WORLD  TRADE  
ORGANIZATION  RESTRICTED 
WT/TPR/S/261 
30 January 2012 
 
 (12-0563) 
Trade Policy Review Body  
  
 
   
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
THE PHILIPPINES 
 
 
  
This report, prepared for the fourth Tr ade Policy Review of the Philippines, has 
been drawn up by the WTO Secretaria t on its own responsibility.  The 
Secretariat has, as required by the Agreement establishing the Trade Policy 
Review Mechanism (Annex 3 of the Ma rrakesh Agreement Establishing the 
World Trade Organization), sought clarification from the Philippines on its trade policies and practices.  Any technical questions arising from this report may be addressed to 
Mr. Ricardo Barba (tel: 022 739 5088) and Ms. Katie Waters (tel: 022 739 
5067).  Document WT/TPR/G/261 contains the policy statement submitted by the Philippines. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Polic y Review Body on the Philippines. The Philippines WT/TPR/S/261 
 Page iii 
 
 
  CONTENTS 
 
    Page 
 
SUMMARY   vii 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AJOR FEATURES OF THE ECONOMY  1 
 (2) R ECENT ECONOMIC PERFORMANCE  1 
 (3) T RADE PERFORMANCE AND INVESTMENT  4 
 (i) Trade in goods and services 4 
 (ii) Foreign direct investment 9 
 (4) O UTLOOK  10 
II. TRADE AND INVESTMENT REGIMES 12 
 (1) T RADE POLICY OBJECTIVES , LAWS AND IMPLEMENTATION  12 
 (2) T RADE AGREEMENTS AND ARRANGEMENTS  14 
 (i) Participation in the WTO 14  (ii) Regional and bilateral free trade agreements 16 
 (iii) Other agreements 19 
 (3) F
OREIGN INVESTMENT REGIME AND BUSINESS FRAMEWORK  19 
III. TRADE POLICIES AND PRACTICES BY MEASURE 25 
 (1) M EASURES DIRECTLY AFFECTING IMPORTS  25 
 (i) Customs registration, documentation, procedures, and valuation 25  (ii) Rules of origin 26 
 (iii) Tariffs, other duties, and taxes 27 
 (iv) Import prohibitions, restrictions, licensing, and quotas 37  (v) Contingency trade remedies 40 
 (vi) Standards and other technical requirements 43 
 (vii) Government procurement 46  (viii) Local-content requirements 49 
 (ix) Other measures 49 
 (2) M
EASURES DIRECTLY AFFECTING EXPORTS  50 
 (i) Registration and documentation 50 
 (ii) Export taxes 50  (iii) Minimum export prices 50 
 (iv) Export prohibitions, restrictions, and licensing 50 
 (v) Export operations of state enterprises 51  (vi) Export support 51 
 (vii) Export performance requirements 53 
 (viii) Export finance, in surance, and guarantees 53 
 (ix) Export promotion and marketing assistance 53 
 (3) M
EASURES AFFECTING PRODUCTION AND TRADE  54 
 (i) Incentives 54  (ii) Competition policy and price controls 56 
 (iii) State-trading, state-owned enterprises, and privatization 58 
 (iv) Intellectual property rights 58 WT/TPR/S/261 Trade Policy Review 
Page iv 
  
      P a g e   
IV. TRADE POLICIES BY SECTOR 65 
 (1) A GRICULTURE AND FISHERIES  65 
 (i) Agriculture 65  (ii) Fisheries 71 
 (2) M
ANUFACTURING  72 
 (3) S ERVICES  74 
 (i) Services commitments under the GATS and FTAs 74 
 (ii) Financial services 75 
 (iii) Telecommunications 82  (iv) Transport 86 
 (v) Tourism 94 
 (vi) Professional services 96 
 
