What is the future of Philippine-UK trade after Britain’s exit (Brexit) from the European Union, the Philippines’ fourth largest trading partner? More specifically, will the zero-percent tariff for more than 6,000 categories of Philippine products, made possible under the EU’s Generalised Scheme of Preferences Plus (GSP+), still apply?
These are likely to be the first questions which Philippine Trade Secretary, Ramon Lopez, will be asking Britain’s Secretary of State for International Trade, Liam Fox, when they meet later this year. And with Philippine exports continuing to struggle – June marked the 15th consecutive month of decline and an annual 11.4% drop – the answers will be critical.
The Philippines was the first country within the Association of Southeast Asian Nations (Asean) to join the GSP+. Categories covered include coconut and marine products, processed fruit, prepared food, animal and vegetable fats and oils, textiles, garments, headwear, footwear, furniture, umbrellas, and chemicals. The agreement allows a total of 6,200 Philippine products to enter the 28 countries of the EU tariff-free until December 2024 – at least it did before Brexit.
Lopez will be looking for a similar bilateral agreement with the UK while the existing scheme with the remaining 27 European countries remains in place. The British Government has set a two-year time frame for implementing its EU exit.
Last year, total EU-Philippines trade was worth US$14.2 billion. This comprised US$7.22 billion-worth of Philippine goods exports to the EU – accounting for 12.2% of the country’s total exports worldwide – and US$6.98 billion of EU-goods imports, or 9.5% of its total global imports. Based on these figures, the EU is the Philippines’ third largest export market after Japan and the US; it is the fourth largest source of imports after China, the US and Japan, and the fourth largest trading partner after Japan, China and the US.
Hidden within these figures, however, is the significance of the Philippines-UK trade component. Bilateral business between the two countries leapt by 30% last year to US$2.6 billion – that’s 18.3% of all EU-Philippines trade, making Britain by far the Philippines’ biggest European trading partner. On top of that, Britain is the largest investor in the Philippines among EU member states, with an FDI stock of more than US$5 billion.
This is trade that the Philippines can ill-afford to lose – and certainly not at a time when its global export figures are looking so unsteady. But does the Philippines really have any cause for concern? Let’s take a look at the other side of this partnership.
What everyone knows is that post-Brexit, in fact even in the run up to it, Britain is looking to make as many trade agreements – bilateral, trilateral, multilateral; whatever their form – that it can. And Asean – more specifically the Asean Economic Community (AEC) – is firmly in its sights. With a combined population of 600 million, the AEC is 20% bigger than the EU and 40% bigger than North America.
Last year, pre the Brexit referendum, then British Prime Minister, David Cameron, made a four-day visit to four Asean capitals, Singapore, Kuala Lumpur, Jakarta and Hanoi. Part of his purpose was to strengthen UK trade ties with the Asean single market. He also appointed a UK Trade Envoy to the AEC; the first country to do so.
Britain, on its own account, will not be looking to damage its existing partnership with the Philippines; it will be looking to grow it further. The two countries have a Bilateral Investment Agreement for the Promotion and Protection of Investments which has been in force since 1981.
An Enhanced Trade and Investment Economic Partnership agreement between the two countries is also in the works and should be completed within the next few months. This will focus on infrastructure, sustainable energy and education.
Exactly what form any new arrangements take with regards to GSP+ – given the machinations of Brussels – remain to be seen. But in any event, Britain’s expected super-sizing of its Asean trade when the dust from Brexit finally settles cannot help but boost its trade relations with the Philippines.