WORLD TRADE  
ORGANIZATION  WT/TPR/M/149 
17 August 2005 
 (05-3653) 
Trade Policy Review Body 
5 and 7 July 2005  
 
 
 
TRADE POLICY REVIEW 
 
THE PHILIPPINES 
 
Minutes of Meeting  
 
Chairperson:  H.E. Mr. Don Stephenson (Canada) 
  
Page 
 
I.
 INTRODUCTORY REMARKS BY THE CHAIRPERSON 3  
II. OPENING STATEMENT BY THE REPRESENTATIVE OF THE PHILIPPINES 4  
III. STATEMENT BY THE DISCUSSANT 7  
IV. STATEMENTS BY MEMBERS 9  
V. REPLIES BY THE REPRESENTATIVE OF THE PHILIPPINES AND 
ADDITIONAL COMMENTS 16  
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 22  
  
 
 
 
  
 
  
 
  
 
  
 
 
 
  
Note:   Advance written questions by WTO Member s and the replies provided by the Philippines are 
reproduced in document WT/TPR/M/149/Ad d.1 and will be available online at 
http://www.wto.org/english/tr atop_e/tpr_e/tp_rep_e.htm. WT/TPR/M/149 
 Page 3 
 
 
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 
1. The third Trade Policy Review of the Philippines was held on 5 and 7 July 2005.  The 
Chairperson (H.E. Mr. Don Ste phenson) welcomed the delegation of the Philippines, led by 
Mr. Thomas G. Aquino, and Ambassador Manuel A. J. Teehankee, and the 
discussant  H.E. Mr. Burhan Gafoor (Singapore).  As usual, the discussant would speak in his 
personal capacity and not as representative of his country.  In accordance with the established 
procedures, the discussant had made available, in a dvance, outlines of the main issues he intended to 
raise (document WT/TPR/D/125). 
2. The Chairperson recalled the purpose of the Trad e Policy Reviews and the main elements of 
the procedures for the meeting.  The report by the Philippines was contained in document 
WT/TPR/G/149 and that of the WTO Secretariat in document WT/TPR/S/149.  Copies of advance 
written questions, submitted by the European Commun ities;  Japan;  Australia;  Hong Kong, China; 
Chile;  the United States;  Colombia;  Canada;  th e Separate Customs Territory of Taiwan, Penghu, 
Kinmen and Matsu;  the Republic of Korea;  and Br azil, had been transmitted to the delegation of the 
Philippines.  These questions and the replies prov ided by the delegation of the Philippines are 
reproduced in document WT/TPR/M/149/Add.1. 
3. The Chairperson noted that during the period under review, growth in the Philippines had 
been steady.  Nonetheless, the Philippines faced sever al long-run challenges.  Sustained future growth 
would require continued macroec onomic policy reforms, including fiscal consolidation aimed at 
reducing the high level of public debt and the large external financing requirements.  It would also 
require further trade and investment liberalizati on as well as other structural reforms to improve 
productivity, which was crucial if the economy w as to compete successfully with lower-cost 
neighbouring economies.  He believed that Member s would be interested in learning how the 
Philippines intended to meet these challenges.  Also  during the period under review, the pace of trade 
liberalization seemed to have slowed.  Accelerati ng the pace of reform would help promote a more 
competitive economy, including in services, which al ong with a sounder and more efficient financial 
sector, would improve the investment and business climate needed to attract FDI and promote the 
development of the private sector. WT/TPR/M/149 
Page 4 
 
 
II. OPENING STATEMENT BY THE REPRES ENTATIVE OF THE PHILIPPINES 
4. The representative of the Philippines , Mr. Thomas G. Aquino, Senior Undersecretary, 
Department of Trade and Industry, stated that th e Philippines' commitment to the WTO was situated 
against the backdrop of an economy characterized by resilience and steady growth, notwithstanding 
political, economic, and social challenges, since its pr evious Review in 1999.  Supported largely by 
robust consumer spending, gross domestic product grew by 6.1% in  2004 (the highest since 1997).  
Inflation had been moderate since 1999, at slightly more than 4%, arising from, inter alia , the 
structural reforms pursued in the 1990s and the econo my’s openness.  In 2004, as had been the case at 
least since 1999, the services sector was the Phili ppine economy’s engine of growth, contributing 
about 3.4 percentage points to GDP growth and accounting for 47% of GDP;  industry contributed 
1.8 percentage points to GDP growth and accounted for 33% of GDP, and the agriculture, fishery and 
forestry sector contributed 0.97 percentage point s to GDP growth and accounted for 20% of GDP.  
The Philippines' external trade had grown modestly in  the past five years, and private enterprise had 
remained the Government’s underlying philosophy in  stimulating business activity.  Exports of goods 
and services, at constant prices, had grown by an  average of 7.26% betw een 1999 and 2004, with 
electronics dominating a large portion of total exports.  
5. The Philippines' top export markets continued to  be Japan and the United States, with export 
receipts in 2003 amounting to US$7.26 billion, a nd US$5.768 billion, respectively.  If regional 
groupings were counted, ASEAN and the EC came in  second and third, with export receipts totalling 
US$6.58 billion and US$5.88 billion, respectively. 
6. On the import side, average growth since the previous Review was 5.02%. Electronics and 
components, office and electronic data processing machines, and telecommunications equipment were 
the country's top imported goods.  Japan and the Unite d States were the top two exporters;  Philippine 
imports from these countries totalled US$7.6 billion a nd US$7.4 billion, respectively, in 2003.  
ASEAN and the EC were strong trading partners , with import receipts amounting to US$6.3 billion 
from ASEAN and US$3.016 billion from the EC. 
7. Amidst continuing challenges, both domestically and externally, there was confidence that the 
economy would expand at 5% to 6% in 2006 and ar ound 7% annually until 2010.   Growth prospects 
could be higher if the necessary reforms were pursu ed with sustained vigour. The conclusion of the 
current Doha Round in the near future should also present to the Philippines and other countries 
further opportunities for higher rates of growth. 
8. International trade had an important role in the Philippines' economic development.  Hence, 
structural reform and trade liberalization had b een priority economic policies.  Among the critical 
reform measures being undertaken were:  strengthening of the banking sector, improving access to SME credit, restructuring the electric power industry, addressing the fiscal deficit challenge, and 
improving governance;  these measures continued to be pursued vigorously.  The Government also 
continued to take measures aimed at investment liberalization, deregulation, and privatization. 
9. The General Banking Act of 2000 promoted a st able and efficient ba nking and financial 
system that was globally competitive, dynamic, a nd responsive to the demands of a developing 
economy, while anti-money-laundering legisla tion was introduced in 2002 and 2003.  In 2003, 
Congress passed the Special Purpose Vehicle Act, providing the framework for banks to sell non-
performing assets to third parties and granting fiscal incentives and regulatory relief for such transfer 
or sale.  In 2000, the BSP declared microfinance as one of its flagship programmes in support of the 
Government’s poverty alleviation efforts. 
10. In support of fiscal consolidation efforts, th e Government was improving the operations of 
revenue collecting agencies.  Information and comm unications technology had started to be harnessed 
in order to modernize the operations of customs an d internal revenue agencies, as well as to enhance  WT/TPR/M/149 
 Page 5 
 
