The Philippine-Korea Free Trade Agreement (PH-Korea FTA) is expected to deliver some $189 million in tariff savings for banana exporters within its first five years as the trade deal comes into force today Tuesday, the Board of Investments (BOI) said.
“Based on 2023 Korean imports of Philippine bananas valued at $210 million, we estimate additional annual tariff savings of $12.6 million from the first year, accumulating to $25.2 million by the second year,” said BOI Export Marketing Bureau (EMB) director Bianca Sykimte.
Under the FTA, tariffs on Philippine bananas will gradually reduce over five years. The current 30 percent most favored nation (MFN) rate will decrease to 24 percent by Dec. 31, 2024 and further to 18 percent by 2025, 12 percent by 2026, 6 percent by 2027 and zero by 2028.
Trade Undersecretary and BOI managing head Cdeferino Rodolfo said the phased reduction would place the Philippines on par with Vietnam, Peru, Honduras and Costa Rica, which already enjoy duty-free banana exports to Korea.
“Lowering tariffs is critical to addressing our competitive disadvantage vis-à-vis other countries,” Rodolfo said.
The BOI said on top of agriculture, the trade agreement includes reduced tariffs on automotive products, a key export sector and gains in other sectors, particularly in transport equipment and garments.
“While agricultural products like bananas are our significant gains, Korea’s interests lie in automotive parts, which benefit from significant tariff changes under this FTA,” Sykimte said.
Trade between the Philippines and Korea has doubled since the ASEAN-Korea FTA was signed and further expanding with the Regional Comprehensive Economic Partnership (RCEP).
Philippine exports to Korea grew by 1.9 times, outpacing Korea’s imports from the rest of the world, which grew by 1.8 times. Imports from Korea to the Philippines also surged, growing by 2.6 times.
Rodolfo expressed hope the political dynamics in Korea would not affect the trade deal it signed with the Philippines.
“We believe in the strength of their mature political and economic systems. This agreement ensures mutual benefits and strengthens our partnership,” said Rodolfo.
South Korea is the third-largest export market for Philippine bananas, accounting for 13.5 percent of exports in 2023 after Japan’s 46.1 percent share and China’s 29.5 percent.
