Energizing EU-Asean trade

Jessen

EU Trade Commissioner Cecilia Malmström visited Manila recently to discuss trade with Asean Economic Ministers. The summit was a milestone in itself as the Ministers discussed the next steps toward the resumption of the Asean-EU Free Trade Agreement (FTA) negotiations as well as ways to enhance economic cooperation in addressing emerging challenges and capitalizing on opportunities for trade and investment between the two regions.

The possibility of establishing a multilateral investment court that may serve as a single global judicial instance for resolving investment-related disputes was also raised.

Asean and the EU are doing remarkably well and are economically and politically stable havens in today’s world where traditional ways are increasingly being challenged.

The EU managed to turn one of its worst crises into an opportunity to strengthen its competitiveness: EU GDP is growing by 1.9 percent, industrial production by 1.6 percent while governments brought down debt levels and deficits —the latter to as low as 1.5 percent. This would have been unthinkable a couple of years ago and shows that the EU took the right measures, painful as they were. It has resulted in significant employment opportunities and business sentiments.

And even though Europe is in the midst of debating what a future EU should look like—a healthy discussion for any organization that is interested in long-term goals and sustainability—economically we are back on our feet. Stronger!

European companies are interested in Asean not the least as they recognize the integration efforts made as—not unlike in the EU—they will help supply chains to be competitive while servicing large consumer markets without unnecessary restrictions. This recognition of integration —even if not as ambitious as in the EU—attracts companies to Asean.

On the local front, we have seen some good examples already: The Philippines’ International Container Terminal Services partnered with Luka Rijeka for the operation, management and development of the main Container Terminal in Croatia, making it the international trading gateway for central and south eastern Europe. Ayala’s Integrated Micro-Electronics built on its domestic strength to invest in electronics plants in Czech Republic and Bulgaria servicing Europe’s large automotive industry. Philippines’ Emperador recently acquired Spanish Fundador and Scottish Whyte & Mackay, allowing the company access to more than 100 countries around the world.

Largest economy

The Philippines’ Development Plan from 2017 to 2022 has projected a GDP growth to strengthen at 7 to 8 percent in the medium term with growth expected to be more inclusive and where overall poverty rate is expected to decline from 21.6 percent to 14 percent. Meanwhile, the EU is the largest economy in the world with a GDP per head of euro 33,000 for its 500 million consumers. It is the world’s largest trading bloc, the world’s largest trader of manufactured goods and services and ranks first in both inbound and outbound international investments.

While comparing EU-Philippine trade to bilateral levels between the Philippines’ other Asean counterparts, the Philippines is still lagging behind but the relationship has a lot of potential to catch up with its neighbors.

The EU-Philippine trade in goods was almost euro 13 billion in 2015. In terms of total trade, the EU is the fourth largest trading partner for the Philippines and is the Philippines’ third export partner, after Japan and the United States. The EU is the second largest service partner and the first investor in the Philippines.

What is more?

The EU provided 37 percent of all new reported investments in the Philippines in 2015, an increase of 80 percent compared to its year ago level with most of the FDI invested in manufacturing, business process outsourcing, which represented an estimated half a million jobs.

The EU has started negotiations with the Philippines, but then I believe that establishing a region-to-region free trade area will act as a powerful catalyst for even closer mutually beneficial economic relationships.

The bottom line therefore is still about continuing dialogue. After all, it’s about ensuring that trade and development are sustainable, and not used to undercut basic rights. This makes sense for companies as well.

Companies want to operate in a good business environment. Respect for human and labor rights; and good governance are important parts of companies’ decision to invest.

As supply chains go global, companies need to control these supply chains to ensure that what they sell is sourced in a legal, preferably sustainable and ethical way.

Values support our people: Creating jobs is very important, but creating quality jobs that can provide a decent living; pay for healthcare, education and development is what we should aim for.

Commitments

This is more important today than ever, in a world that is becoming more unpredictable when it comes to commitments that both the EU and the Philippines all held high … This matters to the EU and to all its regional and bilateral players which benefited so much from integration. This should matter also to our industries, for their longer term continuity and sustainability.

Both the EU and the Philippines should endeavor to create the best possible enabling environment. We both just need to make the trade grow stronger and to focus in working together on market access.

The EU has been supporting the Philippines with trade-related technical assistance since 2005. Through the Trade Related Technical Assistance 3 project (2013-2017), the current cooperation of the EU and the Philippines on trade is geared to strengthening technical cooperation to enhance capacity of both the government and private sector to facilitate trade and investment.

TRTA supported the Philippines’ integration into the international and regional trading and investment system, with the overall objective of boosting inclusive growth and reducing poverty.

TRTA 3 has assisted government agencies and the private sector through technical assistance focusing on trade and competition policies, national quality infrastructure, sanitary and phytosanitary measures and trade facilitation. In parallel with the passage of significant domestic reforms, such as the Philippines Competition Act, the Customs Modernization and Tariff Act and the Food Safety Act, the program has contributed to enhancing the competitiveness of the Philippine economy.

To further enhance our bilateral trade cooperation, the EU has committed euro 6.1 million over four years for a fourth phase of the program, Trade Related Technical Assistance 4. —CONTRIBUTED