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II. THE INSTITUTIONAL ASPECTS OF THE PHILIPPINES' TRADE POLICIES
(1) THE INSTITUTIONAL FRAMEWORK
(i) General framework
1. There has been little change to the trade-re lated institutional framework described in the
Secretariat report for the 1993 Trade Policy Review of the Philippines.  Under the 1987 Constitution,
the President of the Philippines is elected for a non-renewable six-year term.  As Chief Executive and
Head of State, the President, with the concurrence of two thirds of the members of the Senate, is
responsible for the negotiation and conclusion of international treaties.  The President selects
members of the Cabinet, whose appointments must be approved by Congress, directs governmentaction, has authority over the administration, and approves legislation or vetoes it under the conditions
laid down by the Constitution.
2. The President implements the laws passed by Congress, while retaining significant
discretionary authority in daily decisions over general policy issues, through a system of executive
orders, administrative orders, proclamations, memorandum orders, memorandum circulars, andgeneral or special orders.  Executive orders provide rules of a general or permanent character in the
execution of constitutional or statutory powers.  Administrative orders, on the other hand, are acts of
the President that relate to particular aspects of governmental operations in pursuance of his duties as
administrative head.  The operation of specific laws or regulations depends upon the existence of a
date or condition of public interest, set by the President through proclamations and/or memorandumorders.  Memorandum orders concern matters of administrative detail or temporary interest directed to
a particular office or officer of the Government, while memorandum circulars refer to matters relating
to internal administration that the President wishes to bring to the attention of departments, agencies,
bureaux or offices of the Government for information.  General or special orders are commands of the
President in his capacity as Commander-in-Chief of the Armed Forces of the Philippines.
3. The Legislature is  a bicameral Congress  composed of a Senate of 24 members directly
elected by universal suffrage for six-year terms, and a House of Representatives not exceeding 250
members elected for three-year terms.  Every bill passed by Congress is presented to the President,
who may either veto it or approve and sign it.  If the President does neither, the bill automatically
becomes law after 30 days.  Congress may override the President's veto by a vote of two thirds of the
members of each house.  In application of the principle of separation of powers, the President is not
empowered to dissolve Congress.
4. The Judiciary is composed of the Supreme Court, the Court of Appeals, the regional trial
courts and other lower courts created by law.  The Supreme Court rules on the constitutionality of
treaties, international and executive agreements, laws, and other presidential issuances and
regulations.  Judicial decisions form part of the legal system of the Philippines.
(ii) Economic and trade policy formulation
5. Final responsibility for policy formulation, implementation, and administrative functions rests
with the President, but both the Executive and Legi slature play important roles in economic and trade
policy-making.  All appropriation, revenue or tariff bills originate in the House of Representatives,
with amending powers given to the Senate.  All bill s are subject to public hearings in Congress.  The
Constitution allows Congress to delegate certain powers to the President;  for example, Congress hasgiven the President delegated authority in the Tariff and Customs Code to fix, within specified limits,The Philippines WT/TPR/S/59
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tariff rates, import and export quotas, tonnage and wharfage dues, and to take measures to counteract
trade practices deemed to be discriminatory.
6. The National Economic and Development Authority (NEDA) is the agency primarily
responsible for formulating integrated social and economic policies, plans and programmes. NEDA
consists of the Board and the Secretariat, two separate and distinct entities.  The Board is composed of
the President of the Philippines as chairman, the Director-General of the NEDA Secretariat, who alsocarries the rank and title of Secretary of Soci o-Economic Planning, as vice-chairman, a number of
secretaries (ministers) representing their respective departments, and the Deputy Governor of the
Central Bank.  The NEDA Secretariat provides technical assistance and support, such as research,
studies, and advice and recommendations on the formulation, monitoring, and implementation of the
economic development plans.
7. In the performance of its functions, the NEDA Board is assisted and advised by five
interdepartmental, cabinet-level committees, i.e. the Development Budget Coordination Committee,
the Infrastructure Committee, the Investment C oordination Committee, the Social Development
Committee and the Committee on Tariff and Related Matters (CTRM).  The latter is responsible for
providing advice on tariff changes and related matters as well as on the effects on the Philippines ofinternational trade-related developments, coordinating the position of concerned agencies, and
recommending positions for international negotiations.  The CTRM is composed of the Secretary of
Trade and Industry as chairman, the Director-General of the NEDA Secretariat as co-chairman, the
Executive Secretary, the Secretaries of Foreign Affairs, Agriculture,  Environment and Natural
Resources, Budget and Management , and Finance, the Governor of the Central Bank, and the
Chairman of the Tariff Commission.
