PIDS Wants to Utilize FTAs for Philippine Competitiveness

According to Philippine Institute for Development Studies (PIDS), the government will have to increase efforts to entice firms to make use of free trade agreements (FTAs) to grow more competitive.

In a paper titled FTA Utilization in the Philippines: Trends and Determinants, PIDS wrote that as the Philippines continues to push for trade liberalization with potential and current FTA partners, there is a necessity for the FTA policy to target stimulating the use of preferential tariffs among tariffs.

Other recommendations include escalating existing programs ad creating new ones to prepare firms for FTA utilization.

“With firm productivity and knowledge being significant determinants of FTA utilization, increased focus must be given to facilitating the firm growth and providing access to information on FTAs,” said the PIDS.

The study likewise discovered that the Philippines’ FTAs utilization has not grown in the past ten years, despite the expectations that the trade barrier reductions of the FTAs would entice firms to make use of the preferential tariffs.

The study noted that in 2011, only 14.3% of exporters utilized FTAs. This number decreased in 2017 to 3% and then jumped to 8.6% in 2020.

On the other hand, FTA export transactions have been declining, from 2011’s figures of 135,648 to only 78,178 back in 2014. From 2015 – 2017, this increased but has since decreased again in 2020 to 62,503.

“Thus, increased attention must be given to encouraging exporters to increase their utilization of FTAs,” mentioned PIDS.

“These measures could also be beneficial to constantly evaluate the impediments to FTA use. Through its current programs on MSME (micro, small and medium enterprise) development and firm growth, the government could formulate new targeted interventions, focusing on assisting MSMEs and sectors that could be leveraged to boost the country’s competitiveness and strengthen its position in GVCs (global value chains),” they added.

Source: Philstar