GROWING EXPORTS IN RCEP EFTA AND NEW MARKETS

GROWING EXPORTS IN RCEP, EFTA AND NEW MARKETS PHILEXPORT 2 nd Quarter General Membership Meeting 22 June 2017, Manila Diamond Hotel Dr. Ceferino S. Rodolfo DTI Undersecretary Industry Development and Trade Policy

OUTLINE • PH Trade Negotiation Agenda • ASEAN +1 FTAs; RCEP negotiations • Europe Strategy (EU GSP+, EU FTA, EFTA) • Key Bilaterals: Rebalance to Asean partners, China, Russia, Japan, US 2

INTEGRATED INDUSTRY & TRADE STRATEGY International Trade Negotiations One Voice One Network One Team Advocacy & Communications Industry Competitiveness 3

Philippines as a Trading Nation: Top Markets (2015) Non-FTA Partners Source of data: Philippine Statistics Authority (PSA) FTA Partners 4

PH Market Access Initiatives Multilateral § WTO Trade Facilitation Agreement (TFA) § WTO Information Technology Agreement (ITA) II Regional § § § Bilateral § Philippines-Japan Economic Partnership Agreement (PJEPA) § Philippines-European Free Trade Association (EFTA) Free Trade Agreement § Philippines-European Union (EU) Free Trade Agreement Non-FTAs (Active) § China, Taiwan, USA, Indonesia, Thailand, Viet Nam, India, Australia, France, South Korea, Switzerland, Russian Federation, 5 Canada, South Korea, among others. ASEAN Free Trade Area (AFTA) ASEAN-China Free Trade Agreement (ACFTA) ASEAN-Korea Free Trade Agreement (AKFTA) ASEAN-Japan Comprehensive Economic Partnership (AJCEP) ASEAN-India Free Trade Agreement (AIFTA) ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) § ASEAN-Hong Kong Free Trade Agreement (AHKFTA) § Regional Comprehensive Economic Partnership (RCEP)

ASEAN Strategy 6

ASEAN and Its Partners ACFTA (CHINA) EIF MS ES TT 2010 625 M US$ 4. 0 T US$ 79 B EIF MS ES TT AANZFT A (AUSNZL) 2010 1. 81 B US$ 4. 3 T US$ 76 B Entry Into Force (EIF) Market Size (MS) Economy Size (ES) Total Trade (TT) AKFTA (KOREA) ATIGA AIFTA AJCEP (INDIA) (JAPAN) EIF MS ES TT 2005 1. 97 B US$ 10. 6 T US$ 319 B EIF MS ES TT 2007 647 M US$ 3. 5 T US$ 131 B 2008 726 M US$ 8. 3 T US$ 262 B 7

Access thru Free Trade Agreements (FTAs) CHINA KOREA BRUNEI MYANMAR JAPAN VIETNAM CAMBODIA INDIA PHILIPPINES AUSTRALIA THAILAND MALAYSIA INDONESIA NEW ZEALAND LAOS SINGAPORE Market Size • PH - 101 M • ASEAN - 629 M • ASEAN+6 - 3. 5 B (1/2 of World Population) - $22. 4 T (1/3 of World Economy)

ASEAN Plus 1 FTAs Tariff Elimination (% of tariff lines) FTAs Entry into Force 2016 End Date Year % Duty - Free ATIGA 2010 98. 6 AANZFTA 2010 9. 1 92. 9 2020 94. 4 ACFTA 2006 3. 6 86. 8 2012 86. 8 AKFTA 2007 3. 6 88. 1 2012 88. 1 AJCEPA 2010 55. 5 67. 2 2018 92. 9 AIFTA 2011 3. 5 2019 73. 8 PJEPA 2008 59. 1 71. 9 2018 97. 4

What the FTA Partners Committed Tariff Elimination (% of tariff lines) FTAs End Date Year % Duty - Free AUS (AANZFTA) 2015 96. 9% CHN (ACFTA) 2010 94. 6% JP (AJCEP) 2012 63. 9% ID (AIFTA) 2020 74. 2% ROK (AKFTA) 2010 92. 7% NZ (AANZFTA) 2019 96. 8%

STATUS OF NEGOTIATIONS 18 th Regional Comprehensive Economic Partnership (RCEP) Trade Negotiating Committee (TNC) Meeting and Related Meetings, 2 -12 May 2017, Pasay City, Philippines • CONTINUED deliberations to further advance work through market access negotiations on trade in goods and trade in services, and commitments on investment and EXPEDITED text-based negotiations across all negotiating areas.