8. The Department of Trade and Industry (DTI) is responsible for domestic and international
trade and investment, industrial policies, and consum er protection.  The DTI's main responsibilities in
respect of foreign trade cover tariffs, non-tariff measures (including licensing), standards, export and
investment promotion, industrial planning, and intellectual property (Chart II.1).  Key DTI policy
bureaux include the Bureau of International Trade Relations, responsible for "all matters pertaining to
foreign trade relations, whether bilateral, regional and multilateral, especially market access relatedmatters"
1;  the Bureau of Export Trade Promotion, which oversees export development activities and
registers exporters eligible for incentive programmes;  and the Bureau of Import Services, which
handles certain regulated imports (in particular those subject to licensing or bans), deals with trade
defence measures within the DTI, and monitors import levels and prices.
9. The DTI also has direct authority on important trade, industry, and investment-related
agencies, such as the Board of Investment (BOI), re sponsible for investment and industrial policy and
planning, the Philippine Economic Zone Authority (PEZA), mainly responsible for promoting the
establishment of firms in special economic zones (such as export-processing zones, duty-free zones
and industrial estates), and the Bureau of Products Standards (BPS), the national standards body.
Also operating under the DTI's authority are the Intellectual Property Office, with responsibility forrule-making, policy issues, registration, and the issuance of rights in the area of intellectual property,
and the National Consumer Affairs Counci l, responsible for consumer protection.
10. In several areas, such as the determination of tariffs, the DTI cooperates with other
departments and agencies.  Detailed discussions and studies on the direction of tariff policy are
conducted in the context of the Tariff Commission.  This Commission, administratively attached to
NEDA and the President, provides analyses and advice on general tariff issues, such as the effects of
                                                     
1 Executive Order (EO) 133 of February 1987.WT/TPR/S/59 Trade Policy Review
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using different kinds of tariffs ( ad valorem , specific), tariff classification, tariff escalation, and
international tariff issues.  DTI works with the Department of Finance and the Tariff Commission in
administering and implementing trade defence. In addition, the WTO/AFTA Advisory Commission
(WAAC), under the Office of the President, oversees actions of the Government and private sector
regarding compliance with global and regional trade commitments, and undertakes education and
information campaigns on the effects of the WTO, APEC and AFTA on the economy.  The WAAC ischaired by the Secretary of Trade and Industry and includes private sector representation.  Issues
related to the enforcement of intellectual property rights is dealt with in a special Task Force,
gathering representatives of the Intellectual Property Office, Department of Finance, Philippine
National Police, Bureau of Customs, the National Library, Videogram Regulatory Board, the
Department of Justice, and non-governmental organizations involved in intellectual property rights.
Chart II.1
Organization of the Departme nt of Industry and Trade
/g108 Board of Investment 
(BOI)
/g108 Bonded Export Marketing 
Board (BEMB)
/g108 Philippine Export Zone 
Authority (PEZA)/g108 Bureau of Small and 
Medium Business 
Development 
(BSMBD)/g108 Center for labour relations 
assistance (CLARA)
/g108 Small Business and 
Finance  Corporation (SBGFC)Industry and
Investment Group
(IIG)
/g108 Bureau of Product 
Standards                            
(BPS)
/g108 Intellectual  Property 
Office (IPO)
/g108 Bureau of Trade 
Regulations and Consumer Protection (BTRCP)/g108 National Consumer 
Affairs Council (NCAC)  Consumer Welfare
Group 
(CWG)
/g108 Bureau of Domestic Trade 
Promotion (BDTP)
/g108 Bureau of Export Trade
Promotion (BETP)/g108 Bureau of Import Services (BIS)
/g108 Bureau of  International Trade 
Relations (BITR)/g108 Center for International Trade 
Expositions and Missions (CITEM)
/g108 Construction Industry Authority 
of the Philippines (CIAP)/g108 Foreign Trade Services Corps 
(FTSC)
/g108 Garment and Textile Export
Board (GTEB)/g108 Philippines International Trading 
Corporation (PITC)
/g108 Philippines Shippers Bureau
(PSB)Trade 
Group
(TG)
/g108 Financial Management 
Services (FMS)
/g108 General Administrative 
Services (GAS)
/g108 Human Resource 
Development Service (HRDS)/g108Liaison Office for Legislative 
Affairs (OLA)
/g108 Trade and Industry 
Information Center (TIIC)/g108 Press Relations Office (PRO)Management and
Special Services 
Group (MSSG)
/g108Management Information 
Services (NIS)
/g108 Office of Operational 
Planning (OOP)
/g108Office of Policy Research 
(OPR)/g108 Office of Special 
Concerns (OSC)   Policy and Planning
Group 
(PPG)
/g108 National Development 
Company and Subsidairies 
(NDC)Proprietary 
Entities
(PE)
Regional and Provincial Offices (ROG)Regional Operations GroupSecretary
Office of the Secretary
Source :    Department of Industry and Trade of the Philippines. 
