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Brad Lehigh,
Canada Compliance Specialist, GTM Governance
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Filipino president Benjamin Aquino came to Canada for a three-day visit on May 8, during which Canada and the Philippines announced they would begin discussions towards a Canada-Philippines Free Trade Agreement (FTA). Despite the Philippines’ reputation for endemic corruption and poor governance, there have been improvements over recent years, and an increasing trade deficit has made conditions for an FTA between the two nations more suitable.
Canada exports a wide range of product to the Philippines, starting with copper ore. Currently copper ore accounts for nearly 20% of Canada’s exports to Philippines; in 2014 Canada exported over $112 million dollars’ worth into the country, which has a 3% customs duty imposed on it upon entry. Over half a billion dollars of Canadian copper ore entered the Philippine economy in the last 5 years alone, amounting to approximately $17.8 million dollars in duty paid.
Similar numbers can be shown for coniferous wood, which Canada exports a large amount of (15.5% of its exports to the Philippines), and is subject to the same 3% import duty upon entry resulting in over $9 million in duty paid over the past five-year period.
However, it is Canada’s 3rd largest export to the Philippines where we begin to see the real benefit to pursuing an FTA with the archipelago nation.
Much like Canada’s ongoing CETA negotiations with the European Union, it would seem this potential agreement is a push to gain a greater market access to the Philippines pork industry. With duties between 30-40%, Canada’s 2014 frozen pork exports alone would have amounted to $10.9 million in duty paid on only $36.4 million in exports. Gaining a preferential duty rate or quota would give Filipino importers a much greater incentive to source their pork products from Canada.
Looking at the other end of the deal, it is a bit cloudier, as most of the products imported into Canada from the Philippines are already duty free. However, the Philippines is the 5th largest exporter of automobile tires into Canada with a duty rate of 7% applied to new tires. The Philippines government is undertaking various initiatives to promote the manufacturing process of tires and is forecast to increase production annually with most major tire companies already having a presence in the country due to rising automobile production.
There is without question a lot more to FTAs than just duty rates, however the Philippines was named a priority emerging market under Canada’s Global Markets Action Plan, and is a consumption oriented-economy with a strong demand for meat. Pork is a major agricultural food export for Canada and the benefit of opening the market up further for Canadian producers cannot be understated. With the growing business potential in the Philippines, a Free Trade Agreement between the two nations is seen as an opportunity for Canadian importers and exporters to form prosperous business relationships with their supply-chain partners located in the Philippines.
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