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EUROPE Strategy 17

PH’ Europe Strategy • Maximize availment of European Union (EU) Generalized System of Preferences (GSP)-Plus • Pursue PH-EU Free Trade Agreement (FTA) • Negotiate PH-European Free Trade Association (EFTA) FTA 18

EU GSP+ Comparison of tariff lines between General GSP and GSP+ • Offers zero duties to products from countries which implement 27 international conventions on human rights, labour rights and sustainable development TOTAL Agri Fish Textiles Others General GSP 6, 209 866 293 1, 125 3, 925 -Zero duty 2, 442 38 1 0 2, 403 -Non-zero duty 3, 767 828 292 1, 125 1, 522 GSP+ (zero duty) 918 293 1, 125 3, 938 GSP Instrument 6, 274 19

PH Access to EU vs. CN Access to EU (selected products) Sample Products Bikes (complete) Solar Panels Chamois Leather Tariff Rates faced by: CHINA PH MFN GSP+ 14% Anti. Dumping 48. 5% 2. 7% 44. 7% 0% 2. 5% 58. 9% 0% 0% 20

CHINA PRODUCTS FACING TRADE REMEDIES IN THE EU • Acesulfame Potassium (ACE-K) • Bicycles • Ceramic Tiles • Aluminium foil • Aluminium (in rolls of a road wheels weight exceeding 10 kg) • Bicycle Parts • • Aluminium • Barium foils (in rolls of carbonate a weight not exceeding 10 kg) • • Monosodium glutamate • Aluminium radiators • Ceramic • tableware and kitchenware Chamois leather Citric acid • Organic coated • Polyester yarn • Ring binder steel products (high tenacity) mechanisms

CHINA PRODUCTS FACING TRADE REMEDIES IN THE EU • Citrus fruits • Ferro-silicon • Hand pallet • Lever arch trucks and mechanisms their essential Parts • Coated fine paper • Glass fibres (certain open mesh fabrics) • Ironing boards • Melamine • Cold-rolled flat • Grain-oriented • Ironing boards • Molybdenum steel products flat-rolled wires products of siliconelectrical • Steel • Okoumé plywood • Oxalic acid • Polyethylene • Seamless pipes terephthalate and tubes of (PET) iron or steel

CHINA PRODUCTS FACING TRADE REMEDIES IN THE EU • Sodium cyclamate • Solar panels (crystalline silicon photovoltaic modules and key components) • Steel ropes and cables • Threaded tube or pipe cast fittings, of malleable cast iron • Sodium gluconate • Stainless steel • Sulphanilic cold-rolled flat acid products • Trichloroisocy anuric acid • Solar glass • Stainless steel • Tartaric acid fasteners and parts thereof • Tube and pipe fitting, of iron or steel • Open mesh • Peroxosulphat • PSC wires and • Silicon metal fabrics of glass es strands fibres

CHINA PRODUCTS FACING TRADE REMEDIES IN THE EU • Tungsten carbide and • Wire rod fused tungsten carbide • sodium cyclamate • Tungsten electrodes • Silicon metal (silicon) • High fatigue performance steel concrete reinforcement bars • Welded tubes and pipes, of iron or nonalloy steel • Sodium cyclamate • Aspartame (limited to two Chinese exporting producers Fang Da Food Additive (Shen Zhen) Limited and Fang Da Food Additive (Yang Quan) Limited)

Export results • Exports to the EU, which comprised 16. 2% of the total PH merchandise exports, amounted to USD 901 million in March this year, up 52% from same period last year. • For the 1 st Quarter 2017, overall exports to EU went up to USD 2. 4 billion or 48% higher than the same period last year.

Philippines-European Union FTA Negotiations

Why did we engage EU in FTA negotiations? • To lock-in GSP+ tariff preferences; secure additional market access beyond the coverage of GSP+ • PH graduation likely in 5 -7 years, as country may reach higher middle-income status (assuming 7% GDP yearly growth; 2% population growth) • Provide a conducive framework for investments • Other ASEAN member states aggressively pursuing FTA with EU

Objectives of the Negotiations • Improved market access for goods, services and investment • Promotion and facilitation of trade and investments • Enhance competitiveness • Contribute to the objectives of sustainable development

Status of the Negotiations • The 1 st round of FTA negotiations was held on 23 -27 May in Brussels, Belgium • The 2 nd round of negotiations was held last 13 -17 February 2017 in Cebu, Philippines

EFTA Background • Inter-governmental organization composed of: • • Iceland Liechtenstein Norway Switzerland 30