 productivity and collection.  As a result, the fiscal de ficits were being kept within programmed limits, 
and had been reduced annually since 2003.  Th e Government had recently passed the Expanded 
Value-Added Tax (e-VAT) Act of 2005 in order to improve its fiscal position and its chances of 
achieving a balanced budget by 2010.  This law sent a strong signal about the credibility of the 
country’s fiscal consolidation programme. Th e expected revenue proceeds from the e-VAT 
implementation would facilitate c onsolidation of the Government’s fiscal position and reduce the 
country’s level of debt.  As part of the fiscal agenda, Congress had recently increased excise taxes on 
tobacco products and alcohol and passed a law prov iding incentives to promote tax efficiency.  In 
2003, Congress passed the Act Rationalizing the Ex cise Tax on Automobiles, which the President 
described as a concrete manifestation of po litical will to make the tax system work.  
11. The Philippines believed in the need for urgent re forms in the power sector in order to relieve 
the substantial fiscal burden, particularly from that of the National Power Corporation. The 
Government was committed to privatizing the Na tional Transmission Corporation (TransCo), NPC 
power generating assets and NPC-owned independent power producers by continuing the sale of NPC 
assets and securing a nationwide congressional franchi se for and on behalf of a concessionaire who 
would take over TransCo.  The Government also in tended to transfer the management and control of 
energy output of power plants under contract with NPC to IPP administrators through the launch of 
the Wholesale Electricity Spot Market (WESM) by December 2005.  The trial operations programme 
started February 2005. 
12. The Government Procurement Reform Act of 2002 created greater transparency, 
accountability, efficiency, and equal opportunity.  The e-Procurement System also widened access to 
government procurement by establishing a Public Te nder Board for procurement notices, a catalogue 
and virtual store for procurement service transac tions with government agencies, and a supplier’s 
registry to provide agencies a common list of accred ited suppliers to suppor t invitations to bid. 
13. Unilateral measures towards investment liberali zation, deregulation, and privatization had 
continued to mark Philippine economic policy in the l ast five years.  The regular Foreign Investment 
Negative List continued to expand access to foreign pa rticipation in areas previ ously closed to foreign 
investment, such as retail trade enterprises, mini ng, and defence-related manufacturing activities. 
14. Since 2002, the Philippine Annual Investments Pr iorities Plan had been shortened but made 
more focused.  The Plan focused on identified econom ic priority areas and activities, at the national 
and regional levels, with the objective of accel erating the promotion of domestic and foreign 
investment to sustain the country’s growth mo mentum. New areas, such as medical tourism and 
environmental services packaging were included in the 2004 IPP.  To reduce the costs and improve 
the transparency of doing busin ess in the Philippines, the Govern ment had simplified investment 
procedures, such as the grant of environmental compliance certificates for companies located in 
economic zones and projects not deemed environm entally critical. The Board of Investments had 
established an electronic filing system for investment registration to reduce transaction costs, while the Customs Bureau and the Philippine Economic Zone Authority had introduced the Automated 
Export Declaration System (AEDS) to facilitate  the processing of export transactions.  The 
Government aimed to further simplify business procedures and strengthen and increase one-stop 
action centres.  It was developing an electronic business facilitation platform for business matching 
and eventually export transactions, and was in th e process of rolling out the AEDS to cover other 
types of goods.  The Government was also studying the possible amendment of the Export 
Development Act with a view towards exped iting the decision-making process for rules and 
regulations governing exports.  To improve the inv estment climate in the Philippines, the Government 
had realigned the grant of incentives to promote activ ity in the ten investment priority areas identified 
in the MTPDP 2004-2010.  These areas were:  inform ation technology (IT) and IT-enabled services, 
automotive, electronics, mining, healthcare and we llness, tourism, shipbuilding, fashion garments, 
jewellery and agri-business. The areas were identif ied for promotion in view of natural and human 
resource advantage.   WT/TPR/M/149 
Page 6 
 
 15. In ASEAN, the Philippines concluded the rela ted framework agreement and protocols to 
implement the Priority Integration Programme (PIP) aimed at accelerating further the almost 
completed Common Effective Preferential Tari ff Scheme under the ASEAN Free Trade Area, by 
reducing tariffs to zero by 2007 rather than 2010.  The Philippines was also set to implement the 
ASEAN-China FTA in goods in 2005, for completio n in 2010 (with flexibility to 2012).  ASEAN had 
on-going negotiations with India, and negotiations w ith Japan were being worked out for completion 
in 2012, with flexibility particularly for Cambodia,  Lao PDR, Myanmar, and Viet Nam.  ASEAN and 
its partners in the Closer Economic Relations, Aust ralia and New Zealand, were also set to start 
negotiating an FTA in 2005 to be realized within a ten-year period.  The Philippines participated 
actively in the APEC forum, supporting, among othe rs, the objective of building on the open and non-
discriminatory multilateral WTO system.  Under the ASEAN-Japan  economic negotiations, the 
Philippines was at an advanced stage of bilateral negotiations with Japan on an FTA.  In 2004, the 
Philippines and Japan reached an agreement in prin ciple on the major elements of a proposed Japan-
Philippines Economic Partnership Agreement, aimed at promoting freer trans-border flow of goods 
and services, including a comprehensive partne rship affecting human resources development, 
information and communications technology,  and small and medium-scale enterprises. 
16. The Philippines reaffirmed the importance of its  membership in the WTO, and recognized the 
crucial role of the WTO in fostering a more open, transparent, predictable, and competitive 
multilateral trading system. 
17. While the Secretariat report generally portrayed Philippine trade policy in this light, certain 
messages that the report might have somewhat in advertently conveyed to Members needed to be 
clarified.  In particular the section on tariffs in th e third chapter of the report, in tandem, seemed to 
convey the view that:  (i) tariffs had been recalibrate d for, among others, protectionist reasons;  (ii) the 
overhang between applied and bound rates undermined predictability ; and (iii) 21.5% of all applied 
tariffs as of 2004 were nuisance tariffs.  The Philippin es' tariff re-calibration in the last two years was 
squarely within its rights in the WTO and consis tent with the developmental policy space accorded to 
Members.  In this regard, the average applied tari ff of the Philippines was 9.7% in 1999 and 7.4% in 
2004, despite its average bound rate of 25.7%.  Hen ce, there was an overall net reduction of 2.3%.  
There should not be any doubt, therefore, that th e Government remained committed to a strong 
multilateral trading system.  On the tariff overhang issue, the Philippines looked at this as tariff policy 
space that allowed any WTO Member to manage tariff liberalization through time, and at the same time deliver real market access to all interested Me mbers;  21.5% of the Philippines' tariff lines were 
more than zero but less than 2% tariff level becau se of the continuing importance of revenues from 
across a number of tariff lines.  Far from being a nuisance, these tariffs generated necessary revenues 
to allow customs and other services to continue. 
18. Like other WTO Members, the Philippines look ed forward to a fruitful outcome at the 
6th Ministerial Conference later this year in Hong Kong, China.  Th e Philippines shared the 
Director-General’s assessment for the need for a sense of urgency among delegations and capitals.  
The Philippines' overall position was that the outcome  of the DDA should be a balanced package for 
all Members.  The Philippines' general approach to the various DDA issues was elaborated in its 
Report.  The development dimension should be clear ly reflected in the outcome of the negotiations, 
particularly in issues crucial to developing countri es, areas where they could generate viable gains, 
and means to accelerate their full integration into the multilateral trading system.  In this light, the 
Philippines maintained its full co mmitment to the successful conclusion of the Doha Development 
Agenda.  WT/TPR/M/149 
 Page 7 
 