11. There is no single competition authority;  several agencies are involved in competition policy
in their individual field of competence.  For example, the Department of Justice acts as legal advisor
to the Government on competition policy issues, inter alia , anti-trust policy;  the Security and
Exchange Commission looks at mergers and acquisitions involving stock market operations;  and theThe Philippines WT/TPR/S/59
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DTI also plays a role in ensuring that competition rules are respected in individual markets
(Chapter III(4)).
12. The government procurement system is largely decentralized, with each procuring agency or
government-owned or controlled corporation handlin g its own purchasing according to entity-specific
rules and regulations prescribed under EO 302 governing goods, supplies and equipment, EO 164
governing consultancy services, and Presidential Decree (PD) 1594 governing civil works (ChapterIII(2)).  The Departments of Transportation and Co mmunications, and of Finance play important roles
in the definition of policies affecting services activities (Chapter IV(5)).  The Department of
Agriculture plays a role in international negotiations related to agriculture (Chapter IV(2)).  The
Bangko Sentral ng Pilipinas (Philippine Central Bank), by monitoring banks and facilitating the
issuance of letters of credits, plays a role in  the financing of the Philippines' foreign trade
(Chapters III(2)).
13. Pursuant to Executive Order (EO) 133 of February 1987, the private sector is involved in the
decision-making process over trade, industry and investment policies, notably through participation in
various inter-agency committees.  Private sector, participation is possible through venues such as the
Industry Development Council, Export Developm ent Council, Economic Mobilization Group, Small
and Medium Enterprise Development Council, National Business Council, Eminent Persons Group,
Philippine Council for Sustainable Development, National Consumer Affairs Council, and National
Price Coordinating Council.  DTI regularly consults the private sector, particularly at times of major
policy debates and decisions.  Private sector organizations also participate in hearings of the House of
Representatives, at the stage of elaboration of legislation as well as in hearings of the Tariff
Commission when tariff changes are considered.
14. The Government receives input from research institutes, in the form of studies and policy
advice.  The main bodies involved are the government-funded Philippines Institute of Development
Studies (PIDS), and the National Tax Research Centre (NTRC).  The PIDS is tasked to develop a
comprehensive and integrated research programme that provides research materials and studies
required for the formulation of national development plans and policies, as well as to provide a forum
wherein various studies are discussed and evaluated.  The NTRC conducts research, inter alia , on
taxation for the improvement of the tax system and tax policy.  In addition, the Philippines has
traditionally received advice on policy issues (including trade and structural policies) from the Asian
Development Bank, the International Monetary Fund, and the World Bank.  The involvement and
support of multilateral financial organizations has increased since the beginning of the Asian financial
crisis, including through funding and technical cooperation to support the implementation of reformprogrammes agreed with these organizations.
(2) T
RADE POLICY FRAMEWORK
(i) Trade policy objectives
15. Trade and investment liberalization policies in the Philippines have traditionally gone hand in
hand with industrial policy.  In the context of this Review, the authorities indicated that the Medium-Term Philippine Development Plan (MTPDP) outlined policies, strategies, priority sector activities
and legislation for the period 1999-2004 to achieve a sustainable development path anchored on
growth with social equity.  The Plan identified, inter alia , the Philippines' continuing commitment to
liberalization, deregulation, privatization and globalization as among the priority areas of action to
enhance competitiveness, especially of export-oriented industries, as well as raise productivity and
attain a higher degree of industrialization.  They noted that a key policy was to continue liberalization
of trade and investment at a pace consistent with international commitments.WT/TPR/S/59 Trade Policy Review
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16. The authorities also noted that, to encourage, promote, and accelerate trade and investment,
and eliminate distortions in pricing and resource allocation, the MTPDP provided for the
rationalization of fiscal incentives while guarding against incentives that artificially raised returns and,
thus, permitted marginal investment projects to become feasible.  Complementary to incentives
rationalization was the continued liberalization of foreign investment policy by allowing full or
majority foreign ownership of enterprises engaged in activities outside the Regular ForeignInvestment Negative List (Chapter III(4)(i)).
