EU FTA expected to open up $12B in potential PHL exports

By Justine Irish D. Tabile, Senior Reporter

THE PHILIPPINES will have access to additional exports estimated at $12 billion once it concludes a free trade agreement (FTA) with the European Union (EU), Trade Undersecretary Allan B. Gepty said.

Citing data from the International Trade Centre, Mr. Gepty said the estimate represents the unrealized potential for Philippine exports in Europe.

“Usually the reasons for this unrealized potential are two major factors: one is the lack of awareness of the opportunities, and the second is the difficulty in complying with certain rules and standards in accessing the European market,” he told reporters on Thursday.

“We are hoping that through this FTA that we are negotiating, we can in a way fill in the gaps or at least address some of the major issues that bar our (micro-, small-, and medium-sized enterprises) from accessing the European market,” he added.

The Philippines and the EU are looking at concluding the negotiations this year, moving up from the initial target of 2027.

“We are really working hard to conclude it this year because, of course, after the conclusion of the negotiation, there’s still legal scrubbing and signing, and then there’s ratification. It will take time before it becomes effective,” he said.

He said the parties are still on track to conclude the negotiations within the year, adding that “the probability is high.”

“March is a bit critical. We are hoping to stabilize the text,” he said, noting that the meeting in March will be the parties’ fifth full round of negotiations.

Up for discussion in March are market access as well as remaining issues in other chapters.

He said securing an FTA with the EU will allow the Philippines to increase the share of markets with which the Philippines enjoys preferential trade access to 80%, as 70% of Philippine trade currently goes to FTA partners.

Concluding the FTA this year is also critical for the Philippines as it approaches upper middle income class (UMIC) status.

“We are currently benefiting from the EU General System of Preferences Plus (GSP+) … And this is not a permanent arrangement” because “We are about to hit UMIC status, and under EU GSP+ rules, once you hit UMIC, and sustain that for three consecutive years, then you will be disqualified,” he added.

He said that if the Philippines achieves UMIC status this year, it will stop being a beneficiary of the preferential scheme by 2029.

ADB Regional Lead Economist James P. Villafuerte told reporters on Thursday that the Philippines is on track to achieve UMIC status within its target timeline.

“When I look at the per capita income level of the Philippines, I think, if I am not mistaken, it is a few dollars away from UMIC status,” he said.

“Definitely UMIC status will be attained, I think, if not this year, probably next year because we’re really very close to the threshold,” he added.

However, he said the Philippines’ Association of Southeast Asian Nations (ASEAN) peers are now aiming to hit the high income status.

“Indonesia wants to be high income by 2045; Thailand also wants to be high income. I think most ASEAN economies are really trying to step up the income ladder,” he said.

He said that the Philippines has yet to set targets in terms of high-income status, but “for the Philippines to reach high-income status, we should be growing at around 9-10%.”

To prepare for this, he said the Philippines should focus on digital transformation, regional development, and human capital.

Meanwhile, Mr. Gepty said that the Marcos administration has been very aggressive in pursuing FTAs.

“In fact, my count is that if we are successful in concluding all the negotiations and trade arrangements, we are eyeing around 18 new and upgraded FTAs,” he added.

Aside from the Philippines-EU FTA, the Philippines is also in talks for a bilateral FTA with Chile, Canada, and India.

“We are very happy that the Philippines is very visible in the international trade and global economy, and we just have to sustain the gains that we have achieved,” he said.

Despite these gains, he said Philippine trade continues to be in deficit, though it peaked in 2022.

“The challenge is how can we reverse this and how we can improve our export industries,” he said.

Looking deeper, he said 68%, of Philippine imports consist of raw materials and intermediate goods, while consumption goods account for 18%.

“That means that at least slowly our manufacturing industry is catching up. Maybe not at a fast pace, but at least the imports are more focused on raw materials, intermediate goods, and capital goods,” he said.

“This is an indicator of a lot of economic activity, particularly on the production side,” he added.

Meanwhile, Mr. Villafuerte said the ADB expects sustained semiconductor export growth for the Philippines this year.

“In the second half of 2025, we saw a very strong export performance by the Philippines, and it’s related to semiconductor and electronic exports,” he said.

“We feel that this will continue this year because the demand for digital products and artificial intelligence globally is increasing,” he added.