 
III. STATEMENT BY THE DISCUSSANT 
19. The discussant (H.E. Mr. Burhan Gafoor ) stated that the Philippine s' economy was recovering 
from the Asian financial crisis, wh ich had had a deep impact on many countries in the region.  In 
2004, the Philippines economy grew by 6.1%, which w as its highest rate of growth in the last 
15 years.   This was encouraging news, and it ra ised two basic questions:  what accounted for the 
relatively high level of growth in 2004;  and was the level of growth sustainable in the years ahead? 
20. On the first question,  there were several factors.  The first factor was the growing importance 
of the services sector in the Philippines;  it had been the key driver of growth since 1999, and 
represented 60.7% of the GDP in 2004.  The contri bution of the services sector to the Philippines' 
economy had remained fairly constant, while agricult ure had been declining in importance.  This was 
an important structural shift that would position the Philippines well for the future.  Among services, 
transport and communications, and financial servic es had grown quite rapidly.  This could be 
attributed to consumer spending and government polic ies to reform these sectors.  The Philippines, 
given its educated population, had also benefited from the migration of call-centre operations to low-
cost countries.  The Philippines was well positione d to benefit even more from business process 
outsourcing in the years ahead.  The discussant commended the Government on its financial sector 
reforms.  The General Banking Act of 2000, the Anti-Money Laundering Act of 2001, and the 
microfinance initiatives of the Ph ilippines Central Bank were some noteworthy examples.  These 
policies had strengthened the banking sector throug h greater regulation and supervision;  further 
consolidation in the banking industry was also en couraged.  These reforms had helped to increase 
foreign ownership of domestic banks since 1999.  The microfinance initiative had also improved 
access to credit, especially in the rural areas.  This was crucial for rural development and poverty 
alleviation.  Overall, the reforms in the fi nancial and banking sector had proceeded well.   
21. The second factor that had helped growth was the role of overseas remittances in the 
Philippines economy;  these accounted for over 80% of growth in 2003.  The hi gh rate of growth in 
2004 was due mainly to private consumption, whic h was in turn supported by overseas remittances.  
The importance of overseas remittances had been increasing since 1999 when they represented 8.9% 
of GDP, or US$6.8 billion;   in 2004, they re presented 10% of GDP, or about US$8.5 billion.  
Overseas remittances ca me close to matching total tax revenue , which represented 12.3% of GDP.  In 
2005, the Government expected overs eas remittances to increase furthe r;  this would have a positive 
impact on the economy.  As pointed out in the Secr etariat's report, the role of overseas remittances 
illustrated the real importance of mode 4 openings to the Philippines.   
22. The third factor driving growth was the manufacturing sector.  In 2004, manufacturing 
performed strongly, growing by 5%, the best pe rformance since 1999;  it represented 23% of GDP, a 
slight increase since 1999, and accounted for 10% of employment in 2004.  Manufacturing had 
potential for the future, in terms of increasing exports and contributing to GDP. 
23. The issue of whether the high level of growth was sustainable depended on many factors, 
such as the external environment and developments  in the Philippines.  The Medium-Term Philippine 
Development Plan for 2004 to 2010 projected annu al growth of 7% till 2010.  Other estimates had 
projected rates of between 5% and 5.5%.  Howeve r, there were many challenges, and the pace of 
growth would depend on the pace of reform.     
24. The first challenge was the fiscal deficit, which had a direct bearing on macroeconomic 
stability.  It was reassuring that the Government's  macroeconomic priorities included achieving a 
balanced budget by 2009 and reducing the consolidated public sector deficit to 1% of GDP by 2010.  
A major challenge was the declining tax revenues as a percentage of GDP.  In 2004, tax revenue was 
12.3% of GDP, 14.5% in 1999.  In this contex t, tariff revenue became very important for the 
Government.  In 2003, tariff revenue accounted for 7% of total tax revenue.  There was a link between 
the budget deficit and the Tariff Reform Programme ;  many of the written questions by Members WT/TPR/M/149 
Page 8 
 
 focussed on this point.  Further updates on the review of the tariff structure, and on the Government's 
effort to improve tax collection would be useful. 
25. A second challenge was attracting foreign direct investment.  According to available data, 
FDI had not increased in recent years.  In proportion to GDP, FDI had fallen from 2.2% (or 
US$1.7 billion) in 2002 to 0.2% (or US$0.2 billion) in 2003 and 2004.  This was partly the result of 
an increasingly competitive international environmen t for inward investment, especially in Asia.  
However, the Government had made some effort to attract FDI in certain sectors, for example in the 
mining and tourism sectors.  In the first three quart ers of 2004, FDI approvals rose substantially.    
The Government had encouraged investment, in a ccordance with the Investme nt Priority Plan, and 
had identified ten investment priority areas under the Medium Term Development Programme.  He 
looked forward to further elaboration from the Phili ppines on this programme, especially with regard 
to investment promotion. 
26. The third challenge was privatization of state-ow ned enterprises;  privatization could help to 
raise funds, increase efficiency, and help manage the fi scal situation.  In this context, the Government 
had liberalized the utilities sector and intended to pr ivatize the National Transmission Corporation by 
mid 2005.  He asked about the Government's plans w ith regard to privatization in other sectors, and 
whether there were targets and time-lines for the privatization programme.  WT/TPR/M/149 
 Page 9 
 
 
IV. STATEMENTS BY MEMBERS 
27. Members welcomed the delegation of the Phili ppines and appreciated the informative report 
and introductory statement.  Members also tha nked the discussant for his insightful comments, and 
the secretariat for a comprehensive report. 
28. Members were encouraged by the recent rec overy of the Philippines' economy.  Members 
welcomed the Government's reform efforts and en couraged the Philippines to continue its reform 
process and improve access to its markets.  Many in dicated the deepening of their bilateral trade and 
investment relations with the Philippines.  Memb ers also commended the Philippines' strong support 
for the multilateral trading system and active pa rticipation in the Doha Development Agenda. 
29. The representative of the European Communities  stated that the Philippines had made 
important efforts towards liberalization of trade but th at further steps could be taken to ensure a stable 
economy, continued growth, and sust ainable development.  In 2001, the Philippines had introduced an 
electronic procurement system;  while this could assi st the Government with its fiscal consolidation 
and increase the cost-efficiency of the public sect or, it largely excluded participation of foreign 
companies.  Foreign competition would ensure competitive pressure capable of making domestic 
companies better and more efficient.  The Agreement on Government Procurement would serve as an 
appropriate set of rules furthering the efforts of the Philippines. 
30. The Philippines had already gone through crucia l reforms of its customs regime, although to 
some extent the benefits had been hampered by th e many changes in tariffs.  Many non-tariff barriers 
had hampered trade further.  The Philippines' lo cal-content schemes seemed to continue to be an 
obstacle to consolidation of efficient domestic production of a number of products, and the Philippine 
law preventing maritime cabotage by foreign vessels increased the cost of transport and decreased the 
competitiveness of Philippine products in export markets.   
31. The Philippines would be better served by fu rther market-opening and strengthening of 
fundamental rules, with the aim of increasing investment and strengthening the goods and services 
markets by furthering competition.  Political inst ability might have a negative effect on economic 
stability and on development.  The WTO system could assist countries by providing strong rules and 
market opportunities;  it provided an economic frame that was conducive to stability, whereas political and security constraints could al so vastly diminish such benefits. 
32. The Philippines had taken important steps to  address the relationship between trade and 
sustainable development.  The EC was interested to  learn more about the Philippines' view of the 
potential for ensuring strong synergy between trade and sustainable development.   
33. Regional integration was a good way to stimulate the consolidation of regional trade and to 
foster economic development.  Consolidation through the ASEAN had great potential for increasing 
trade and development on a global level.  Howeve r, full benefits could only be achieved through 
agreements covering substantially all sectors and su bstantially all products, an d while consolidation of 
regional trade could benefit devel opment, multilateral trade talks provi ded an important platform, not 
least for better integration of developing countries in the global trading system.  Market opening and 
strengthening of rules at the global level would benefit the Philippines.  Further benefits were 
available from continued domestic reform aimed at abolishing arrangements that were inimical to 
Philippine development.   
34. The representative of Japan
 commended the Philippines' effort for economic recovery and 
hoped this would continue.  Although ASEAN inte gration was to be welcomed, the Philippines’ 
neighbours were partners as well as competito rs for exports and FDI.  He commended the 
Government's awareness of the problems of the fiscal deficit, unemployment, productivity, and 
competition with neighbouring countries, and for taki ng measures to cope with them.  The Philippines WT/TPR/M/149 
Page 10 
 
