries on both sides.
With the implementation timeline fast approaching, the South Korean Ministry has held several informational sessions to clarify the agreement's details for various stakeholders and industries. These discussions have centered around how the phasing out of tariffs will affect various sectors and strategic industries, including agriculture and manufacturing.
Both governments are optimistic about the effects of the FTA. Economic analysts predict it could lead to increased competitiveness for both South Korea's automotive industry and the Philippines' agricultural sector. Such developments not only showcase the dynamic economic environment within ASEAN but also cement the Philippines' status as a key trading partner for South Korea.
This FTA opens numerous avenues for expansion and collaboration, giving both countries the chance to leverage their respective strengths. The potential reduction of consumer prices for automobiles and improved market access for agricultural products could resonate well with citizens of both nations.
Overall, the South Korea-Philippines Free Trade Agreement symbolizes not just the easing of tariffs but also a broader commitment to fostering economic partnerships within the region. This agreement stands as a significant milestone aimed at promoting trade harmony and could set the stage for future collaborations not only within ASEAN but also with other nations.
