Questionnaire on a free trade agreement with the Philippines Feedback from Industry stakeholders Date: 29/07/2016
I. BACKGROUND OF THE QUESTIONNAIRE DG Trade launched a questionnaire on the future EU-Philippines FTA using the on-line tool. The link to the on-line questionnaire was published on DG Trade's website, and notifications were distributed widely to Member States and stakeholders. The objective of launching the consultation has been to gather information that should assist DG Trade in defining a negotiation position. The deadline of the questionnaire was 30 April 2016. In total 34 replies were received, of which 11 from industrial sectors, 11 from the Agri-Food sector and 7 from Services. Respondents included 15 industry/business federations and 17 individual companies. II. ASSESSMENT The replies from stakeholders consulted allowed identifying a number of priority issues, that are further described in the sections bellow, namely: It is generally recognised that the Philippine s (PH) economy is relatively open for EU goods, although in some sectors, tariffs, NTBs and the competition from FTA partners of PH is causing the bilateral trade to be below is potential. Huge interest and opportunities in many sectors, in particular automotive, ICT, pharmaceuticals, and agro-food and beverages. High interest to open up services to EU providers but so far PH commitments very limited. Main obstacles on visa/work permit, on mode 1 and 2 as well. On Investment, PH recently made efforts to improve economic environment for foreign investors. FDI are allowed in most of the sectors. However, major impediments for European companies to do business in Philippines remain. Certain sectors are reserved by law to Philippines citizens with foreign equity limited to a minority share; limits on membership of the board of directors; discriminatory access to capital and a ban on land ownership. The 1987 Constitution still states that foreign investors may not own more than 40% of a company s share, with the remaining 60% being under control of Philippine company/citizens. Other concerns of industry include RoO, public procurement, bureaucracy and corruption, lack of competition in some sectors (old-families conglomerates set the scene). 29/07/2016 Page 2 of 6
Call for the agreement with PH to be in line with SG and Vietnam FTA. In the absence of an EU-PH FTA, EU Member States are perceived to be treated differently. In addition, there is a competitive disadvantage for EU business stemming from the PH FTA with other partners (Japan, ASEAN, China, Australia/NZ).. Automotive sector: The automotive industry has signalled a clearly offensive interest (tariffs and NTBs) and no defensive sensitivity. It has no local production, but some potential in sourcing of certain components from PH competitive threat by other PH FTAs (with Japan, Korea and China) request for more convergence with UN/ECE regulations 1. RULES OF ORIGIN (ROO) ROO is a major issue for EU companies. Depending on the sector some favour ROO applied in EU-Vietnam and EU- Singapore while some other request ROO provided in the GSP scheme Limitation in cumulation possibilities 2. DUTIES/IMPORT RESTRICTIONS Non-automatic licensing: lengthy and burdensome procedures, in particular with regard to the Certificate of Product Registration from the Bureau of Food and Drugs. High duties in some cases (alcohol, automotives, ) Some complaints concern bureaucracy (although there is no mention of discrimination). 3. ACCESS TO RAW MATERIALS AND EXPORT RESTRICTIONS Only a few comments but no mention of the products concerned. 29/07/2016 Page 3 of 6
4. CUSTOMS PROCEDURES A number of complaints in particular from transportation/maritime services. So request that EU-PH FTA customs and trade facilitation chapter to be much more specific. Issues are: arbitrary decisions on valuation and classification matters. Lack of automation and where there is, duplication with manual procedures. Lack of uniform procedures between different customs offices. Lack of clear guidelines on procedural matters, including valuation. The valuation methodology is not aligned with WTO Valuation Agreement as retail prices found on internet are being used as a regular valuation source. Shipment value will often be upgraded by the Bureau of Customs and a corresponding surcharge of penalty will be imposed on the importers. lengthy customs procedures use of brokers to avoid problems different standards between customs centers servicing the same port areas 5. DISCRIMINATION IN REGULATION/ TAXATION high excise taxes for alcohol and automotive discriminatory VAT for transportation services 6. TBT/ NTBS burdensome and lenghty procedure to get mandatory certificate (Certificate of Product Registration) from Bureau of Food and Drugs request PH to follow more international standards 7. SPS Licensing procedures for SPS products authorization system for import lengthy and non-transparent (very costly and time consuming). health certificate required on each EU exports of fruits and vegetables restrictions on import of meat products 29/07/2016 Page 4 of 6
Recognition of the EU as one entity and pre-listing of establishment is a must as well as acceptance of regionalisation under OIE rules. 8. SERVICES/ INVESTMENT Participants to the survey called for the FTA to revise the restrictive provisions in the Philippine Constitution related to foreign ownership in certain economic sectors. Problematic requirements for work permits Paid-up capital: the requirement for companies to have a paid-in equity capital of 200,000 USD if they are more than 40% foreign-owned and the capital requirement of 2.5 million USD for foreign-owned retail trade enterprises hamper investment To go beyond WTO commitments for services EU business expresses interest for MRA on academic degrees, education certification. Professional services: to open the market 9. REGULATORY 9.1. Transparency: While access to government officials is generally not an issue, formal public consultations are not generally carried out. 9.2. IPR IPR key interest for several EU stakeholders. Complaints on prosecution, resolution of patent disputes, counterfeiting 9.3. Competition/ State aid Presence of cartels and conglomerates owned by old families However, recent improvement with the adoption of Competition Act, 9.4. Government Procurement In general for public procurements, challenges for foreign companies to access the public procurement market: foreign companies need to enter into a Joint Venture with a Philippines company (60% Philippines company, 40% foreign company) 29/07/2016 Page 5 of 6
Certain exceptions exist that don t require a Joint Venture when local expertise and local goods are used but these are applied in an arbitrary way and at the discretion of Government Agency. Furthermore, 1930 FLAG Law requires foreign companies to be at least 15% lower price than lowest local bid if they want to win the tender in cases where foreign direct participation is allowed in public procurement. This law is applied in a discretionary way. 29/07/2016 Page 6 of 6