 was starting fiscal reform, such as introduction of VAT from May 2005.  In th is regard, he hoped for 
the success of the Philippines' priv atization efforts. To face unemployment, insufficient productivity, 
and competition with nearby countries, the Philippi nes was trying to encourage FDI and to explore 
more foreign markets.  One tool was free-trad e agreements.  The Philippines had been very 
forthcoming on FTAs and its positive attitude  towards them was very impressive.  
35. Referring to the information in the Secretariat report concerning the Philippines' FTA activity, 
he considered that the analysis focused on the number of FTAs but did not fully take into account 
their content.  Improving the FDI environment was ve ry important with regard to transparency and 
predictability;  he was interested in the future schedule for relaxation of the FDI negative list.  Since 
2003 June, the Philippines had introduced safe guards against imported cement, although some 
countries were exempted from these measures.  He  enquired about the compatibility of the measure 
with the MFN clause of GATT Article I.  He also asked about the Philippines' plans for strengthening 
IPR-related rules and regulations , which would help to improve the investment environment.  
36. The representative of Australia
 stated that sustained growth would depend on a stronger 
commitment to domestic policy reforms.  To this en d, he congratulated the Government for setting out 
a supportive policy framework for the development of a viable mining industry.  He encouraged the 
Government to implement its comprehensive minera ls action plans in a timely and effective manner, 
and to work closely with local governments to re move any obstacles to foreign investment.  The 
recent decision by the Philippines Supreme Court to  reaffirm the constitutiona lity of the Mining Act 
had removed a major obstacle to foreign investment  in the mining sector;  this should provide 
significant opportunities for rejuvenation and development in this area.   
37. He appreciated the Government's determinati on to address the fiscal shortfall and welcomed 
recent revenue-raising legislation, including the im position of a tax on alc ohol and tobacco and the 
removal of VAT exemptions for certain industries.  Australia was concerned that the Government was 
reportedly considering tariff increases as a means of increasing revenue.  It was also concerned about 
non-tariff barriers to imports, especially the licensi ng and permit systems for some products, which in 
some cases were extremely complex.   
38. The representative of Hong Kong, China  expressed appreciation for the Philippines' support 
for the Doha Development Agenda, and particularly the development dimension of the Round.  The 
DDA would provide potential development gains through improved market access and multilateral 
trade rules. 
39. The Philippines had increased its simple average applied tariff rate from 5.8% to 7.4% in 
2004, in the course of recalibrating its tariffs with a view to protecting "critical" industries. Such 
change in the tariff regime might generate a moment um to maintain high tariffs as a means to protect 
domestic industries, undermining the progress of liber alization.  He urged the Philippines to take 
advantage of the ongoing NAMA negotiations to de monstrate its commitment to multilateral trade 
liberalization by substantially reducing its bound ra tes and the large gap between the applied and 
bound rates.  He also encouraged the Philippines to simplify its complex import licensing system.   
40. The representative commended the Philippines' continual efforts to align its national 
standards with international ones;  75% were al ready aligned at the end of October 2004.  He 
encouraged the Philippines to continue its efforts to  achieve the target of 95% alignment by 2010, and 
hoped that the remaining 5% could be aligned within less than ten years.  He also commended the 
Philippines for taking steps to reform its proc urement regime by introducing and electronic 
procurement system and passing new legislation (G overnment Procurement Reform Act) in 2003 to 
standardize and streamline the procurement process.  However, the Philippines gave strong preference 
to domestic labour, materials, and goods in gove rnment procurements contracts, and foreign 
participation in goods procuremen t remained restricted.  He urge d the Philippines to move quickly 
towards an open and non-discriminatory government procurement regime.    WT/TPR/M/149 
 Page 11 
 
 41. The Philippines had taken substantial steps to  strengthen and liberalize its key services 
sectors, notably financial and transport services.  He welcomed the recent tabling of the Philippines' 
initial services offer, and encouraged it to furthe r improve its services commitments by binding the 
relevant liberalization measures in this Round of th e services negotiations and reflecting them in its 
revised offer.  He hoped that the Philippines would expedite its process of ratification of the Fourth 
and Fifth Protocol of the GATS. 
42. The representative of Brunei, on behalf of the ASEAN
, stated that the Philippines’ simple 
average applied MFN tariff rate was 9.7% in 1999, and fell to 5.8% in 2003.  Although it was increased to 7.4% in 2004, this average was still low by developing country standards.  All tariff rates 
were ad valorem , which contributed strongly to transparen cy and predictability.  ASEAN commended 
the Philippines’ continuing engagement in the D oha Round agriculture negotiations;  70% of the poor 
depended on this sector or related activities in the Philippines.  While noting the necessity and 
objective of protection in agriculture, which was to promote the growth in this sector, ASEAN 
believed that such measures tended to tax the consumers, and the poor were especially hard hit.  The 
Philippines supported the necessity of liberalizi ng utilities and other key services for efficiency 
promotion through competition and private sect or participation.  ASEAN commended the 
Government for its efforts in restructuring a nd deregulating and privatizing electricity.   
43. The Philippines had made significant efforts to st rengthen its financial sector, most notably in 
banking, including the revamping of the regulator y and supervisory framework in line with BIS 
recommendations.  ASEAN commended the Philippines for maintaining unrestricted access in most 
telecommunications services.  This measure allowed for boosted competition due to relatively 
unfettered market entry and exit.  
44. The Secretariat report cited that the Philippines’ general trade policy objectives included 
moving towards a more outward-oriented trade regime, strengthening and increasing overseas market 
access for exports, and greater integration into th e world economy.  These objectives were pursued 
through multilateral, bilateral and regional trade in itiatives, in particular through ASEAN.  ASEAN 
had virtually created an ASEAN Free Trade Area by reducing tariffs of over 94% of all goods in 
ASEAN-6 members to 0-5%.  Non-tariff barri ers were also tackled by introducing, inter alia , 
measures to harmonize customs nomenclature and developing common product certification 
standards.  Investment within the region would be liberalized by the year 2020.  ASEAN’s FTA 
initiative would also help build momentum and the comfort level for the Philippines to engage in 
further liberalization efforts at a multilateral le vel.  Furthermore, ASEAN was making progress in 
building economic linkages with trading partners out side the region, including China, Japan, Korea 
and India.  These linkages would broaden the lib eralization efforts beyond ASEAN and the region. 
45. The representative of Chile
 stated that the Philippines had un ilaterally liberalized its tariffs 
substantially, achieving an average applied tariff ra te of around 7%, one of the lowest rates among 
developing countries in Asia.  The Philippines main tained tariff peaks in some sensitive sectors.  
However, only 56% of the Philippines' tariff lines were bound, at an average rate of 25.6%, which 
could affect the progress achieved in reducing tariffs.  He hoped that the percentage of bound products 
would increase considerably as result of the Doha Development Agenda.  This would improve the 
trading environment in the Philippines by raising predictability, which was a key factor since the 
Philippines had modified its tariff regime in 1999 to grant temporary relief to the agricultural and 
manufacturing sectors after the financial crisis in 199 7.  He asked whether the implementation process 
for a uniform tariff of 5% for all sectors, which began in 1981 and was frozen because of the Asia 
financial crisis, was still being considered by the Philippines authorities.   
46. The Philippines, as a member of ASEAN, par ticipated in various trade initiatives with 
regional partners such as Japan and China.  He asked what treatment was being given to sensitive 
sectors such as agriculture in these negotiations and whether there were plans for policy changes in 
this area in the near future. WT/TPR/M/149 
Page 12 
 
 47. The Philippines had taken significant steps to liber alize its foreign investment regime in key 
sectors, such as manufacturing and mining, which no w allowed 100% foreign ownership.  However, 
the constitutional ban on the acquisition of land by foreigners and legal restrictions for foreign 
participation in some sectors still prevailed.  He  asked whether there were plans to deepen the 
liberalization of the investment regime and to allo w for greater participation of foreign capital.   
48. The representative of the United States
 was impressed by the growing importance of the 
services sector in the Philippines.  The Philippi nes was reportedly consid ering amendments to 
sections of its Constitution that limited foreign in vestment in services sectors;  the representative 
asked for an update in this regard.  Such a step co uld go a long way in attracting foreign investment 
and in paving the way for new jobs and a more co mpetitive economy;  another step would be prompt 
action by the Philippine Senate to ratify the Fourth and Fifth protocols to the GATS.   
49. In 2004, the Philippines had raised applied tari ffs between 67% and 100% on key industrial 
and consumer goods and raw materi als.  While these higher tariffs  remained below bound rates, and 
were described by the Government as temporary, they represented a reversal of reforms implemented by successive Philippine administrations during the 1990s.  It was important to stay on a path of tariff 
liberalization, as it was an important way to boost trade and economic growth.  The U.S. experience 
was that tariff increases could ha ve negative, unpredictable e ffects on productivity and growth, 
particularly if trading partners followed suit. 
50. The Secretariat Report had mentioned several incentive programmes that appeared to be 
contingent on export performance or the use of lo cal content.  He hoped that these subsidies were 
consistent with the Agreement on Subsidies a nd Countervailing Measures and that the Philippines 
would soon file its first subsidies notification since 1996.  Noting that the import licensing system in 
the Philippines had been described as highly complex,  he requested additional information about its 
administration and coverage.   
51. The theft of intellectual property rights in th e Philippines remained a persistent problem and 
an impediment to foreign investment.  There we re at least 20 production lines in the Philippines 
producing more than 90 million illegal optical discs per year.  U.S. copyright industries estimated 
their losses in 2004 due to copyright piracy at ar ound US$139 million.  New leaders at the Philippines 
Intellectual Property Office and Optical Media Board ha d pledge to take action against IP piracy, and 
the new Optical Media Act and its implementing regulations provided valuable new tools against IP 
pirates;  the United States was expecting to see positive developments in IP enforcement in the 
coming year. 
52. Last July, President Arroyo announced five key themes of future reform:  (i) job creation 
through economic growth, (ii) anti-corruption throug h good government, (iii) social justice and basic 
needs, (iv) education and youth opportunity, and (v ) energy independence and savings.  These reform 
programmes, along with President Arroyo's Ten-Poin t Agenda for economic growth, set out ambitious 
goals for reinvigorating the Philippines and its ec onomy.  The United States wished the Government 
great success with these initiatives, and looked forw ard to continuing work with the Philippines to 
further expand mutually beneficial trade and investment relationship.  
53. The representative of Colombia
 stated that the Secretariat Report had presented some courses 
of action for improving the tax structure and the institutional capacity that would allow the 
Government to achieve the goals of reducing fiscal deficit and establishing budgetary balance 
foreseen under the Medium Term Development Plan.  These achievements, along with an appropriate 
framework to attract foreign investment, and trad e, productivity, and external competitiveness, would 
set the Philippines on a path sustained growth in the medium term.  
54. The Philippines had made significant progress in  terms of trade liberalization since its 
previous Review.  However, there had also been some backward steps in response the protectionist  WT/TPR/M/149 
 Page 13 
 
