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Business Matters

A missed opportunity

/ 05:20 AM December 16, 2017

The Philippines earned plaudits from the international community for successfully hosting the 31st Asean Leaders, East Asia, and Asean Business & Investment Summits.

Among the agreements signed in the presence of the Asean leaders was the Hong Kong-Asean Free Trade Agreement, which was initiated in July 2014 and was concluded last September after 10 rounds of negotiations. This free trade agreement (FTA) and its related investment agreement were signed during the Asean Summit on Nov. 12. Its speedy conclusion can be credited to Trade Secretary Ramon Lopez and Undersecretary Ceferino Rodolfo, who made sure that Asean and Hong Kong would have an agreement in time for the summit.

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The FTA consists of 14 chapters covering many areas of importance to Hong Kong and Asean Member States (AMS). Aside from agreeing to facilitate trade in services, there are rules requiring all parties to maintain transparent and fair domestic regulations.

AMS have agreed to eliminate/reduce their customs duties on goods originating from Hong Kong. Individual AMS have made varying commitments. Singapore has pledged to bind its customs duties at zero on the date the FTA comes into force. Brunei, Malaysia, the Philippines, and Thailand will eliminate customs duties of about 85 percent of their tariff lines within 10 years, and another 10 percent within 14 years. Indonesia and Vietnam will eliminate customs duties of about 75 percent of their tariff lines within 10 years, and another 10 percent within 14 years; Cambodia, Laos and Myanmar will eliminate customs duties of about 65 percent of their tariff lines within 15 years, and another 20 percent within 20 years.

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Hong Kong, on the other hand, commits to granting tariff-free access to all products originating from AMS when the FTA takes effect.

The FTA comprises a chapter on economic and technical cooperation that aims to enhance its benefits through capacity-building programs and technical assistance.

It is noteworthy to point out that Asean was Hong Kong’s second largest trading partner in terms of merchandise and fourth largest partner in services trade. Total merchandise trade between Asean and Hong Kong was HK$833 billion in 2016, and total services trade between Hong Kong and Asean was HK$121 billion in 2015.

But while I welcome the forging of the Hong Kong-Asean Free Trade Agreement, which will surely spur growth in trade and encourage investment flows, I lament the missed opportunity of the Philippines, as chair of Asean, to push more aggressively for a US-Asean Free Trade Agreement.

Let me cite some important facts regarding trade and investments between the United States and Asean culled from the US-Asean Business Council report titled “Asean Matters for America.” AMS are America’s key diplomatic, economic, and security partners. The United States and Asean elevated their relationship into a strategic partnership in 2015 and, in 2017, celebrated 40 years as dialogue partners. The United States exports over $100 billion in goods and services to Asean. Taken together, AMS rank fourth (after Canada, Mexico and China) as a goods export market for the United States, and the latter is the fourth largest trading partner for Asean. Asean is the sixth largest importer of US agricultural goods, and the third largest in Asia (after China and Japan).

Asean is the No. 1 destination for US investments in Asia. Asean has received about $274 billion in investments from the United States, more than China, Japan and South Korea combined.

Shouldn’t the United States agree to an FTA with Asean considering the substantial trade and investment relationship thus cited, and when Asean already has FTAs with China, Japan, South Korea, Australia and New Zealand? The Department of Trade and Industry is promoting a US-PH FTA but, realistically speaking, the Philippines is only the 31st largest trading partner of the United States and may therefore have less clout. Let’s hope, however, that our DTI negotiators can nevertheless convince their US counterparts to conclude a US-PH FTA sometime soon.

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Jose L. Cuisia Jr. is the immediate past ambassador of the Philippines to the United States.

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TAGS: 31st Asean Leaders, Asean Business & Investment Summits, East Asia, Hong Kong-Asean Free Trade Agreement
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