17. Trade and investment policies have traditionally gone hand in hand with industrial policy;
thus, for example, special trade and investment regimes have been used to considerable effect to
promote investment and trade in certain sectors, notably in the special economic zones.  Local-
content requirements and other trade-related investment measures (TRIMs) are still maintain insupport of the motor vehicle, and soap and detergent sectors (Chapter III(4)).
(ii) Multilateral agreements and arrangements
18. The main objectives of the Philippines during the Uruguay Round negotiations were to:
- improve market access for Philippine exports, particularly for agricultural,
tropical, and natural-resource-based products as well as textiles and clothing;and
- safeguard national interests in carrying out multilateral obligations while
ensuring that trade measures undertaken were consistent with its trade,
development and financial needs.
19. The Philippines grants at least most-favoured nations (MFN) treatment to all trading partners;
it became a founding Member of the WTO on 1 January 1995.  The WTO Agreement was ratified by
the Philippine Senate on 14 December 1994 through a single act (Senate Resolution), signed by thePresident of the Philippines on 16 December 1994.  The implementation of specific commitments
under the WTO Agreement, such as anti-dumping, "tariffication" in agriculture, customs valuation,
and protection of intellectual property rights, has required the passage of specific legislation
(Chapter III).
20. The authorities indicated that Philippine priorities in the WTO have been:
- the full and faithful implementation of commitments;
- compliance with the decisions and recommendations under the dispute
settlement mechanism;
- abiding by multilateral rules and disciplines including in areas such as
customs valuation, trade defence, subsidies, intellectual property rights,investment and the protection of balance of payments;  and
- improving the multilateral trading system through the Trade Policy Review
Mechanism.
21. To ensure full conformity of its legislation with WTO Agreements, the Philippines has
envisaged amending legislation in areas such as anti-dumping and countervailing measures, and newlegislation on safeguard measures, the protection of layout designs of integrated circuits, and plant
variety protection.  The Philippines is reportedly planning to seek the extension of the time allowed toThe Philippines WT/TPR/S/59
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meet its WTO commitments in view of the depressed business environment resulting from the Asian
financial crisis.2
22. As a result of the Uruguay Round, the share of bound lines in the Philippines' tariff schedule
increased to nearly 100% in agriculture, rice being the one exception, and to about 60% in
manufacturing.  The Philippines also replaced discretionary licensing and quantitative restrictions on
agricultural products, except for rice, by bound ad valorem  tariffs (Chapter III(2)).  In addition, the
Philippines made extensive commitments under the General Agreement on Trade in Services (GATS)
in areas such as transport, financial, and telecomm unications services;  and participated in the Second
and Fifth Protocols on financial services and in the Fourth Protocol on basic telecommunications
(Chapter IV(5)).
23. Table II.1 lists major notifications made by the Philippines to the WTO in the context of its
implementation of multilateral agreements.
Table II.1
Principal notifications made in the context of implementing the WTO Agreement, June 1999
WTO Agreement WTO Document Main content
General Agreement on Tariffs and Trade
(GATT) 1994Schedule LXXV – The Philippines Schedule of tariff concessions
General Agreement on Trade in Services GATS/SC/70 and GATS/EL/70, 15 April 1994
and GATS/SC/70/Suppl.1–Suppl.3,
28 July 1995–26 February 1998Schedule of specific commitments
in services;  list of Article II (MFN)
exemptions
Quantitative Restrictions (Decision onNotification Procedures for Quantitative
Restrictions)WT/BOP/W/10, 15 November 1995 and
WT/BOP/N/19, 3 July 1996Initial and biennal reports
Agreement on Agriculture
(Article 18.2) G/AG/N/PHL/1 of 1 December 1995,
G/AG/N/PHL/3, 19 September 1996,
G/AG/N/PHL/12, 5 November 1997 and
G/AG/N/PHL/13, 9 April 1998Table MA:1 – Administration of
tariff quotas
G/AG/N/PHL/4, 23 September 1996,
G/AG/N/PHL/8, 15 September 1997 and
G/AG/N/PHL/16, 9 September 1998Table MA:2 – Volume of imports
under tariff and other quotas
(Article 16.2) G/AG/N/PHL/7, 21 April 1997 Table NF:1 – Food aid and other