 pressures.  Colombia hoped that there would be c ontinued will to strengthen the process of trade 
liberalization and that the Philippines' active par ticipation and commitment to the multilateral trading 
system would allow it to maintain stability in its trade policy.  Colombia believed that the progress 
made to date was an incentive fo r the Philippines to continue its structural reforms, which would 
allow it to achieve an adequate and appr opriate level of ec onomic development. 
55. While industrial tariffs had been reduced si gnificantly, Colombia was concerned about the 
instability caused by the presidential authority to in crease the applied tariff up to 100% when deemed 
necessary, the management of non-automatic impor t licences and permits, and the system of import 
restrictions and taxes, which were appl ied to the import of certain products.   
56. The representative of Canada
 stated that, while recent efforts had been made to address the 
lack of infrastructure deployments, bureaucratic red tape, corruption, and a pervasive public sector debt, the economy remained vulnerable to external  shocks such as oil prices, as well as sudden 
changes in interest or peso exchange rates.  Canada commended the Government for pursuing fiscal 
policies aimed at restoring the country’s economic growth, and recognized a number of actions taken 
by the Government to restore fiscal health th rough increasing revenue and reducing expenditures, 
including the passage of tax measures such as the tobacco and alcohol excise tax bill. 
57. Canada welcomed the Philippine Supreme Cour t's decision of December 2004 that upheld the 
constitutionality of the Financial and Technical As sistance Agreement (FTAA) of the 1995 Mining 
Act. The decision allowed global investors to enter the sector with up to 100% ownership.  This 
decision removed a major hurdle to international co mpetitiveness.  It also reflected the country’s 
pursuit of sound economic liberalization policies as outlined in the ten-point Economic Development 
Agenda. 
58. Canada awaited the Philippines' decision c oncerning the tariff rate quota system, and 
cautioned against the employment of special safegua rd measures if TRQs were removed due to the 
potentially adverse impact on the agri-food sector.  The Philippines had asked for an extension of 
special treatment provisions on rice, for which concomitant concessions to Canada were being 
negotiated. The Government's c ooperation in resolving market access issues included the recent 
lifting of the temporary ban on Canadian beef ;  Canada commended the Philippines for its 
demonstrated commitment to a science-based appro ach in resolving this issue.  Canada commended 
the Government of the Philippines for pursuing out ward-oriented economic and trade policies, and 
urged it to continue on its path to recovery and growth. 
59. The representative of the Separate Customs Te rritory of Taiwan, Penghu, Kinmen and Matsu
 
(Chinese Taipei ) stated that while the Philippines had expe rienced a general pattern of growth since 
1997, further domestic policy reform would be require d if that growth was to be sustained in the 
future.  The likely priorities would be reduction in the overall high levels of public debt and external 
financing requirements, further trade and investment  liberalization, and other structural reforms to 
improve productivity and make the Philippines mo re competitive with its low-cost neighbours. 
60. FDI remained a very important factor in terms of development. The levels of FDI inflows had 
been negatively influenced by investor uncertainty  about the stability of the economy, especially its 
fiscal position and the increasing competition from nei ghbouring economies that were also seeking to 
attract more FDI.  While bilateral trade between  Chinese Taipei and the Philippines had remained 
reasonably strong, the attractiveness of the Philip pines as an investment destination had been 
weakening in recent years, thus limiting the potentia l for greater bilateral economic cooperation.  He 
was interested in learning of any concrete plans to  revitalize the investment climate in the Philippines 
in the future.  For inbound FDI to grow, it would be  necessary to lift the restrictions on foreign banks 
and insurance companies on setting up branch es and subsidiaries in the Philippines.  WT/TPR/M/149 
Page 14 
 
 61. The representative of the Republic of Korea
 stated that the Philippines' applied MFN rates 
were relatively low for a developing country, with simp le average of 7.4% in 2004.  However, tariff 
binding ratio remained at 64.8%, and the simple  average bound rate was 25.7%.  The Philippines had 
raised the applied rate to the current level from 5. 8% of 2003 in the context of tariff "recalibration".  
Increasing the coverage of tariff binding and reduc ing the bound rates woul d help to enhance the 
predictability to the tariff regime.  The Philippi nes maintained import prohibitions and licensing 
regulations for health and safety reasons.  In December 2002, the Philippines had established a ban on 
used vehicle imports.  However, the Court of A ppeals had decided that the ban was unconstitutional, 
and Korea was interested to know whether the Phili ppines had any plans to remove this ban.  There 
had been positive developments in customs proc edures, including introduction of the automated 
customs operating system (ACOS).  Nevertheless, about 80% of imports were classified as "red lane" and were subject to physical inspection.  Korea was interested in learning the type of situations that 
required such a high percentage of physical insp ection, and whether the Philippines had any plans to 
improve risk assessment methodology. 
62. The Philippines had strengthened the institutiona l and legal framework for the protection of 
IPRs, but the continued proliferation of pirated copyright materials demonstrated the need for 
strengthened enforcement.  Korea welcomed measu res to increase the transparency of government 
procurement, including the introduction of the el ectronic procurement system.  However, little 
progress seemed to have been made in opening the government procurement market to foreign 
competition, reflecting the Philippines' view of government procurement as a development tool.  
Provided that the increasing competition in governme nt procurement would contribute to greater 
"value for money" and thus savings in budgetary resources, he asked whether the Philippines had any 
plans to reduce barriers to foreign par ticipation in government procurement. 
63. The representative of Brazil
 stated that the Philippines' economy remained vulnerable to 
external shocks, reflecting macroec onomic and structural problems, lik e high levels of public debt, 
equivalent to slightly below 100% of GDP. This w ould have generated substa ntial external financing 
requirements and contributed to higher interest ra tes and costs of capital, weakening the external 
competitiveness of the Philippine economy.  As th e fiscal situation could undermine macroeconomic 
stability, he encouraged the Philippines in its effort s to reduce the public sector deficit and achieve a 
balanced budget, as provided for in the Medium -Term Philippine Development Plan 2004-2010.  
64. Growth prospects were linked to reforms to improve productivity, which would be essential 
to meet the increasing external competition.  The re moval of impediments to investment, an important 
factor in the country's development, would prom ote productivity.  The Philippines' general trade 
policy objectives included moving toward a more out ward-oriented trade regime, strengthening and 
increasing overseas market access for exports, and gr eater integration to the world economy.  The 
Philippines granted at least MFN treatment to all tr ading partners. Even tho ugh its tariff rates were ad 
valorem , which contributed to transparency, they we re not all bound.  The Philippines' future 
economic performance seemed to depend on its ow n efforts to make the necessary structural 
adjustments.  
65. The representative of Turkey  stated that the Philippines was very active within the WTO but 
was also pursuing a great number of regional and b ilateral talks.  He hoped that the Philippines' 
initiatives outside the WTO would not lessen th e country's commitments towards multilateral 
liberalization. 
66. Although the average tariff rose to 7.4% in 200 4, from 5.8%, this could still be considered 
quite low.  However, narrowing current gap between  applied and bound tariff could contribute to the 
stability and predictability of the trade and invest ment regimes and facilitate the necessary flow of 
FDI into the economy.  Despite many structural problems and several economic crises, the country 
had been successful in accelerating economic growth since 1999.  Turkey had signed several bilateral  WT/TPR/M/149 
 Page 15 
 