EFTA’s Economy GDP: USD 515. 58 B Population: 5, 084, 190 GDP per capita: 100, 819 Total GDP: USD 1. 22 T GDP: USD 15. 33 B Population: 323, 002 GDP per capita: USD 47, 461 Total Population: 13. 52 M Ave. GDP per Capita: USD 91, 928 GDP: USD 685. 43 B Population: 8, 081, 482 GDP per capita: USD 84, 815 Data Source: World Bank; Image Source: EFTA GDP: USD 4. 82 B Population: 35, 851 GDP per capita: USD 134, 617 31

What are our export interests? • Products currently being imported by EFTA from PH • Electronic integrated circuits, semiconductors • Artificial teeth • Fresh or chilled fish fillets, prepared or preserved tunas • Pneumatic tyres • Travelling bags • T-shirts, jackets • Bicycles • Desiccated coconuts • Crude coconut oil • Pineapple juice, prepared or preserved pineapples • Raw cane sugar 32

What are our export interests? • Products being imported by EFTA from ASEAN in bigger values which PH is also exporting to EU • Frames and mounting for spectacles • Parts of gas turbines • Ball bearings • Hydraulic power engines and motors • Babies’ garments • Undergarments • Dresses • Fresh or dried bananas • Palm oil • Fresh or dried guavas, mangoes and mangosteens • Fresh or dried pineapples 33

What are our export interests? • Products being imported by EFTA from world in bigger values which PH is also exporting to EU • Ballasts for discharge lamps or tubes • Gear boxes and parts • Safety airbags • Mattress supports for bed frames • Tobacco refuse • Vinegar, fermented vinegar • Smoking tobacco • Glycerol • Seaweeds and other algae • Juice of fruit or vegetables • Jams, jellies, marmalades 34

What were we able to achieve? Among others: • Duty-free access to all industrial and fisheries products to the EFTA Member States • Concessions on PH agricultural exports • Openings for Services exporters; Filipino professionals & skilled workers

BILATERALS: Rebalance towards Neighbors 36

CHINA • $15 B B-B & 250, 000 jobs • $9 B ODA and grants • $1. 7 B Actual POs of agricultural & industrial products for exports • $10. 4 B B-B Ventures • 100 M Yuan Grant • $1 M donation to Surigao Rehabilitation • Business matching of

JAPAN $2 B B-B CARS Program: Launching of Mitsubishi Mirage G 4 and Toyota Vios Nippon Freuhaut wing van Php 14. 5 B investments and 26, 000 jobs in (shipbuilding and biofuel industry), Ichijo (pre-fabrication construction materials), and an electronic parts exporter • Php 198. 5 B investment commitments from Sogo Soshas • • RUSSIA • $2. 5 B purchase of agricultural products

MIDDLE EAST (K. S. A. , BAHRAIN & QATAR) • $925 M investment commitments • Signed Investment Promotion and Protection Agreement (IPPA) with $1 B Qatar Sovereign Fund

JAPAN: PJEPA 40

PJEPA General Review • Convened the 5 th PJEPA Joint Committee Meeting last 06 May 2016 in Manila • Discussions focused on the scope of the General Review including Trade in Goods, Rules of Origin, Trade in Services, among others • PH’ main offensive interest: Agricultural market access; terms for deployment of skilled workers, professionals • Next PJEPA JCM scheduled in September in Japan 41

US: TIFA, GSP 42

PH Interest: US GSP reauthorization • Extension of the program until December 2017 (under the Trade Preferences Extension Act of 2015; signed: 29 June 2015) • Where Sec. 204 authorizes POTUS to include certain luggage and travel articles for duty-free treatment under the GSP 43

US GSP • Offers preferential dutyfree entry to the US for more than 5, 000 products for 122 designated beneficiary countries and territories • About 17% of PH exports enter the US market through the GSP Year US GSP Imports from PH 2011 US$ 1. 133 2012 US$ 1. 239 2013 US$ 1. 268 2014 US$ 1. 328 2015 US$ 2. 524 44

Profile of PH exports to US Exports by duty level (2012) Value (in US $) Percent Total exports 7, 395, 425, 546 Accounted by top 300 7, 066, 801, 272 96% 1. Of which already zero 5, 070, 385, 085 69% a. MFN-zero 4, 027, 176, 173 54% b. GSP products 1, 043, 208, 912 14% 2. Of which duty still positive 1, 996, 416, 187 27% 45

Profile of PH exports to US Exports by duty level Value (in US $) Percent Total exports (2015) 9, 016, 486, 764 Accounted by top 300 (2015) 8, 538, 514, 611 95% 1. Of which already zero 5, 070, 385, 085 69% a. MFN-zero 4, 027, 176, 173 54% b. GSP products 1, 043, 208, 912 14% 1, 996, 416, 187 27% 2. Of which duty still positive 46