assistance
(Articles 10 and 18.2) G/AG/N/PHL/2, 15 February 1996,
G/AG/N/PHL/6, 22 April 1997,
G/AG/N/PHL/11, 15 September 1997 and
G/AG/N/PHL/17, 9 September 1998Table ES:1 to ES:3 – Export
subsidies
(Article 5.8 and 18.2) G/AG/N/PHL/5, 11 November 1996,
G/AG/N/PHL/9, 15 September 1997 and
G/AG/N/PHL/18, 9 September 1998Table MA:5 – Special safeguards
Agreement on Textiles and Clothing
(Article 3.1) G/TMB/N/76, 28 April 1995 Quantitative restrictions maintained
on 31 December 1994
(Articles 2.8(a) and 2.11) G/TMB/N/76/Add.1, 24 July 1996,
G/TMB/N/76/Add,2, 23 September 1997 and
G/TMB/N/205, 6 February 1997List of products to be included in
the first and second stages of
integration
Table II.1 (cont'd)
                                                     
2 Agence France-Presse , 25 May 1999.WT/TPR/S/59 Trade Policy Review
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WTO Agreement WTO Document Main content
Agreement on Technical Barriers to Trade
(Article 15.2) G/TBT/2/Add.11, 11 June 1996 Implementation and administration
of the Agreement
Agreement on Anti-Dumping Practices
(Article 18.5) G/ADP/N/1/PHL/1, 6 November 1995 Law relevant to the Agreement
(Article 16.4) G/ADP/N/41/PHL, 17 August 1998 and
G/ADP/N/47/PHL, 9 February 1999Most recent semi-annual reports on
anti-dumping actions
Agreement on Safeguard Measures
(Article 12.6) G/SG/N/1/PHL/1, 18 December 1995 No legislation or regulation on
safeguard measures
Agreement on Subsidies and CountervailingMeasures
(Article 32.6) G/SCM/N/1/PHL/1, 3 November 1995 Law relevant to the Agreement
(Article 25.11) No outstanding countervailing measures Semi-annual report on
countervailing actions
(Article 25.1) G/SCM/N/3/PHL, 15 April 1996 and
G/SCM/N/25/PHL, 23 September 1997Notification of subsidies
Agreement on Import Licensing
(Articles 1.4(a) and 8.2(b) G/LIC/N/1/PHL/1, 14 April 1998 Laws and regulation concerning
import licensing procedures
(Article 7.3) G/LIC/N/3/PHL/1, 15 November 1996 and
G/LIC/N/3/PHL/2, 17 April 1998Notifications on import licensing
procedures
Agreement on Preshipment Inspection
(Article 5) G/PSI/N/1/Add.4, 9 October 1996 Law relevant to the Agreement
Sanitary and Phytosanitary Measures
(Agreement on the Application of)
(Articles 7 and Annex B) G/SPS/N/PHL/1-13, 21 January 1997 –
25 June 1999Notification of measures
State Trading (Understanding on the
Interpretation of Article XVII of the GATT
1994)
(Article XVII:4(a)) G/STR/N/1/PHL, 16 November 1995 State-trading activities
Agreement on Trade-Related InvestmentMeasures
(Article 5.1) G/TRIMS/N/1/PHL/1, 25 April 1995 Notification of TRIMs
Agreement on Trade-Related Aspects ofIntellectual Property
(Article 63.2) IP/N/1/PHL/1, 4 November 1996 Notification of four-year delay for
application of TRIPS Agreement,
starting 1 January 1996
Agreement on Customs Valuation
(Article 22.2) No notification Implementation of the Agreement
Source: WTO Secretariat.
24. Since the establishment of the WTO, the Philippines has been involved in five dispute
settlement cases, two as a complainant, one as a respondent, and two as a third party (Table II.2). The
United States challenged the operation of tariff quotas maintained by the Philippines on pork and
poultry;  the two parties found a mutually agreed solution at the consultation stage, which was
communicated to the Dispute Settlement Body in March 1998.The Philippines WT/TPR/S/59
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Table II.2
Cases involving the Philippines under WTO dispute settlement provisions, May 1999
DisputeRaised
by/againstRequest for
consultationsCirculation of
first panel reportAdoption of
Appellate Body
ReportDocument
series
1. Complaints by the Philippines
Measures affectingdesiccated coconutPhilippines/
Brazil27 November 1999 17 October 1996 20 March 1997 WT/DS22
Import prohibition of
certain shrimp and
shrimp productsPhilippines/
United States24 October 1996 n.a. n.a. WT/DS61
2. Consultations on Philippine measures
Measures affecting pork
and poultryUnited States/
Philippines1 April 1997a             
7 October1997an.a. n.a. WT/DS74
WT/DS102
3. Philippine participation as a third party
Import prohibition of
certain shrimp and
shrimp productsIndia, Malaysia,
Pakistan and
Thailand/
United States8 October 1996 15 May 1998 6 November 1998 WT/DS58
Quantitative import
restrictions on textiles
and clothingIndia/Turkey 21 March 1996 31 May 1999 n.a. WT/DS34
n.a. Not applicable.
a The two parties communicated a mutually agreed solution to the Dispute Settlement Body.
