FTAs and Philippine Business: Evidence from Transport, Food, and Electronics Firms

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of ADBI, the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Ganeshan Wignaraja is a principal economist at the Office of Regional Economic Integration, Asian Development Bank (ADB The Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. AbstractWithin East Asia, the outward-oriented Philippine economy is a latecomer to using free trade agreements (FTAs) as a trade policy instrument and has relied heavily on the Association of Southeast Asian Nations (ASEAN) for regional liberalization. While negotiating FTAs has consumed scarce time and other resources, limited attention has been hitherto given to evaluating the impact of FTAs-particularly the 15-year-old ASEAN Free Trade Area (AFTA) agreement-on business activity in the Philippines. Using a survey of 155 manufactured goods exporters from three sectors (transport equipment, processed foods, and electronics), this study deals with three questions: (i) Do firms use AFTA and why?; (ii) What impedes firms from using AFTA and other FTAs?; and (iii) What can be done to improve FTA use at firm level in the future? The study finds that utilization of AFTA is higher than expected from existing studies and is set to double in the future. Econometric analysis suggests that firm age, domestic ownership, awareness of FTAs, and membership in the transport sector increase the probability of using AFTA. Surprisingly, among nonusers, a lack of information is the biggest barrier to FTA use. Other impediments to use include the availability of export processing zone incentive schemes, low most-favored-nation rates (particularly in electronics), delays in origin administration, rent-seeking behavior, and nontariff measures in part...

The Openness of National Economies: The World and Russia

“…The emergence of South-South integration may also reflect its usefulness as a policy tool for industrialization by facilitating the inclusion of leastdeveloped countries (LDCs) into regional production networks and hence into the export process. SouthSouth integration also provides a means of strengthening developing countries' bargaining power in multilateral trade negotiations (Wignaraja et al, 2010a) and of addressing region-specific issues, such as transit, migration and water (World Bank, 2005).…”

“…For example, Wignaraja et al (2010a) show that in the Philippines, the probability of firms in the sample that are less than ten years old using the ASEAN Free Trade Agreement (AFTA) is about 10 per cent or less, while the probability for firms in operation for more than 25 years is more than 25 per cent. This may be because more experienced firms develop core capabilities, extensive supply networks and administrative capacity over time to better compete in the world market and take advantage of PTAs.…”

“…In contrast, in the Philippines, which has a relatively low preference utilization rate, only 7 per cent of users claim thorough knowledge (Kawai and Wignaraja, 2011). In fact, Wignaraja et al (2010a) report that firms in the Philippines that are "aware" of FTA provisions have a predicted AFTA use rate of 40 per cent, compared with a mere 11 per cent for those that are less "aware".…”

15. Role of the Private Sector in Regional Economic Integration: A View from The Philippines

“…In the Philippine study by Wignaraja et al (2010), low use of AFTA in the food sector was likewise attributed to small margins of preference; while in the electronics sector, low or zero MFN tariff rates and investment schemes available in export processing zones (e.g. duty-free importation and tax and non-tax incentives) or outside processing zones (e.g.…”