 agreements with the Philippines, including on tour ism, technical and econom ic cooperation, and for 
investment protection. 
67. The representative of Pakistan
 stated that the Medium-Term Philippines Development Plan 
foresaw an annual growth rate of around 7% until 2010.  The services sector continued to dominate 
the economy, representing over 60% of GDP in nominal  terms, with a growth rate of 7.3% during 
2004.  Though agriculture provided livelihood for some 70% of the poor, the Philippines' exports 
were concentrated in manufactures, which account ed for approximately 90% of total merchandise 
exports.  Pakistan congratulated the Philippines for launching electronic procurement system, thereby making public sector procurements more transparent and less expensive.   
68. Recalibration of the tariff reforms, whereby tariffs had been re-raised during 2004, was a 
matter of concern.  The Presidential discretion to raise MFN tariffs to 100% when deemed necessary, 
which provided scope to raise tariffs above their bound rates, created a degree of tariff 
unpredictability.  Pakistan hoped that some further thought would be given to this policy shift.  Non-
tariff barriers, especially import licensing and perm its, and some export prohibitions, also needed 
further consideration. 
69. The representative of India
 lauded the Government's co mmitment towards fundamental 
structural reform of the economy.  The DDA could contribute to economic growth and development if 
the negotiations remained true to its mandate.  The commitment of both the Philippines and India to 
the G20 had provided the basis for closer coope ration and collaboration over the ongoing DDA.  The 
Government's priority to eradicate poverty as a f undamental development challenge was reflected in 
its Report.  In this context India appreciated the efforts of the Government in revamping its micro-
finance programme and declaring it as a flagship programme towards poverty alleviation.   
70. The representative of China  stated that in November 2002, China and ASEAN had signed a 
Framework Agreement on Comprehe nsive Economic Cooperation, whic h had entered into force on 
1 July 2003.  Under the agreement, both parties ag reed to negotiate the establishment of an ASEAN-
China Free Trade Area within ten y ears.  Now, the framework agreement was being applied smoothly 
and both parties had implemented their commitments on goods trade in accordance with the time table 
set by the framework.  However, China was concer ned with some aspects of the Philippines' trade 
policy.  For example, with regard to national tr eatment, it seemed that the Philippines had different 
consumption taxes on imported and domestic alcohols;  tariffs on imported vehicles, set by a decree 
issued in 2003 were of concern;  and some SPS and TBT measures seemed a little stringent, in 
particular, the standard on grains of corn and th e measure on imported seeds of rice.  China was also 
concerned by the frequent application of trade re medy measures against Chinese products.  As to 
services, China wished to learn more about the Phi lippines' plan to further develop and liberate its 
market, in particular in financial services and te lecommunications.  In 2005, China and the Philippines 
had signed an understanding on the special treatment  of rice, which proved that bilateral discussion 
was an important and effective means to resolve mutual concerns. WT/TPR/M/149 
Page 16 
 
 
V. REPLIES BY THE REPRESENTATIVE OF THE PHILIPPINES AND ADDITIONAL 
COMMENTS 
71. The representative of the Philippines  stated that the TPR exercise had allowed it to bring 
together various government agencies and thus to have a holistic view of its commitments in the 
WTO. 
72. The passage of the VAT law, which was curren tly undergoing judicial tests, would address 
the Philippines' fiscal problems.  Domestic re forms taking place on government procurement were 
quite significant.  The Philippines was also going th rough other reforms such as in the fiscal area, 
customs, energy, the opening of foreign invest ment, and banking, taking into account sensitivities 
with citizens.   
73. On the question of whether growth would sustainable, a number of positive developments 
pointed to an affirmative answer.  First, the Government’s fiscal position, although still weak, was 
improving.  Addressing the fiscal problem was primary and essential to achieving sustained and 
accelerated growth.  The 2004 final national govern ment fiscal deficit was P hp 186.1 billion, or 3.8% 
of GDP, lower than the target of 4.2%.  In 2005,  the Government aimed to this further reduce to 
Php 180 billion or 3.6% of GDP.  The Government remained confident that recent fiscal legislative 
measures, such as the Expanded VAT Law, when fully implemented, would assist in expanding the tax base.  Regarding concerns about fiscal incentiv e measures that allowed the loss of potential tax 
revenues, the Government was undertaking an on-go ing review of existing tax incentives and other 
relevant matters. 
74. Second, on the structural shift in the Philippine economy, the Government remained 
committed to invigorating the agriculture sector, a nd facilitating growth of mi cro, small and medium 
enterprises in order to help generate 10 million jobs in the next five years.  About 1.5 million farmers 
were expected to benefit, for example, from the establishment of e-farms (electronically literate), 
where farmers could enhance their technical knowledge.    
75. Third, The Government was addressing the key c oncerns in investment.  A number of major 
infrastructure projects were expected to be launche d in 2005.  The Department of Energy was also 
working to accelerate the privatization of th e National Power Corporation and the National 
Transmission Corporation in 2005 from th e initial target date of 2006.   
76. Market conditions would continue to influen ce the Government’s privatization programme. 
Since the Government hoped to fetch favourable prices and a number of the assets were real estate 
properties, the market condition had not been very  favourable. The same conditions also affected non-
property assets.  Privatization of the National Tran smission Corporation, for example, was delayed 
because the initial bidding rounds had yielded unaccep table proposals.  However, the Government 
remained committed to its privatization programme. 
77. Lastly, on the issue of corruption, the Bur eau of Customs was strengthening its capabilities 
and processes to combat smuggling and technical evasi on. The Bureau of Internal Revenue was also 
strengthening its computer-assisted audit programmes to reduce tax evasion on VAT and corporate 
income. 
78. The Government also recognized the importance of enhancing transparency and 
competitiveness in government purchasing.  Par ticipation in the Agreement on Government 
Procurement was, and should continue to be, voluntary.  The recently established e-Procurement 
System provided an open, transparent, and compe titive environment through on-line bidding and bid 
matching.  It had generated competitive prices and sa vings of at least 30%.  The Government intended 
to further build on progress already made with  the new Procurement Law by developing guidelines  WT/TPR/M/149 
 Page 17 
 
 for value engineering, and setting quality and pr ice standards for infrastructure projects, among 
others. 
79. The Philippines was confident therefore, that  fiscal problem was manageable and that a 
balanced budget by 2010 was worth achieving. 
80. A pro-poor and pro-employment growth strategy was critical for the Philippines'  
development efforts. Therefore, strong and effec tive trade and investment policies, among others, 
were essential components of its growth strate gy.  Philippine Agenda 21 provided the overall 
framework and roadmap for the achievement of sust ainable development in the country.  Through the 
framework Philippine Agenda 21, the Philippines was pursuing sustainable development that took 
into consideration a sound and viable economy, responsible governance, social cohesion, and 
ecological integrity.  This was to be achieved w ithin the Medium-Term Philippine Development Plan 
by promoting stable and broad-based developmen t in output and employment, through a range of 
fiscal, monetary, and investment policies.  It set the principles and context against which trade would 
be conducted.  This framework highlighted th e need for measures to seize the potential of 
globalization to contribute to sustainable development. 
81. The Philippines' investment environment had b een adversely affected by the world economic 
slowdown and political instability particularly durin g 1999–03.  To improve the investment climate 
and reverse the decline in the country’s interna tional competitiveness, the Government was focusing 
on five strategic measures:  make food plentiful at reasonable prices;  reduce the cost of electricity;  
modernize the physical infrastructure and logistics system;  mobilize and disseminate knowledge to upgrade existing technologies and increase people’s productivity; and streamline government 
procedures.  The Consolidated Investment and Ince ntives Code of the Philippines, which had been 
filed in Congress, was aimed at creating a more open and transparent basis for foreign investment.  It 
would create a unified incentives policy with one governing statute. 
82. The Medium-Term Philippine Development Plan also included in the Constitutional Reform 
Agenda the need for fundamental reform of th e constitutional provisions on national economy and 
patrimony.  The Plan had also realigned the grant of incentives to promote activity in ten investment 
priority areas.  These areas had been identified ba sed on the country’s natural and human resource 
advantages.  These was also an Inv estment Priorities Plan, a rolling annual plan of priority industries 
and service areas that were being encouraged through fiscal and non-fiscal incentives.  The 
Investment Priorities Plan of 2004 included a nationa l list, a regional list, and the ARMM list.  Under 
the national list were export projects, mandatory inclusions, and areas supporting special government 
programmes, including infrastructure upgrading,  mass housing, modernization programmes for the 
agricultural, fishery and the pharmaceutical sectors,  biotechnology, and tourism.  The regional list 
covered activities in specific regions of the count ry, notably industry cl usters composed of 
horizontally and vertically linked industries that t ook advantage of the natural advantages of specific 
locations.  The ARMM list was prepared by the Regional Board of Investments of the Autonomous 
Region of Muslim Mindanao. 
83. Furthermore, the Government had strengthe ned existing venues for regular government-
private sector dialogues, particularly, on matters involving the business environment.  To enhance international competitiveness, the Government ha d adopted a business development approach and 
focused its promotion efforts on the ten priority invest ment areas.  As an example, it had endorsed the 
setting up of the Advanced Research and Competen cy Development Institute, a private sector and 
academe-led entity designed to develop skills, upg rade technology, and encourage research and 
development in the electronics sector.  
84. The Philippines' tariff re-calibration in the last two years was squarely within the rights of the 
Philippines in the WTO, and consistent with th e developmental policy space accorded to Members, 
and the net effect since the Philippines' previ ous TPR was clearly a net over-all reduction of the WT/TPR/M/149 
Page 18 
 