REFERENCES   99 
APPENDIX TABLES  101 
 
 The Philippines WT/TPR/S/261 
 Page v 
 
 
  CHARTS 
    P a g e  
I. ECONOMIC ENVIRONMENT 
I.1 Composition of merchandise trade, 2005 and 2010 7 
I.2 Direction of merchandise trade, 2005 and 2010 8 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
III.1 Breakdown of import duty rates, 2011 28 
III.2 Tariff escalation by 2-digit ISIC industry, 2011 31 
IV. TRADE POLICIES BY SECTOR  
IV.1 Fixed-line and mobile subscriptions, 2005-10 86 
TABLES 
I. ECONOMIC ENVIRONMENT  
I.1 Selected economic indicators, 2005-11 2 
I.2 Balance of payments, 2005-10 5 
I.3 Trade in services, 2005-10 6 
I.4 Foreign direct investment, 2006-10 9 I.5 Total approved local and foreign investment by activity and country of origin, 2005-10 10 
II. TRADE AND INVESTMENT REGIMES  
II.1 Main institutions involved in trade policy formulation and implementation, 2011 12 
II.2 Philippines' involvement in WTO dispute se ttlement:  new cases, 2005 to July 2011 14 
II.3 Overview of participation in FTAs, 2011 17 II.4 Philippines' participation in investment-related agreements, November 2011 22 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
III.1 Tariff structure, 2004 and 2011 27 
III.2 Philippines' tariff summary, 2011 29 
III.3 Goods subject to a conditional duty exemption, 2011 33 
III.4 Summary analysis of the Philippines' selected preferential tariff averages, 2011 35 III.5 Prohibited imports, 2011 37 
III.6 Goods subject to regulation/import licensing 38 
III.7 Definitive safeguards measures in force, 2011 42 III.8 Laws dealing with competition, 2011 57 
III.9 Membership in international IPR convention and treaties, 2011 59 
IV. TRADE POLICIES BY SECTOR  IV.1 Agricultural production, 2010 67 
IV.2 Value of fish production, by type of fishing operation (2005-10) 71 
IV.3 Manufacturing production, 2005-10 72 IV.4 Summary of Philippines' specific commitments under the GATS and FTAs 74 WT/TPR/S/261 Trade Policy Review 
Page vi 
  
      P a g e   
 
IV.5 Philippines' banking institutions, March 2011 77 
IV.6 Market structure of insu rance companies, 2005-10 79 
IV.7 Minimum paid-up capital requ irements for existing insurance  
 and reinsurance companies, 2011 81 
IV.8 Telecommunications laws and regulations, 2011 83 IV.9 Domestic airlines:  market share and foreign equity participation, October 2011 90 
IV.10 Key characteristics of the Philippines's ASAs, 2005-11 91 
IV.11 ASEAN air services agr eements signed since 2005 92 
IV.12 Philippines' specific commitments on  sales, reservation, marketing,  
 and repair and maintenance services (modes 1-3) 93 
IV.13 Market access and investment co nditions, tourism services, 2011 95 
IV.14 Fiscal incentives offered under the 2009 Tourism Act 96 
IV.15 Specific commitments on professional services undertaken in FTAs 97 
APPENDIX TABLES 
I. ECONOMIC ENVIRONMENT  
AI.1 Merchandise exports by group of products, 2005-10 103 
AI.2 Merchandise imports by group of products, 2005-10 105 
AI.3 Merchandise exports by destination, 2005-10 107 
AI.4 Merchandise imports by origin, 2005-10 108 
II. TRADE AND INVESTMENT REGIMES  
AII.1 Notifications to the WTO, June 2005 to November 2011 109 
AII.2 Foreign investment negative list, November 2011 111 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
AIII.1 Applied MFN tariff averages by HS2 Code, 2011 113 
AIII.2 In quota and out-of quota tariff rates, 2011  116 AIII.3 Excise taxes, 2011 118 
AIII.4 Import prohibitions and restrictions on plants and plant products for importation, 2011 120 
AIII.5 Import restrictions on fruits and vegetables, 2011 121 AIII.6 Prohibited and regulated exports, 2011 123 
 The Philippines WT/TPR/S/261 
 Page vii 
 
