EU and Philippines FTA 'still on the table' - so what's the delay?

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There has been talk for some time now of a free trade deal between the EU and the Philippines, but little actual progress. Here, we'll take a look at why that might be.

A European Union delegation has insisted a free trade agreement between the EU and the Philippines is still on the cards, despite persistent delays in further talks to progress it.

In a statement, it was clarified that negotiations "have not been suspended" and that the next round would take place "when the conditions are right".

A 2018 report published by the EU had led to suggestions that the government's war on illegal drugs in the Philippines is proving a sticking point for Europe, but the delegation did not confirm this and instead said the priority is currently ensuring the implementation of several UN conventions.

In the Philippines, trade and industry secretary Ramon Lopez also denied that the FTA has been stalling due to concerns over a drugs war, instead telling reporters the Department of Trade and Industry (DTI) has heard no such complaints.

"We're just having problems on the scheduling on the continuation of the third round of talks," he added.

The EU and the Philippines have so far met only twice for formal FTA negotiations: the first time in May 2016 and the second in February 2017.

Trade between the EU and the Philippines

Trade in goods between the EU and the Philippines equalled €15.6 billion last year, with the EU the largest foreign investor in the Philippines. The EU is the Philippines' fourth-largest trading partner and accounts for nearly ten per cent of the country's total trade.

Meanwhile, the Philippines is the EU's 41st-largest trading partner, accounting for 0.4 per cent of the bloc's total trade.

In terms of exports, those from the EU to the Philippines are dominated by machinery, chemicals, food and electronics, while the Philippines mainly exports telecoms equipment, machinery, food and photographic instruments.

Benefits of an FTA

At present, the Philippines benefits from a trade perk called the Generalized System of Preference Plus (GSP+) when trading with the EU. This has been in effect since 2014 and allows the country to export more than 6,000 product lines to Europe at zero tariff rates.

There is also the EU-Philippines Framework Agreement on Partnership and Cooperation that entered into force in March 2018 to act as a building block for an FTA.

However, the ultimate aim is to conclude a true FTA that covers everything from tariffs and non-tariff barriers to investment.

It is hoped the FTA would be similar in scope to those the EU has already agreed with Singapore and, more recently, Vietnam.

According to the DTI in the Philippines, this would give the nation wider and permanent duty-free market access, unlike that offered by the temporary GSP+.

For the EU's part, the Philippines is one of the ten members of the Association of Southeast Asian Nations (ASEAN), and ensuring better access for EU exporters to this market is known to be a priority for the European bloc.

Looking forward, the EU hopes to agree bilateral trade agreements with individual ASEAN nations that will build the foundations for more region-to-region cooperation in trade.

Next steps

Negotiations surrounding the FTA were launched back in December 2015 and many questions have arisen as to why the process is dragging on without much apparent progress.

A Sustainability Impact Assessment has now been launched in order to assess how trade provisions in the FTA might impact human rights, as well as economic, social, and environmental elements in each country or bloc, and across the globe.

There are hopes that this assessment could accelerate the negotiations. Optimism was also generated when an FTA between the Philippines and the European Free Trade Association covering Switzerland entered into force in June 2018.

Ultimately, the Philippines wants to gain a better foothold in the European market and the EU is keen to further connect with the ASEAN region.

However, the agreement's ambitious scope could be its Achilles' heel, as an FTA that covers such an array of trade-related issues is typically years in the making.

And with no third round of talks scheduled yet, it looks as though economists and traders alike will just have to keep waiting.