The Department of Trade and Industry (DTI) of the Philippines anticipates a $189 million reduction in expenses over five years for banana exports as a result of the newly activated Philippines-South Korea free trade agreement (FTA). The FTA is set to decrease tariffs on Philippine banana exports by 6 percentage points immediately, with a further reduction to 12 percentage points by January 1, 2025, according to Export Marketing Bureau Director Bianca Pearl R. Sykimte.
The tariff adjustments are expected to generate annual savings of approximately $12.6 million, escalating to over $25 million by the second year. This FTA aims to mitigate the Philippines' tariff disadvantage compared to South Korea's other FTA partners, such as Vietnam, which will enjoy a 0% duty on its banana exports by next year. The Philippines' share of South Korea's banana imports has declined from 98.2% in 2012 to 69.1% last year, a decrease attributed to competitors securing lower tariffs through FTAs.
Under the previous tariff regime, bananas from the Philippines faced a 30% tariff, whereas countries like Costa Rica, Honduras, Peru, and Vietnam benefited from zero duty on their exports to South Korea. The FTA is also expected to bring benefits to other sectors, including machinery, transport equipment, and garments, with tariff eliminations phased in over several years.
While the impact of tariff savings on Korean goods prices in the Philippines remains uncertain, it is suggested that it might depend on business models and market competition levels. Tariff concessions under the FTA are considered minimal due to existing low duties under other trade agreements like the ASEAN-Korea FTA and the Regional Comprehensive Economic Partnership.
Source: BusinessWorld