 
  SUMMARY 
 
1. The Philippines economy has performed well since its third TPR in 2005, based on a 
relatively open trade regime.  Nonetheless, the econo my is operating below potential due to the slow 
pace of reform while some of the key constrai nts on overall growth remain (e.g. inadequate 
infrastructure, low investment, and governance i ssues).  Improved productivity is essential for the 
Philippines to compete with low-cost neighbourin g economies, and additional steps are needed to 
promote more competition, improve human capital,  eliminate limitations on foreign investment, 
reduce incentives, and reform state-owned institutions.  It is also hoped that the Government's recently 
launched public-private partners hips initiative will encourage inv estment in major infrastructure 
projects. 
2. During 2005-11, the Philippines had an annua l real GDP growth rate of 5%, moderate 
inflation (5% on average during the period), and a surp lus in its external account in part due to high 
remittances inflows (about 10% of GDP).  Growth h as been broad-based across private consumption, 
investment, and exports, and was helped by fiscal stimulus implemented in 2008 and 2011 in response 
to the global economic crisis.  Persistent fiscal defic its and the resulting large public debt continue to 
pose the greatest risk to macro-stability. 
3. The Philippines was the world's 37th largest exporter and the 29th importer of goods in 2010.  
In services trade, it ranked 27th among exporters and 36th among importers.  The Philippines' outward-
orientation makes it vulnerable to external shocks but has also contributed to the resilience of the 
economy in adapting to challenges.  Greater trade di versification would help the Philippines, since it 
relies heavily on manufactured products ( 85% of exports and 67% of imports). 
4. The Philippines continues to enc ourage investment in "preferred" areas, which are listed in 
the Investment Priority Plan (IPP).  Tax and ot her incentives, often contingent on export performance 
and Filipino ownership, are still provided in an effo rt to attract investment.  Additional incentives 
have recently been introduced, e.g. to support biofuel production and organic agriculture.  The 
authorities acknowledge the need to rationalize the in centives system and a bill is being considered in 
Congress. 
5. Measures have been taken over the review pe riod to improve the business environment but 
there remains considerable scope for improvement.  Moreover, the Philippines maintains its overall 
policy of ensuring that key sectors are effectively c ontrolled by Filipinos and remain restricted for 
foreign investors, notably agricu lture, fisheries, and a large number of services.  As a result, FDI 
inflows are low compared with other countries in the region.  While the Government has expressed 
concern, no concrete changes are foreseen to op en up these sectors to foreign investment.  
6. Foreign investment is encouraged in some sect ors, particularly manufacturing, which mainly 
takes place within export processing zones (EPZs), wh ere substantial fiscal incentives are offered.  
While this policy has supported manufacturing em ployment and exports, it adds pressure on the 
budget deficit and discourages efficiency. 
7. The Philippines ratified the Fourth Protocol to the GATS on basic telecommunications in 
2006 and the Fifth Protocol on financial services in 2011.  Its record on making notifications to the 
WTO has been solid, except in agri culture.  Over the review period the Philippines was involved in 
two WTO disputes, one as complainant and one as defendant. WT/TPR/S/261 Trade Policy Review 
Page viii 
  
  8. As a member of ASEAN, the Philippines is committed to deepening economic integration 
among members, including removing obstacles to trade and improving trade facilitation.  The Philippines, both unilaterally and through ASEAN, h as continued to pursue a policy of negotiating 
regional trade agreements (RTAs) of varyi ng scope with the focus on Asia-Pacific.  
9. Over the review period, new RTAs have entere d into force between ASEAN and:  Australia 
and New Zealand;  China (services);  India;  Japan ;  and Korea.  In addition, a bilateral agreement 
between the Philippines and Japan entered into effe ct, bringing the total number of the Philippines' 
preferential partners to 15.  Only under ASEAN h as tariff liberalization been fully implemented, and 
this is putting pressure on the non-competitive sectors of the Philippine economy, particularly sugar.  
Most of these RTAs contain services commitments, wh ich are much more extensive than those taken 
by the Philippines under the GATS.  
10. Trade policy has not undergone major changes si nce 2005;  the tariff remains the main policy 
instrument.  With the adoption of the 2007 ASE AN Harmonized Tariff Nomenclature, the Philippines' 
tariff was simplified and now comprises 8,299 lines at  the HS eight-digit level (compared with 10,688 
in 2004).  The simple average MFN applied tariff (6.4%) is 19.3 percentage points lower than the 
simple average bound rate (25.7%), giving the author ities ample scope to raise applied tariffs. Tariffs 
average 10.2% (10.3% in 2004) on agriculture (WTO definition), and 5.8% on non-agricultural products (7% in 2004).  All tariff lines, applied and bound, are ad valorem .  About 40% of tariff lines 
are unbound. 
11. On aggregate, the tariff displays mixed escalation, negative from first-stage processed 
products (average tariff rate of 6.7%), to semi-finished goods (ave rage rate of 4.9%), and positive 
from semi-finished to fully processed products (avera ge 7%).  At a more disaggregate level, positive 
tariff escalation is most pronounced in textiles and leather, followed by wood and furniture, paper and 
printing, chemicals, and non-metallic mineral produc ts, thereby providing highe r levels of effective 
protection to those industries than that reflected by the nominal rates. 
12. Customs procedures have been automated throu gh the Electronic-to-Mobile (E2M) system to 
streamline the payment and clearance processes at  the Bureau of Customs.  Under ASEAN, 
the Philippines is in the process of finalizing a "na tional single window" in order to expedite intra- 
and extra-ASEAN trade. 
13. The Philippines' import licencing system remains complex, with fees varying by product.  
Imports of some goods are prohibited and a few ve ry sensitive goods, notably rice, are subject to 
import quotas.  The rice quota was to be phased out by 2005, but the Philippines obtained a seven-
year extension (until 30 June 2012) within the WTO. 
14. National standards and technical regulations appear to follow international guidelines 
whenever possible, and the number of national sta ndards that correspond to international standards 
has increased since 2005.  SPS regulations appear to be stringent. 
15. Since 2005, the Philippines has initiated three anti-dumping investigations (13 cases during 
1999-2003), with one definitive measur e applied against clear float glass from Indonesia.  It has not 
initiated any countervailing actions since 1999.  The Philippines has seven definitive safeguard 
measures in force, and a special safeguard measure is on frozen chicken. 
16. Prohibited and regulated exports include endange red wildlife species and live animals.  Only 
plantation (non-native) logs are subject to an export tax (20% f.o.b). The Philippines WT/TPR/S/261 
 Page ix 
 
