Minister for Trade Dukgeun Ahn and the Philippines’ Department of Trade and Industry (DTI) Secretary Alfredo E. Pascual signed the Korea-Philippines Free Trade Agreement (FTA) on September 7 on the sidelines of the ASEAN Summit 2023 held in Jakarta, Indonesia.

Korea and the Philippines announced a joint declaration on the conclusion of the basic FTA framework in October 2021, succeeded by a number of negotiations regarding the specific schedule for removal and reduction of tariffs, implementation procedures of agriculture safeguards, and management rules for the Committee on Trade in Goods, after which a final agreement was reached on all items of the Korea-Philippines FTA in June 2022. Legal scrubbing followed on both sides until October 2022, and Korea concluded its internal procedures in July 2023 required for entering the FTA.

With this new FTA, Korea has entered a total of 22 FTAs with 59 countries around the world. Next to Singapore, Vietnam, Cambodia and Indonesia, the Philippines is the fifth ASEAN country to enter an FTA with Korea. The sum of Korea’s trade with these five countries takes up 91 percent of Korea’s total trade with ASEAN as of 2022.

Through the existing Korea-ASEAN FTA, Regional Comprehensive Economic Partnership (RCEP) and the said Korea-Philippines FTA, it is conclusive that Korea opens up 94.8 percent of its items to the Philippines free of tariffs, while 96.5 percent of Filipino items open to Korea tariff-free, resulting in a considerably high level of open trade.

For Korea, cars and car parts are some of the major items to benefit from the bilateral FTA, as the Philippines is the number one importer of automobiles among ASEAN countries. As of 2022, Japan vastly outperformed Korea in the Philippines’ automobile market with a market share of 82.5 percent, followed by the U.S. (7.0 percent), China (6.4 percent) and Korea (2.5 percent). Japanese automobiles and car parts enter the Filipino market tariff-free through Japan’s Economic Partnership Agreement (EPA) with the Philippines, with an exception of a 20 percent tariff on Japanese sedans.

The Korea-Philippines FTA’s entry into force will automatically remove all tariffs for Korean automobiles, and the car parts tariff (currently 3-30 percent) will be removed over the next five years, raising expectations for Korea’s enhanced competitiveness in the Philippines’ automotive market. Moreover, tariffs for eco-friendly cars like electric vehicles (EVs) and hybrids will also be eliminated within the next five years, as the Philippines’ economic growth rate (6.5 percent in 2022) indicates much potential for these vehicles in the market.

The FTA deal strengthens market presence for Korea’s major agro-fishery products in the Philippines as well, notably for processed food products (currently 5-10 percent), ginseng (5 percent), chili peppers (5 percent), pears (7 percent) and mackerels (5 percent), by shedding off tariffs over the next 15 years in step with the rising Hallyu influence.

Meanwhile, Korea’s sensitive agricultural and forestry items remain unchanged in accordance with the Korea-ASEAN FTA and RCEP. The current 30 percent tariff on Filipino bananas coming into Korea will gradually slide to zero over the next five years, but Korea has inserted a safeguard measure to prevent a rapid surge of banana imports.

The two countries have also introduced a cooperation agreement in economy and technology within the Korea-Philippines FTA to establish a basis for pushing forward-looking economic cooperation in various areas, including vaccines, climate change and culture, based on the plan to advance mutually cooperative discussions through many different forms of collaboration in promising strategic areas, such as healthcare, rare metals processing, innovation ecosystem, culture, movies, e-commerce and intellectual property.

The Korean government will be preparing for the National Assembly’s ratification procedures so that the FTA can come into effect by the first half of 2024.