Source: WTO Secretariat.
25. During the First WTO Ministerial Conference, the Philippines welcomed the progress made
in implementing WTO Agreements but emphasized the continued market access difficulties, in
particular in respect of the use of contingency measures.3  It expressed concern about the
implementation of the Agreement on Textiles and Clothing (ATC), especially about the small number
of restricted products integrated in the first stage.  It called for closer monitoring in the application of
the Agreement on Agriculture, regarding in particular the use of export subsidies and sanitary andphytosanitary measures, and for further information and analyses to increase understanding on the
issues facing agricultural negotiations.  The Philippines supported further multilateral sectoral
liberalization such as the Information Technology Agre ement.  It expressed interest in issues such as
trade facilitation, trade and environment and regional trade agreements, but had doubts on the urgency
to start work on the relationship between trade and competition, and trade and investment.
26. Philippine policy priorities were confirmed in the Second WTO Ministerial Conference in
1998.
4  The Philippines reiterated its call for full and faithful implementation of WTO Agreements,
expressing disappointment over the lack of sufficient  progress in areas such as textiles and clothing,
sanitary and phytosanitary measures, rules of origin, and agricultural subsidies.  It acknowledged
progress in other areas, such as services, and rules, e.g. anti-dumping and countervailing duties andsafeguard measures.  The Philippines urged WTO Members to concentrate their efforts on the
completion of the built-in agenda.  It called for efficient implementation of the mandated review of
existing agreements and, while expressing satisfaction about the work undertaken in areas such as
                                                     
3 This paragraph is drawn from the Statement by Ph ilippine Secretary of Trade and Industry at the
WTO Ministerial Conference in Singapore (WTO document WT/MIN(96)/ST/41, 10 December 1996).
4 This paragraph is drawn from the statement by Philippine Secretary of Trade and Industry at the
WTO Ministerial Conference in Geneva (WTO document WT/MIN(98)/ST/11, 18 May 1998).WT/TPR/S/59 Trade Policy Review
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regional trade agreements and trade and environment, in general it considered that WTO ambitions
and activities should better reflect the readiness and abilities of developing countries.
(iii) Regional agreements and arrangements
27. Like most other WTO Members, the Philippines complements trade policies at the
multilateral level with a network of bilateral and regional relationships.  In support of its programme
of unilateral MFN trade liberalization, the Philippines has also participated actively in the WTO andthe Asia Pacific Economic Cooperation (APEC) foru m, and in the creation of a free-trade area among
ASEAN Members.
(a) Developments in ASEAN
28. Since 1993, the Philippines has made particular progress in trade and investment
liberalization in the ASEAN context, which was accelerated after the beginning of the Asian financialcrisis, notably in the areas of tariffs, investment, services, and industrial cooperation.  In view of the
financial crisis and its effects on intra-ASEAN trade,  the Heads of State or Government decided at the
Sixth ASEAN Summit in Hanoi (December 1998) to  adopt measures to expand intraregional
economic integration through trade and investment liberalization.  The outcome was the creation of a
preferential ASEAN investment area, the acceleration of the ASEAN Free-Trade Area, the launch of anew round of liberalization negotiation on services, and the introduction of a long-term Action Plan to
promote economic recovery and enhance greater economic integration among Members (Annex II.1).
29. The Philippine authorities noted that all trade ag reements relating to the establishment of the
ASEAN Free-Trade Area (AFTA) are based on WTO principles, as ASEAN members are either
active members of the WTO or have applied to join it.  The reduction both of MFN rates (on a
unilateral basis) and of AFTA-CEPT (Common Effective Preferential Tariff) rates have broadly
proceeded in parallel, a process facilitated by the closeness of implementation dates:  2003 for theASEAN-AFTA scheme and 2004 for its programme of unilateral tariff reductions.
30. As a result of the acceleration of liberalization under CEPT-AFTA from 2003 to 2008, and
the review of MFN rates on a unilateral basis, more than 95% of the Philippines' tariff lines are
currently subject to a reduced rate .  The authorities indicated that, in 1999, 3,112 lines or about 57%
of Philippine tariff lines had reached the 0-5% CEPT final rate, and that the Philippine simple averageCEPT tariff rate was about 6.8%.  As a result of  the measures agreed by ASEAN leaders in Hanoi in
December 1998, the Philippines is to increase the coverage of products with 0-5% tariffs to 4,738
lines in 2000 and 5,045 lines in 2001;  all products in the inclusion list, with minimal exceptions, will
be at 0-5% in 2002.  Rice, which is currently excluded from the CEPT scheme, is subject to
quantitative import restrictions.  The Philippines has proceeded to reduce CEPT and MFN ratesconcurrently, so that the margin of preference for regional supplies remains relatively limited.