 
  17. Participation by foreigners in the government  procurement regime remains restricted, and 
seems to depend upon the source of the funds for the project and the domestic availability of the 
procured goods and services.  The Philippines is neit her a signatory nor an observer to the plurilateral 
Government Procurement Agreement.   
18. The Philippines does not have a general comp etition law, but several laws deal with 
competition.  The Department of Justice has recen tly been designated as the Competition Authority.  
Legislation on IPRs is comprehensive and steps have been taken to improve its enforcement. 
19. The Philippines' agriculture sector is dominated by small farms with low mechanization.  This 
was largely the result of a major on-going land dist ribution programme, and poses a significant barrier 
to competitiveness.  In value terms, the Philippines'  main crops are rice, banana, coconut, corn, and 
sugarcane.  While coconut oil is exported, rice, sugar, and corn are largely produced for domestic 
consumption, and a variety of measures are in place to protect and achieve self-sufficiency in these products.  These include price support for rice and corn (which has been highly costly), high tariffs, rice import quotas, as well as import and export restrictions.  Initiatives to assist agricultural producers include:  various incentives;  a new requirement that  all banking institutions (g overnment and private) 
must set aside at least 25% of their total loanable funds to agriculture and fisheries credit;  and to 
assist sugar producers, a requirement for a 10% locally  sourced bioethanol blend in gasoline, and 2% 
in diesel. 
20. The Philippines fisheries sector comprises commercial fisheries,  municipal fisheries, and 
aquaculture. Commercial fishing is allowed in waters  that are 16 km or more from the shoreline:  
foreign equity in deep-sea-fishing vessels is ca pped at 40%, and all fishermen must be Filipino 
citizens.  Imports of fresh, chilled or frozen fish  (except when imported for canning and processing) 
are allowed only when deemed "necessary", and a certif icate of necessity is required.  Fish exports 
require a permit. 
21. The Philippines' banking system was resilient in the face of the global financial crisis:  the 
major banks remained well capitalized and liquid.  Initiatives are being undertaken to encourage 
weaker rural banks to merge with stronger ones.  Fo reign participation in the banking sector is subject 
to significant restrictions:  70% of the banking syst em's assets must be held by domestic banks that 
are majority Filipino-owned.  Foreign direct inv estment in the banking sector may in practice only 
take the form of investment of up to 60% of the voting stock of an existing domestic bank.  
22. The insurance sector in the Philippines is small,  with deposits amounting to just over 1% of 
GDP.  There are no limits on foreign equity partic ipation, and foreign insurance companies may 
operate as branches, subsidiaries or joint ventures,  provided they have been ranked among the world's 
200 largest foreign companies for the past ten years.  However, new minimum paid-up capital requirements serve to keep lower value companies e ither fully or substantially owned by Filipinos.  
Reinsurance services may be obtained from abro ad upon the authorization of the Insurance 
Commission.  However, 10% of outward reinsura nce placements must be ceded to the partly 
Government-owned National Reinsurance Corporation. 
23. The legal and regulatory environment for telecomm unications remains the same as at the time 
of the Philippines previous Review.  However, th ere are a number of ICT-related Bills pending in 
Congress.  Foreign equity in telecom companies, both basic and value-added, is limited to 40%.  A Congressional franchise is required in order to provide basic telecom service.  No entity is 
permitted to have a franchise in both telecommunicati ons and broadcasting.  Foreign equity in private 
radio communications networks is  limited to 20%, and broadcas ting and TV are reserved for WT/TPR/S/261 Trade Policy Review 
Page x 
  
