The free trade agreement (FTA) between the Philippines and South Korea entered into force on December 31, 2024, marking a historic milestone in the trade and economic relationship between the two countries.
This agreement is expected to create new opportunities for businesses and consumers, while fostering strong and resilient supply chains.
Signed on September 17, 2023, the FTA represents a significant move to facilitate trade, enhance cooperation, and promote industrial growth across priority sectors.
This is particularly timely as it coincides with the 75th year of diplomatic relations between the Philippines and South Korea and the recent elevation of their ties to a strategic partnership.
“The implementation of this bilateral FTA is a significant stride in growing trade and investment between the Philippines and South Korea.”
“The implementation of this bilateral FTA is a significant stride in growing trade and investment between the Philippines and South Korea, as it represents a collective achievement that will truly set the stage for the growth of our industries and businesses,” said Philippine Department of Trade and Industry (DTI) Secretary Cristina Roque.
Through the FTA, the Philippines is positioned to gain significantly improved market access for tropical fruits, especially fresh bananas. It also paves the way for cooperation and investment in forward-looking sectors such as critical minerals processing, and electric vehicle and parts manufacturing.
The agreement also allows the Philippines to export fresh bananas to South Korea at zero duty by January 2028, with tariffs starting at 24% upon entry and 18% by January 2025. This is a crucial development for the Philippine banana industry, as South Korea represents a key market.
The steady elimination of tariffs will significantly boost the competitiveness of Philippine bananas, especially against those from other regional producers like Vietnam. As a major source of livelihood for many Filipino farmers, the banana industry is poised for growth and will create more employment opportunities in banana production and export as a result of the FTA.
In addition, the FTA safeguards key Philippine industries where certain sensitive products remain protected with no tariff cuts for South Korean exporters. These products include some plastics and petrochemical products; beverages including liqueur, batteries and battery components, sugar and confectionery goods; and agricultural products such as fish, dairy, fresh fruit and vegetables, processed meat and meat products, sauces and condiments, and pastry goods.
Meanwhile, South Korea will benefit from the FTA through lower tariffs on automotive vehicles, parts and components, especially for commercial passenger and transport vehicles. This will lead to cheaper costs for vehicle assemblers and car owners. The FTA positions South Korean automakers to better compete with established players from Japan, the United States, and China.
Beyond tariff reductions, the FTA includes a comprehensive chapter on Economic and Technical Cooperation. This forward-looking chapter encompasses priority sectors for trade and investment promotion and industrial development, such as health and scientific manufacturing, critical minerals processing, innovation and research and development (R&D), creative and cultural industries, intellectual property, and e-commerce. Collaboration in these areas may involve information exchange, sharing of best practices, technical assistance, joint R&D, and transfer of technology or new business models, benefitting micro, small, and medium enterprises.
To operationalize these commitments, the Philippines and South Korea signed the Implementing Arrangement for Economic and Technical Cooperation pursuant to the bilateral FTA. This specifically outlines priority projects for implementation.
To ensure prompt and targeted action on the identified areas for cooperation, both sides will begin consultations within six months of the FTA’s entry into force. These consultations will identify specific projects, including their respective resource requirements and possible funding sources. Furthermore, consultations will include relevant stakeholders, with both sides committed to establishing and sustaining active communication channels for ongoing discussions about project development.
“This collaborative approach will help unlock a more prosperous and sustainable future for both the Philippines and South Korea.”
“To ensure the success of the FTA and all existing economic mechanisms between our countries, we recognize the significant role of continued partnership and stronger stakeholder engagement. This collaborative approach will help unlock a more prosperous and sustainable future for both the Philippines and South Korea,” Roque added.
As the FTA enters into force, both sides work closely together to ensure its successful implementation. This includes discussions on mechanisms for utilization monitoring and targeted promotion efforts.
The FTA with South Korea is the Philippines’ third free trade agreement, following the Philippines-Japan Economic Partnership Agreement signed in September 2006 and entered into force in December 2008, and the Philippines-European Free Trade Area FTA signed in April 2016 and entered into force in June 2018.
In 2023, South Korea ranked 5th among the Philippines’ 230 trade partners, 5th out of 205 export markets, and 4th out of 221 import suppliers. Bilateral trade between the two countries amounted to $12 billion. In the same year, South Korea also ranked 7th in terms of net foreign direct investment, with $21.3 million, and 12th in terms of approved investments with $27.3 million.
For more information on the FTA between the Philippines and South Korea, visit www.dti.gov.ph or send an email to brd@dti.gov.ph.