Top 10 PH-GSP exports to the US (2015) Product Spectacle lenses of other materials Other electrical switches Relays, for a voltage exceeding 60 V, n. e. s. Other articles carried in pocket/handbag, with outer surface plastic sheeting or of textile materials Other preparations not elsewhere specified or included Other waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other nonalcoholic beverages, not including fruit or vegetable juices of heading No. 20. 09 Lighting sets of a kind used for Christmas trees Other basketwork, wickerwork and other articles, n. e. s. , made directly to shape from plaiting materials or made up from goods of heading No. 46. 01; articles of loofah Activated carbon Spectacle lenses of other materials Sub-total value /Percent share (Top 10) – 64. 5% Value in USD ‘ 000 572, 903 188, 941 161, 216 158, 537 111, 291 103, 190 92, 342 91, 419 78, 256 72, 360 1, 630, 454 47

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US Registered Significant Trade Deficits in Goods (2016) • Canada • China • EU • India • Indonesia • Japan • Korea • Malaysia • Mexico • Switzerland • Taiwan • Thailand • Vietnam

PH part of advocacy for: • Addition of travel goods to GSP • Creation of new classification of footwear, ‘protective active, ’ which permanently lowered duties from 37. 5% to 20% • Creation of new apparel breakouts for recreational Performance Outerwear Apparel -------- • EO for inclusion of travel goods to GSP, not just to AGOA parties • Renewal of Trade Preferences Extension Act of 2015; inclusion of recreational performance outerwear apparel

New Southbound Policy Promotion Plan Four (4) main tasks: Promote Economic Share Resources Talent Exchange Regional Links

n of Taiwan’s AN for 2015 Total investments of Taiwan to ASEAN $2806. 49 1. Singapore $1569. 00 2. Vietnam $725. 04 3. Philippines $196. 13 4. Thailand $116. 50 5. Cambodia $76. 37 6. Malaysia $72. 27 7. Indonesia $28. 28 8. Lao PDR $22. 75 9. Myanmar $0. 08 10. Brunei $0. 07

In RCEP, we can be the “last touch” for GVCs accessing the EU & US markets: • EU - duty-free access for 6, 274 tariff lines under GSP+ Program • PH, only ASEAN country with GSP+ • US – 70% of PH exports enter the US duty-free (GSP & MFN)

PH ACCESS TO KEY MARKETS • ASEAN (10 members) • ASEAN Partners: China, Japan, S. Korea, India, Australia and New Zealand ------------- • Europe: EU (GSP+) and EFTA (Switzerland, Norway, Iceland Liechtenstein • United States

EXECUTIVE ORDERS 56

EXECUTIVE ORDERS Executive Order No. TITLE Date EO 20 MODIFYING THE NOMENCLATURE AND RATES OF IMPORT DUTY ON VARIOUS PRODUCTS UNDER SECTION 1611 OF REPUBLIC ACT NO. 10863 OTHERWISE KNOWN AS THE CUSTOMS MODERNIZATION AND TARIFF ACT Published: 18 May 2017 Manila Bulletin MODIFYING THE NOMENCLATURE AND THE RATES OF IMPORT DUTY ON CERTAIN INFORMATION TECHNOLOGY PRODUCTS UNDER SECTION 1611 OF THE CUSTOMS MODERNIZATION AND TARIFF ACT, IN ORDER TO IMPLEMENT THE PHILIPPINES' TARIFF COMMITMENTS UNDER THE WORLD TRADE ORGANIZATION - INFORMATION TECHNOLOGY AGREEMENT Published: 18 May 2017 Manila Bulletin EO 21 Effectivity Date: 17 June 2017 Effectivity Date: 18 May 2017

Executive TITLE Order No. Date EO 22 REDUCING THE RATES OF DUTY ON CAPITAL EQUIPMENT, SPARE PARTS AND ACCESSORIES IMPORTED BY BOARD OP INVESTMENTS - REGISTERED NEW AND EXPANDING ENTERPRISES Published: 18 May 2017 Manila Bulletin EXTENDING THE EFFECTIVITY OF THE MOSTFAVOURED-NATION RATES OF DUTY ON CERTAIN AGRICULTURE PRODUCTS UNDER REPUBLIC ACT NO. 10863, OTHERWISE KNOWN AS THE CUSTOMS MODERNIZATION AND TARIFF ACT, AND THE OTHER PHILIPPINE COMMITMENTS UNDER THE WORLD TRADE ORGANIZATION DECISION ON WAIVER RELATING TO SPECIAL TREATMENT FOR RICE OF THE PHILIPPINES Published: 24 May 2017 Manila Bulletin EO 23 Effectivity Date: 18 May 2017 Effectivity Date: 24 May 2017