  Filipinos.  The fixed-line market remains domi nated by the Philippine Long Distance Telephone 
Company (PLDT); there are two main mobile provide rs.  The review period has seen a massive surge 
in cellular use, and tariffs have gone down.  However, prices for fixed and broadband services are 
relatively high. 
24. The main change to the Philippines' maritime transport sector over the review period was the 
completion of a nautical highway roll-on-roll-off tr ansport system, which allows for the continuous 
movement of cargo using land and wa ter transport.  According to th e authorities, this has reduced 
freight costs, which were reported as high in the pr evious TPR.  Ownership restrictions on maritime 
transport remain in place.  Nationally registered sh ips must be at least 60% Filipino-owned with 100% 
Filipino crew.  In addition, while there is some fl exibility in their application, other requirements 
include Government cargo reservation;  a requirement  that cabotage be provided by Philippine ships 
registered to provide domestic shipping;  and a rule that Philippine registered vessels must be 
repaired, altered, and dry docked at domestic shipyards.  The Philippines allows private ownership 
and operation of ports, although fo reign equity in port ownership is limited to 40%.  Some 
state-owned ports, including the Philippines princi pal port in Manila, are operated by private 
companies under concession agreements:  these comp anies must be at least 60% Filipino-owned.  
Customs brokers must also be Filipinos. 
25. In air transport, there has been a steady increase in passenger movements over the review 
period.  Fourteen new air services agreements have entered into force since 2005, most of which have 
mainly restrictive features.  Howe ver, in 2011, flexibility was given to negotiating entities to pursue a 
more liberal approach.  Cargo and passenger transp ort is also being liberalized within ASEAN.  
Foreign equity in domestically licenced airlines is still capped at 40%, and cabotage is restricted to 
domestic airlines.  Philippine Airlines (PAL) remain s the dominant Filipino carrier for international 
passenger transport, while the market share for domes tic services is more evenly distributed.  A major 
challenge facing the Philippines has been its dow ngrading or blacklisting on security grounds by 
the United States, EU, and ICAO.  While the recently created Civil Aviation Authority of 
the Philippines is responsible for operating most airports, private management of one secondary 
airport has been concessioned to the private sector, and another is foreseen.  Self, mutual and third-
party handling at airports are permitted. 
26. The Philippines tourism sector is considered to be central to its social and economic 
development, and the Government's objective is to double tourist arrivals by 2016.  Infrastructural 
weaknesses, particularly highways, hotels, and t ourist facilities, have been identified as the main 
bottlenecks to tourism development.  Taxes on airlin es are also considered to be a disincentive for 
long-haul carriers.  In order to promote the hotel industry, the Government enacted a Tourism Act in 
2009.  This develops the concept of the Tourism Enterprise Zone for which special incentives are 
offered, including a tax credit for locally sourced goods. 
27. The Philippines Professional Regulation Commission  (PRC) is responsible for regulating and 
licensing 46 professions, through sector-specific pr ofessional regulatory boards and the respective 
profession-specific laws.  Law, the only profession not regulated by the PRC, is the responsibility of 
the Supreme Court.  The Constitution limits the pr actice of professional services to Filipinos, except 
in cases prescribed by law, and there is flex ibility under the Labour Code and under the PRC 
Modernization Act to enable foreign professionals to practice in the Philippines.  A notable recent 
development has been the inclusion of speci fic commitments on professional services in the 
Philippines' RTAs.  Negotiations to implement these commitments have only advanced between 
ASEAN countries who have concluded framework agreements to facilitate mutual recognition 
agreements for seven professional services.