MANILA, Philippines — While the United Kingdom’s Developing Countries Trading Scheme (DCTS) was recently launched in the Philippines, the country is eyeing to forge a free trade agreement (FTA) with the UK as it won’t be able to access the trading scheme once the Philippines becomes an upper middle-income country.
On the sidelines of the Outstanding Filipino Retailers Awards, Trade Secretary Alfredo Pascual said the DCTS is a one-way scheme, with the UK giving concessions to the Philippines.
“The concessions are given to us. They are not asking for concessions from us. In an FTA, it will be give and take,” Pascual said.
The DCTS, which applies to 65 countries, offers lower tariffs and simpler rules of origin requirements for exporting to the UK. The scheme helps countries to diversify their exports and grow their economies, while British households and businesses benefit from lower prices and more choice, according to the UK government.
During the launch of the DCTS in the Philippines earlier this week, Pascual said the DCTS lowers or removes tariffs on more than 150 products. The coverage extends to agricultural products, such as tomatoes, milk and cream, cheese, grains, tropical fruits, and animal and vegetable oils as well as electronic products and optical instruments.
According to the UK government, the DCTS applies to countries that currently benefit under the UK’s Generalized Scheme of Preferences (GSP), including 47 countries in the GSP Least Developed Country (LDC) Framework and 18 additional countries or territories classified by the World Bank as low income (LIC) and lower-middle income (LMIC).
Pascual explained that trading schemes such as the DCTS and the GSP allow developing countries to have a convergence with the developed world.
“That’s really the objective of the GSPs and those are only available while the country is a lower middle- income country,” adding that the country will need an FTA when it falls under the upper middle-income status and will no longer be eligible for these trading schemes.
“Yes, we are pushing for an FTA,” Pascual said, noting that the trade deal take years as it involves long negotiations.
In December, the National Economic Development Authority said the Philippines is expected to become an upper middle-income country by 2025, a year later from its 2024 target due to the pandemic.
Beyond reducing tariffs, Pascual said the DCTS’ provision for simpler rules and procedures, including the rules of origin is another benefit for the Philippines,
“The scheme’s simplified trade conditions and regional cumulation measures will benefit Philippine exporters. Exporters of electronic products, which is our top commodity group in 2022, can source components from other Southeast Asian countries within its Group, follow processing rules, and still claim products as originating from the Philippines,” Pascual said.
As the scheme strengthens the UK and the Philippines’ economic ties, Pascual said the UK can also look forward to the Philippines’ continued development that is focused on trade and investments.
“UK businesses will find immense potential in the Philippines as a destination for their investments. Our country has been on a remarkable recovery from the pandemic. Our GDP growth rate soared to 7.6 percent in 2022, up from 5.7 percent in 2021. This year 2023, the Philippines is forecast to grow at six percent and inflationary pressures, our country remains on track to become an upper-middle income nation in the next few years. We are set on building upon the momentum of our recent and continuing economic and governance reforms,” he said.
Moreover, Pascual highlighted that a continued partnership with the UK government would sustain the country’s efforts to enhance trade and investment with the UK.
Last month, the Philippines and the UK inked a partnership statement on trade, investment and economic cooperation aimed at growing bilateral trade between the two countries.
The partnership statement was recently signed by Trade Undersecretary Ceferino Rodolfo and UK Ambassador to the Philippines Laure Beaufils during the fourth round of bilateral economic dialogue between the two countries.