According to the authorities, about  72% of Philippine CEPT-AFTA and MFN tariff lines (accounting
for  about 63% of import values) carry similar rates;  under current projections, it is expected that this
will rise to about 75% of Philippine CEPT-AFTA and MFN tariff lines, covering about 66% of import
values, when the CEPT-AFTA scheme is fully implemented.
(b) Asia-Pacific Economic Cooperation (APEC)
31. The Philippines views APEC as an important  forum for promoting consultation, cooperation
and trade within the region, while emphasizing that such initiatives, particularly on trade
liberalization, should be implemented on an MFN basis.  The Philippines participates in all APEC
fora.The Philippines WT/TPR/S/59
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32.  At the second meeting of APEC leaders in Bogor in 1994, members committed to free and
open trade and investment in the Asia-Pacific region, by 2010 for industrialized economies and no
later than 2020 for developing economies.  To achie ve this goal, APEC leaders adopted in 1995 the
Osaka Action Agenda representing three pillars, i.e. trade liberalization, trade facilitation and
economic and technical cooperation.  Fifteen priority areas for future work have been identified:
tariffs;  non-tariff measures;  services;  investment;  customs procedures;  standards;  intellectualproperty rights;  government procurement;  competition policy;  deregulation;  rules of origin;  dispute
settlement;  mobility of businessmen;  implementation of Uruguay Round Agreements;  and
information gathering  and analysis.  In Manila in 1996, members submitted their Individual Action
Plans (IAPs), outlining liberalization initiatives and facilitation measures to be undertaken over the
short-, medium-, and long-term.  The Philippine  IAP focused on a continued process of unilateral
trade liberalization, deregulation, and the implementation of WTO commitments.
33. Sectors for early and voluntary liberalization were defined at the APEC leaders' meeting in
Vancouver (1997), and included fish and fish produc ts, forestry products, energy, chemicals, medical
equipment and instruments, gems and jewellery, toys, telecommunications, oil seeds and oil-seed
products, natural and synthetic rubber, fertilizers, automotive, civil aircraft, and environmental goodsand services.  At the APEC meeting in Kuala Lum pur (1998), members agreed on proposals for fast-
tracked liberalization of six sectors.
(iv) Participation in other organizations and fora
34. The Philippines is a member of the Cairns Group of producers and exporters of agricultural
products, which also includes Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Indonesia,
Malaysia, New Zealand, Paraguay, Thailand, Uruguay, and South Africa.  The Philippines also
participates in several international commodity organizations such as the International Tropical
Timber Organization, the International Coffee Organization, the Common Fund for Commodities, the
Asian and Pacific Coconut Community, the International Network for the Improvement of Banana
and Plantain, and the Regional Coordination Centre for Research and Development of Coarse Grains,
Pulses, Roots and Tuber Crops in Humid Tropics of Asia and the Pacific. In addition, the Philippines
is a Member of the Asian Development Bank, the International Monetary Fund, the United Nations,and the World Bank.
35. Government officials, business representatives and academics from the Philippines are
actively participating in the Pacific Economic C ooperation Council (PECC).  PECC provides a forum
for exchange and consultation among individuals from various Pacific countries to identify emerging
problems and opportunities in trade and investment, as well as economic development andcooperation.
(v) Bilateral relationships
36. The Generalized System of Preferences (GSP) in operation by certain developed  countries
provides for either zero tariffs or lower tariff rates to GSP eligible Philippine exports.  GSP is applied
to Philippine exports by Australia, Canada, the European Union, Japan, New Zealand and theUnited States.
37. The Philippines participates in the Global System of Trade Preferences among Developing
Countries (GSTP), which provides for the exchange of trade concessions among developing countries.