 applied average rate by 2.3%.  Far from undermining predictability , the tariff overhang represented a 
reasonable tariff policy space for Members to manage  tariff liberalization through time, while giving 
real market access to all interest ed WTO Members.  The Government  remained committed to a strong 
multilateral trading system.  It would exercise its flexibilities with utmost prudence and restraint, and 
only to the extent required by its developmental ne eds. The Philippines remained at the forefront of 
the WTO membership in terms of openness and ambition.  While willing to do more, practicality and 
equity demanded that the Philippines move at the same pace as other members.   
85. A well-functioning multilateral WTO system was of crucial importance, and regional and 
bilateral trade agreements complement the multilateral trading system.  It was in this spirit that the 
Philippines had engaged in free-trade agreements in the context of ASEAN and in its major bilateral 
economic relations. These agreements supplemented its trade liberalization commitments in the 
multilateral trading system.  On the question of  sensitive products in the Philippines' free-trade 
agreement negotiations, these were time-limited in app lication, consistent with  its narrow definition of 
the concept of all or substantially all trade in such negotiations. 
86. The Intellectual Property Office coordinated w ith government enforcement agencies and the 
private sector to formulate and implement effe ctive plans and policies against piracy and 
infringement, particularly in the context of the multi-stakeholder Intellectual Property Rights 
Enforcement Action Panel.  Over the past two years, practically all of the reform objectives or targets 
had been achieved. Among the significant improve ments were (i) the Optical Media Act and its 
implementing rules, (ii) the formulation of admi nistrative rules on border control measures and cable 
TV piracy, and (iii) the institutionalization of specia lized IP enforcement units.  There had also been 
positive results in enforcement actions and opera tions.  The Optical Media Board had reported a 
downtrend in piracy.  The Philippine National Police and the judiciary were also actively doing their 
part.  The Intellectual Property Office was finaliz ing a comprehensive IPR Action Plan, which would 
become part of a consolidated effort to combat infringements and piracy. 
87. Pursuant to the comprehensive Mineral Action Plan, an Executive Order creating the Minerals 
Development Council had been prepared for the Pr esident’s signature.  The Council would serve as a 
"one-stop-shop" with the primary responsibility of attending to the needs of the investors in the 
minerals industry.  It was also envisioned as a c oordinating body, and provide information, guidance, 
direction, and solution for investors' problems and needs.  Exploration, mining, and mineral 
processing was listed under the Mandatory Inclusion Li st of the 2005 Investment Priorities Plan by 
virtue of the Mining Act of 1995.  A number of investment missions and roadshows abroad, 
specifically in China, Canada, Japan, Korea, and so me parts of Europe, had been undertaken recently 
by senior government officials in order to re-se ll the highly mineralized Philippine archipelago as a 
viable destination for mining investment. 
88. The Philippines shared the discu ssant’s observation about the growing importance of services 
for the Philippine economy.  The representative noted his country's active participation in the services 
negotiations under the Doha Round, and drew th e Body’s attention to the submission of its 
conditional initial offer in May.  However,  liberalization should be accompanied by sound 
macroeconomic management and a ppropriate regulation and supervision. While the Philippines fully 
recognized the potential benefits of binding at least the status quo, it was carefully considering the 
pace and sequencing of further liberalization, togeth er with a comprehensive review of its existing 
regulatory regime in order to ensure the sust ained soundness of the Philippine services sector. 
89. The President had written to the Philippine Se nate earlier in 2005 to certify as urgent the 
ratification of the Fourth and Fifth Protocols of the GATS.  In response, a public hearing on 2 June 
had considered the two protocols, and the Governme nt was working with legislators to complete the 
ratification process as soon as possible.   WT/TPR/M/149 
 Page 19 
 
 90. The discussant
 was encouraged that the Philippines G overnment recognized the importance of 
the fiscal problem.  The lowering of the Government fiscal deficit, year on year, was a good sign, not 
only for the targeted elimination of the deficit by 2010, but also for governmental fiscal discipline.  
Various initiatives, such as the implementation of th e Expanded VAT Law, the review of existing tax 
incentives, and enhancement of the e-procurement sy stem, would help to raise revenue and broaden 
the tax base.  The discussant wondered whether ther e were any plans to review the e-procurement 
system with a view to improving and making it more efficient. 
91. He was encouraged to hear of the various initiatives that the Government was implementing 
to attract foreign direct investment.  The five st rategic measures identified by the Government should 
help create a more conducive investment climate;  the proposed bill for a Consolidated Investment 
and Incentive Code would also be helpful.  He hoped that the Medium-Term Philippines Development 
Plan and the Investment Priorities Plan would contribute to enhance transparency and promote 
investment in priority areas.  He asked whether the proposed Consolidated Investment and Incentive 
Code would result in a legal or institutional c onsolidation of different agencies dealing with 
investments. 
92. The Government's support for private sector proj ects to promote research and enhance skills 
was also a step in the right direction.  The fi nalization of the comprehensive IPR Action Plan was 
timely and reflected the Government's determina tion to combat IPR infringement and piracy.  He 
asked about the timeframe envisaged for putting the action plan into practice. 
93. As stated by the representative of the Philippines,  state assets could not be disposed of in the 
market in a hasty manner.  The Government's commitment to the privatization programme was 
encouraging, particularly the Energy Department's  acceleration of the privatization of the National 
Power Corporation and the Transmission Compan y from the target date of 2006 to 2005. 
94. The Philippines' submission of its services conditional initial offer last May was welcomed.  
He was also encouraged by movements on the ratifi cation of the Fourth and Fifth Protocols of the 
GATS.  Members would be looking forward to the cr eation of the "one-stop-shop";  it would help to 
streamline and facilitate investor-related activities.  Tourism, which the discussant thought had great 
potential, currently accounted for about 9% of the Philippine's GDP.  There had been some 
encouraging movement for tourism development,  notably the implementation of the 1991-2010 
Tourism Master Plan. 
95. There were different regional clusters of de velopment in the Philippines;  some regional 
centres were growing faster than Metro Manila.  They were growing because of increased exports 
through Governments' export zones and increased investments, and because of tourism.  Metro 
Manila, which had been the traditional locomotive,  was being complemented by several regional 
agencies that helped to spread growth and job creation;  the Government seemed to have been 
encouraging the regional focus of these developmen t tools.  These regional clusters might in time 
overtake Metro Manila as engine of growth.  
96. On unemployment, the importance of poverty alleviation and job creation could not be 
underestimated in a large developing country like the Philippines with a large population and rural 
sector.  The various programmes the Government  had put in place would have to address 
unemployment, which was still relatively high, at 11% to 12%.   
97. Since 1999, the Philippines had been moving in the right direction towards reform and 
liberalization.  Its simple average applied MFN ra te at 7.4% in 2004 was low by developing country 
standards.  The average bound rate of the Philippin es was 25.7% in 2004, whic h was still substantially 
lower than the developing country average of 36%.  Countries had taken autonomous liberalization 
but binding was important.  The gap between bound  and applied rates was a fundamental issue and 
had been addressed in negotiating context. WT/TPR/M/149 
Page 20 
 
