Countries that export bananas like Vietnam will be able to ship the tropical fruit to South Korea tariff-free in a few years, but Philippine banana exporters have to keep paying much more if they want to sell their goods in South Korea.
The growing market advantage of its competitors is worrying the Pilipino Banana Growers and Exporters Association Inc. (PBGEA), whose members pay a 30-percent tariff for their banana exports to the South Korean market. Although the Philippines is still the biggest supplier of bananas in South Korea, the Philippines might not be able to hold the fort for long.
Vietnam signed a free-trade agreement with South Korea in 2015, easing two-way trade for both countries. By 2024, banana exports from Vietnam to South Korea will enjoy zero tariff, according to a recent statement from the Department of Trade and Industry (DTI). Five Central American countries that signed their FTA with South Korea last year will enjoy the same perk by 2021.
On the other hand, the Philippines failed to reach its target of concluding its FTA with South Korea this November, just a few months since the negotiations began. While the DTI targets to finish the deal within the first half of 2020, the competitive advantage that other countries will soon concern PBGEA.
“The negotiations [between the Philippines and South Korea] only started in the second quarter while the tariff rates for our competitors have been getting more and more favorable to our disadvantage,” said Stephen Antig, executive director of PBGEA, in a recent statement.
The delay of the PH-KOR FTA talks did not come as a surprise. Back in October, Trade and Industry Secretary Ramon Lopez told reporters that they were still confident when the start of the negotiations was announced in April. But a lot changed on the negotiating table since then, such as South Korea’s refusal to bring down the tariff on Philippine bananas within a five-year timeframe.
South Korea is the country’s third most important banana market, next to China and Japan, PBGEA said. Despite the high import tariff, banana shipments to this East Asian country reached 420,344 metric tons valued at $203.69 million in 2018, from 379,144 MT (worth $176.55 million) in the previous year.
However, PBGEA said that banana growers were worried that their share in the South Korean market might be reduced as Central American economies secured trade deals with Seoul that cut, if not eliminated, tariff on their banana.
Talks for an FTA with Costa Rica, El Salvador, Honduras, Nicaragua and Panama began in June 2015. The formal agreement was inked in February 2018.