Few firms availing of benefits under ASEAN free trade deal

MANILA, Philippines – Just a fifth of Philippine-based firms have been taking advantage of a regional trade pact although the number may increase as interest in newer agreements grows.

Out of 155 firms in the food, electronics and automotive industries, only 20% said they had availed of lower tariffs under the deal establishing the Association of Southeast Asian Nations (ASEAN) Free Trade Area, according to an Asian Development Bank report released yesterday.

“80% of firms still did not use [AFTA], citing several noteworthy obstacles,” the report stated, listing the lack of information as the primary reason.

Delays in government certification of a product’s compliance with local content requirements were also blamed, as were the exclusion of certain sensitive products and non-tariff barriers such as product standards that made exporting difficult.

Some firms, particularly those in electronics, complained that tariff rates under the regional trade pact were not drastically lower than those implemented by World Trade Organization members.

The report said the automotive sector utilized the regional trade pact the most, probably because of “the successful implementation of the ASEAN Industrial Cooperation scheme” which encouraged carmakers to diffuse their assembly across the region.

Moving forward, the report said more companies were likely to take advantage of AFTA and other trade pacts.

“[T]he overall … utilization rate is expected to increase dramatically. At least 63 firms (40.7% of all firms) stated that they plan to use AFTA or [other agreements],” it said.

The survey used in the report was conducted in 2008, before the implementation of the Japan-Philippines Economic Partnership Agreement. Deeper cuts committed under regional trade pacts with China and Korea, meanwhile, only took effect this year, as did deals with Australia and New Zealand.

Interest in the ASEAN-China free trade pact is particularly strong, the report stated, noting that respondents ranked this as the most important agreement.

“Firms in the food sector are eyeing strategic and emerging markets covered by the [deals], particularly the ASEAN-China free trade agreement (FTA),” it stated.

As more firms intend to avail of the trade pacts, the government would do well to address barriers that are currently keeping the usage rate low, it stated.

“These findings make a case for the need to evaluate the quality of information and awareness campaigns on FTAs in the Philippines.

“In particular, firms complained that the tariff rates of concluded FTAs are not immediately published in the Tariff and Customs Code or in customs circulars, nor are they readily made available on the internet.”

“Almost 90% of the sample … demanded information-based services,” the report stated, although it conceded that the Trade department and industry groups had been implementing several programs.

The ease of export procedures must likewise be addressed while classifications of products must be clarified to prevent arbitrary decisions from Customs, the report stated. — Jessica Anne D. Hermosa, BusinessWorld