Current GSTP concessions granted by the Philippines involve four products (HS 7308.30.00,
7308.90.00, 8213.00.00 and 8301.10.00), each of which was given a 10% margin of preference from
its base rate.WT/TPR/S/59 Trade Policy Review
Page 26
Annex II.1:  Developments in ASEAN
1. The Philippines is one of six founding memb ers of the Association of South-East Asian
Nations (ASEAN) formed in 1967.  Since the 1993 Trade Policy Review, Viet Nam, Myanmar, Laos
and Cambodia have become members of ASEAN.  The ASEAN maintains regular dialogue with
Australia, Canada, China, the European Union, Indi a, Japan, the Republic of Korea, New Zealand and
the United States.  In addition, the trade minist ers from ASEAN and the Closer Economic Relations
(CER) Agreement with Australia and New Zealand, agreed to meet annually.
2. The Philippines strongly supported the creation of the ASEAN Free-Trade Area (AFTA).  On
1 January 1993, ASEAN members started to implement tariff reductions agreed under the Common
Effective Preferential Tariff (CEPT), the backbone of  the AFTA, with a view to reducing all tariffs on
ASEAN trade to between 0 and 5% over a maximum of 15 years and to eliminating non-tariffbarriers.  Members submitted a list of products temporarily excluded from the application of the
CEPT (Temporary Exclusion List).  Products that  would not be part of the CEPT scheme were
integrated in a "General Exclusion List".
3. The 1995 ASEAN Summit formalized a proposal to  advance the completion of AFTA by five
years, from 2008 to 2003, and to expand the coverage of the scheme to unprocessed agriculturalproducts.  In addition, a Sensitive Product List was created for a few items that are to be phased into
the CEPT from 2001-2003.  In 1998, items covered by tariff reduction under the CEPT scheme
accounted for four fifth of intra-ASEAN trade.  This incorporation is taking place in five equal
instalments of 20%, with the first instalment in January 1996 and the last in 2000.
4. In December 1997, the Heads of State or Government of ASEAN agreed on the principle of
again bringing forward on a voluntary basis the completion of the free-trade area, as a response to the
economic and financial crisis.  The acceleration of the tariff schedule was formalized and mademandatory a year later at the ASEAN Summit of Hanoi when Heads of State or Government agreed to
advance the completion date of AFTA by one year, from 2003 to 2002.   By 2000, most tariff rates on
products covered by the AFTA scheme are expected to fall below 5%.
5. The ASEAN also decided to expand the scope of regional cooperation from the field of goods
to services, intellectual property, and investment.  During the first round of negotiations under theFramework Agreement on Services, the liberalization covered seven priority areas, i.e.
telecommunications, tourism, financial services, construction, business/profession, and maritime and
air transport.  The Philippines made its first co mmitments at the ASEAN Economic Ministers Meeting
in October 1997, for implementation in 1998. In December 1998, the Heads of State or Government
decided to launch a new round of negotiations covering all services sectors, with a view to concludingan agreement by 2001.  The Framework Agreement on Intellectual Property is aimed at improving the
legislation and enforcement of intellectual property rights in the ASEAN region and envisages the
possibility of integrating patent and trade mark  protection into a single ASEAN legal framework.
6. Cooperation in the field of investment strengthened significantly with the conclusion of an
agreement to establish an ASEAN Investment Area by 2010;  under the agreement, all restrictions toforeign direct investment in manufacturing, except those justified on health, safety, security, and
environmental grounds
5, are to be removed for ASEAN investors, who will also receive full national
treatment. The agreement, which is binding on all members, also contains provisions on transparency,
more liberal investment regimes, and methods of settling disputes.  It provides for a safeguard clause,
allowing a particular member to adopt investment restrictions in the case of serious balance-of-
payments and financial difficulties.  The agreement contains provisions aimed at harmonizing
                                                     
5 These exclusions are to be progressively phased out by 2003.The Philippines WT/TPR/S/59
Page 27
conditions for, and privileges to, ASEAN investors in the fields of taxation and imports (duty-free
import of capital goods, speedy customs clearance ).  The ASEAN Investment Area would be opened
to non-members only in 2020.
7. ASEAN members also seek to develop joint industrial projects between private companies
from ASEAN countries, by granting, under the new ASEAN Industrial Cooperation Scheme, a
preferential tariff of 0-5% to the output of the participating companies.  To date, six  cooperationprojects have benefited from these preferential tariff reductions.  Four Philippine companies have
availed of the scheme, involving six projects.
8. In the wake of the currency crisis, ASEAN members have agreed on the principle of reducing
their dependence on the U.S. dollar as a currency of payment and hence promoting the use of regional
currencies in intra-ASEAN trade.  The Philippines and Malaysia signed an agreement in autumn 1998to make progress in that direction.  ASEAN Ministers also agreed in autumn 1998 on a mechanism to
strengthen their surveillance of economic and financial developments in the region, with a view to
better anticipating cyclical downturns.