Amid snarled global supply chain, European expats want PH-EU free trade talks revived

Metro Manila (CNN Philippines, November 23) — European businessmen want a revival in negotiations between the Philippines and the 27-nation European Union (EU) for a free trade deal amid a snarled global supply chain.

The call comes as the pandemic put front and center the need for the Philippines to pivot to an investment-led economy as its current domestic demand-driven setup made it vulnerable to recession when COVID-19 brought global trade almost to a standstill in 2020.

The Philippines and the EU first sat down for talks for free trade deal in 2016, but the negotiations were unofficially put on hold since 2017.

"There is no [EU] free trade agreement with the Philippines. We've talked a lot about how should we improve foreign investments, and the operating environment to attract investments in the Philippines. We've come a long way there," said Lars Wittig, president of the European Chamber of Commerce in the Philippines which groups over 700 European companies across several industries.

"We should try to shift back and discuss more how can we further the free trade agreements," he pointed out.

Of the 10 members of the Association of Southeast Asian Nations (ASEAN), Vietnam and Singapore had already separately signed bilateral pacts with the bloc. Two other ASEAN countries — Thailand and Indonesia— as well as Australia and New Zealand also revived talks this year to address supply chain bottlenecks.

A survey released last September by the EU-ASEAN Business Council — the primary business body for European companies doing business in Southeast Asia — showed 81% of respondents believe "there are too many barriers to the efficient use of supply chains in ASEAN." The poll also found that 98% of businesses want the EU to accelerate FTA negotiations with ASEAN and its members.

Free trade deals between Europe and the Philippines currently are limited to the European Free Trade Association (EFTA) that groups Iceland, Liechtenstein, Norway and Switzerland, but observers noted that even this has not been fully harnessed since first sealed in 2016. The EU had also earlier granted Philippine goods, mostly agriculture and fisheries, preferential access or zero duties under the so-called Generalize Scheme of Preferences Plus (GSP+), the only ASEAN nation having that privilege.

But even the GSP+ grant is under threat of being recalled amid alleged human rights abuses by the Duterte administration.

"EU-Philippines trade growth today is far from its full potential," Deputy Head of the EU Delegation to the Philippines Ana Isabel Sanchez Ruiz told a virtual conference on Tuesday, noting that trade between the Philippines and the bloc fell by 17% in 2020.

The Philippines' top European trade partners in 2020 were Germany, Netherlands, France, UK, Italy, Belgium and Spain.

"GSP+ is an important competitive advantage for the Philippines since the Philippines is the only ASEAN country that is granted this straight preference in the EU market," the EU Delegation official said.

"We look forward to a continued fruitful collaboration with the Philippines for the correct implementation of the GSP+ for the years to come, especially in the respect of human rights and labor rights conventions subscribed by the Philippines," she added.

Data presented by the European Chamber of Commerce of the Philippines during Tuesday's virtual briefing showed the country at the bottom (13th out of 14 countries) in a 2021 ranking made by Oxford Economics in terms of foreign direct investments (FDI) attractiveness.

Former Sunlife CEO Riza Mantaring, now an independent director of Ayala Corp., also said that the Philippines' "low competitiveness" is among foreign investor issues, with the economy ranking "near the bottom of APEC countries in all the indices measuring supply chain performance."

Analyst Dindo Manhit of the Stratbase ADR Institute said: "This might be an opportune time to start shifting to a more investment-led economy and to focus on scaling up the country's role in the global supply chain."

"This COVID-19 crisis can be an opportunity for the Philippines to draw attention from foreign investors to further enhance its capabilities, especially in manufacturing," he added.