PH Investment Priorities Plan 2017 A. PREFERRED ACTIVITIES 1. ALL QUALIFIED MANUFACTURING ACTIVITIES INCLUDING AGRO PROCESSING 2. AGRICULTURE, FISHER AND FORESTRY 3. STRATEGIC SERVICES o IC DESIGN o CREATIVE INDUSTRIES/KNOWLEDGEBASED SERVICES o MAINTENANCE , REPAIR, AND OVERHAUL (MRO) OF AIRCRAFT o CHARGING/REFUELLING STATIONS FOR ALTERNATIVE ENERGY VEHICLES o INDUSTRIAL WASTE TREATMENT 4. HEALTHCARE SERVICES 5. 6. 7. 8. 9. 10. INCLUDING DRUG REHABILITATION CENTERS MASS HOUSING INFRASTRUCTURE AND LOGISTICS INCLUDING LGU-PPPs INNOVATION DRIVERS INCLUSIVE BUSINESS (IB) MODELS ENVIRONTMENT OR CLIMATE CHANGE-RELATED ACTIVITIES ENERGY

PH Investment Priorities Plan 2017 B. EXPORT ACTIVITIES II. ARMM LIST § PRODUCTION AND MANUFACTURE OF 1. EXPORT PRODUCTS § SERVICES EXPORTS § ACTIVITIES IN SUPPORT OF EXPORTERS 2. C. SPECIAL LAWS 1. 2. 3. 4. 5. 6. 7. INDUSTRIAL TREE PLANTATION (P. D. 705) MINING (R. A. 7942) (limited to capital equipment incentive) PUBLICATION OR PRINTING OF BOOKS/TEXTBOOKS (R. A. 8047) REFINING, STORAGE, MARKETING AND DISTRIBUTION OF PETROLEUM PRODUCTS (R. A. 8479) REHABILITATION, SELF-DEVELOPMENT AND SELF-RELIANCE OF PERSONS WITH DISABILITY (R. A. 7277) RENEWABLE ENERGY (R. A. 9513) TOURISM (R. A. 9593) 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. EXPORT ACTIVITIES AGRICULTURE, AGRIBUSINESS, AQUACULTURE AND FISHERY BASIC INDUSTRIES INFRASTRUCTURE AND SERVICES INDUSTRIAL SERVICE FACILITIES ENGINEERING INDUSTRIES LOGISTICS BIMP-EAGA RELATED INVESTMENT ENTERPRISES TOURISM HEALTH AND EDUCATION SERVICES AND FACILITIES HALAL INDUSTRY BANKING, NON-BANK FINANCIAL INSTITUTIONS AND FACILITIES ENERGY

GROWING EXPORTS IN RCEP, EFTA AND NEW MARKETS PHILEXPORT 2 nd Quarter General Membership Meeting 22 June 2017, Manila Diamond Hotel Dr. Ceferino S. Rodolfo DTI Undersecretary Industry Development and Trade Policy

Philippines (PH) – Taiwan (TW) Trade & Investment Relations Key Exports to TW PH-TW Bilateral Merchandise Trade 1. 2. 3. 4. 6 5 5. 4 US$ Billion 3 Key Imports from CN 1. 2 1 0 Digital monolithic integrated circuits Other digital monolithic integrated circuits, not elsewhere specified (n. e. s. ) Storage units Semiconductor devices manufactured from materials on consignment basis Electrical and electronic machinery, equipment and parts manufactured 2013 2014 2015 Export Import 2016 2. 3. 4. 5. Materials, accessories and supplies imported on consignment basis for the manufacture of dice of any material Other materials, accessories and supplies imported on consignment basis for the manufacture of semiconductor devices Digital monolithic integrated circuits Other digital monolithic integrated circuits, n. e. s. Petroleum oils and oils obtained from bituminous minerals, other than light, n. e. s.

TW New Southbound Policy Promotion Plan Taiwan ASEAN South Asia Australia & New Zealand People to People Tourism Cultural Educational Academic Research Economic Links

With DUTERTENOMICS… Recent Economic Growth Momentum Demographic Sweet Spot Investment and Trade Growth Momentum Young Employed Purchasing Power Human Capital Advantage Infrastructure Development Socio-economic Reforms ASEAN RCEP and GSP Markets President Duterte’s wisdom to adopt Independent Foreign Policy to strengthen ties with economies in the region – China, Japan, Russia, Middle East