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21 January 2010

Philippines sees FTA deals to dent government revenues

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Free trade agreements with large neighboring markets that took effect starting Jan. 1 and provide for the gradual removal of tariffs will pare off up to 9 billion peso (1$=46 peso) from the Philippine government revenues this year, reported Philippine Daily Inquirer.

Finance Secretary Margarito B. Teves, however, said the negative effect of dismantling tariffs would be “quickly compensated” by the expected rise in the traffic of goods in general.

“Certain tariff lines will be affected, but there will be additional importation of raw materials that will become inputs for finished products,” Teves said.

For 2010, the net effect of reduced tariffs would be revenue losses of between 7 billion peso and 9 billion peso,” he said.

The Association of Southeast Asian Nations, of which the Philippines is a founding member, last Jan. 1 kicked off two agree ments establishing free trade areas (FTAs) with China, Australia and New Zealand.

Initially signed in February 2009, the Asean-Australia-New Zealand FTA hopes to create a trans-Pacific free trade zone comprising a market of 600 million people with a combined $2.7-trillion output of goods and services.

Under the agreement, tariffs will be reduced gradually starting Jan. 1, 2010, until a zero-tariff regime is realized by 2015 or at least those of Australia, New Zealand and the so-called Asean6—the Philippines, Indonesia, Thailand, Malaysia, Singapore and Brunei.

The newer Asean member states—Cambodia, Laos, Myanmar (Burma) and Vietnam—have longer time frames.

On the other hand, the Asean-China FTA came into full force after a prelimary “early harvest program” spelled out under the Comprehensive Economic Cooperation that, for the Philippines, started in 2006.

The program gave Asean members an advance low-tariff entry before the free trade agreement takes effect on condition that Asean markets be open to Chinese products.

The Philippine-China EHP covered 209 tariff lines that include plant, animal and marine products.


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