 98. The Philippines was a Member of ASEAN and APEC, and this membership had acted as an 
incentive and encouraged the Government to move towards reforms in liberalization. 
99. He hoped that Members recognized the Philippi nes' continuing commitment to a strong 
multilateral trading system.  He was encouraged  that the Government was aware of the many 
challenges facing the Philippines and was determin ed to overcome the constraints and advance. 
100. The representative of the United States
 referred to a statement in the Secretariat Report about 
imported distilled spirits being subject to higher ex cise taxes than those produced domestically.  He 
asked for clarification whether these taxes were substantially equivalent.  The United States was 
concerned that the Safeguard Measures Act, enacted in July 2000, which authorized the Secretary of 
Trade and Industry or the Secretary of Agriculture to raise the tariff or impose quantitative restriction 
in the event of an import surge, provided only a five-day period for an industry to comment on any proposed safeguards.  He asked for clarification of the relation between such provision and the 
requirement under the Agreement on Safeguards that  Governments offer reasonable periods of time 
for affected parties to make comments.     
101. The representative of Japan
 appreciated that the Philippines had submitted its initial services 
offer last May, and had initiated the process to ratify the Fourth and Fifth Protocols. 
102. The representative of the European Communities  stated that, on tariffs, he looked forward to 
constructive engagement of the Ph ilippines in the NAMA discussions. 
103. The representative of the Philippines  stated that there would be a review of the experience and 
outcome of the initial phase of implementation of the e-procurement system.  The proposed bill on FDI would lead to institutional consolidation a nd rationalize different incentives currently provided 
by several investment promotion agencies, a nationa l and regional.  There was an also effort to 
streamline institutional mechanisms towards a "one -stop" approach, though actual streamlining might 
be rather limited.   On the IP R action plan, there was no timeline as  he undertook to provide a further 
response at a later date.  On tourism, initial gain s obtained from reforms in revenue generation might 
give the Government funds to advertise Philippine  tourism in global media.  Unemployment was a 
major concern to the Government;  in the growi ng countryside there were many initiatives including 
infrastructure at the local level, housing, use of la nd and microfinance.  On distilled spirits, the focus 
had been on raising revenues;  the reform of th e tax structure would require another legislative 
exercise.  On the five-day period for comme nts on safeguard measures, the Government was 
considering a longer period, but this would requi re an amendment to the law in the Congress. 
104. The representative of the Republic of Korea
 asked how the Government intended to reconcile 
the two legitimate objectives in government proc urement:  as a tool for development, and for 
increasing the efficiency of government expenditure by introducing more competition in procurement 
procedures.  He asked for further clarification of  the response to Korea's written question regarding 
the ban on imports of certain used vehicles. 
105. The representative of the Philippines  stated that on revenue side, there were administrative 
measures, which required periodic adjustment, such  as fees and projects;  and legislative revenue 
measures, which included indexation of certain excise  tax, a possible general amnesty, rationalization 
of fiscal incentives, review of the VAT system, and other measures listed in the Medium-Term Philippine Plan.  With respect to the expenditure  side, administrative measures included austerity, 
strengthening the decision-making process of th e investment coordinating committee, and a 
moratorium on setting up state-owned companies,  promoting local government autonomy.  On 
legislative measures, there was a rationalization/re organization plan that required all government 
agencies to undergo a review process.   On the issue of the ban on u sed vehicles, it was less likely to 
be removed than strengthened.  WT/TPR/M/149 
 Page 21 
 
 106. The discussant
 asked for additional information on th e strengthening of the Government's 
regular dialogues with the private sector on the business environment;  as existing foreign investors 
were likely to expand investment in the Philippi nes, such strengthening of dialogue would be 
important. 
107. The representative of the Philippines  stated that in promoting FD I, it was necessary to ensure  
a good investment environment for existing investors.   If they expanded their investment they would 
effectively be showing confidence in the Philippin es' investment environment, which would help 
attract new investors into the country. 
108. The representative of Australia  asked about the Philippines' policy of maintaining tariff-rate 
quotas for some products, including beef, which were not regularly filled.  He asked for further 
information on how the import quotas on certain fish and other products relate d to GATT Article 11.  
In relation to FTAs, in particular the ASEAN ag reement, he asked how the Philippines defined the 
narrow definition of "substantially all tr ade" in relation to GATT Article 24. 
109. The representative of the Philippines  stated that as part of the Philippines' Uruguay Round 
commitment, tariff-rate quotas had initially covered a wide range of products, and the market had 
manifested its preference over time;  quotas for some products were under-filled.  The quotas would 
perhaps need to be reviewed.  On import quot as, most Members had sensitive sectors.  On 
"substantially all trade", this was not 100% and th ere were sectors that th e Philippines considered 
sensitive. WT/TPR/M/149 
Page 22 
 
  VI. CONCLUDING REMARKS BY THE CHAIRPERSON 
110. The third Trade Policy Review of the Philippi nes has been informative and open, thus 
contributing to a better understandi ng of recent developments in the Philippines' trade and related 
policies and the domestic circumstances in which th ese policies are formulated and implemented.  The 
preparation of the Member Report has provided an opportunity for domestic discussion and reflection 
and, together with the excellent Secretariat Repor t, has contributed to transparency and enabled 
Members to assess the trade polici es and practices of the Philippines.  Our discussion has greatly 
benefited from the active engagement of the Philip pines' delegation as well as from our discussant's 
insightful comments and many thoughtful interventions by Members.   
111. Members were encouraged by the recovery of the Philippines' economy after the Asian 
financial crisis.  Members welcomed the Government's reform efforts, particularly concerning trade 
liberalization, fiscal consolidation, and privati zation.  Members encouraged the Philippines to 
continue its reform process and improve access to its markets.   
112. Members welcomed the Philippines' commitment to the multilateral trading system, including 
its strong support for the Doha Development Agenda .  In this context, Members welcomed the 
Philippines' recent tabling of its initial services offer.   
113. Members expressed their appreciation of steps take n by the Philippines to liberalize further its 
trade regime.   While noting that its average applied tari ff rate is relatively low among developing 
countries, Members were concerned about the predicta bility of applied tariffs, referring in particular 
to the increase in the av erage applied tariff rate in 2004.  W ith a view to increasing predictability, 
Members urged the Philippines to narrow the gap between applied and bound MFN tariff rates and to 
bind more tariff lines.  Members also encouraged the Philippines to simplify its non-tariff measures.  While welcoming the Phili ppines' efforts to increase the transparency of its government procurement 
regime, Members were concerned about the existe nce of a strong preference for domestic goods and 
services.  Some Members encouraged the Philippines to participate in the Government Procurement 
Agreement.  Steps to strengthen intellectual prope rty rules were welcomed;  Members encouraged the 
Philippines to strengthen enforcement of such rules. Members commended the Philippines' ongoing 
efforts to align its national standards with interna tional ones, and encouraged its continued efforts in 
this regard.  In addition, while expressing their apprecia tion of recent steps by the Philippines to 
reduce barriers to inward foreign direct invest ment (FDI), Members were interested in the 
Government's plans to liberalize further the FDI re gime.  Members sought clarification on a range of 
issues including customs procedures, subsidies, saf eguard measures, and trade and environment.  
114. On sectoral issues, Members noted the growing importance of the manufacturing and services 
sectors in the Philippines' economy.  Members expre ssed their appreciation of reforms in the services 
sector, in particular, in financial services and tr ansport.  Many Members urged the Philippines to 
ratify the Fourth and Fifth Protocols of the GATS.   Some Members noted the growing importance of 
overseas remittances in the Philippines economy, and in this context, of Mode 4 liberalization.   
115. Members expressed their appreciation of the or al and written responses to their questions 
provided by the Philippines delegation, and looke d forward to receiving outstanding answers to 
questions. 
116. This successfully concludes our Review of the Philippines.  Members have shown a keen 
interest in the Philippines' trade and related policies an d its participation in the WTO.  In this context, 
I would encourage the Philippines to continue its reform process.  I trust that Members can look 
forward to the Philippines' active support for th e multilateral trading syst em and ongoing negotiations. 
__________