Endnotes

¹See World Trade Organization (WTO) (2005), Balisacan and Hill (2003), and Austria (2001) for a detailed account of the Philippines' trade and investment regime.

²Starting from 1981, overall nominal tariffs were reduced over a series of phases under the Tariff Reform Program. By the late 1980s, the government had implemented the Import Liberalization Program, which resulted in the reduction of regulated items from 32% to only 3% by 1996.

³The share of manufacturing value-added in gross domestic product was 26% in 1980, 22% in 2000, and 22% in 2007. The average growth thereof was 0.9% in the 1980s, 2% in the 1990s, and 4% in 2000–2007 (World Bank 2008).

⁴A trade and investment framework agreement is a prerequisite to negotiating a bilateral FTA with the US.

⁵The government's medium-term development plan states that the Philippines will continue to participate in and conclude various international trading arrangements and aim to maximize exports and investment opportunities offered through these trade agreements (NEDA 2004).

⁶The goal of the ITA is the global reduction or elimination of tariffs by some WTO members on selected electronics and information and communication technology (ICT) products. Under the ITA, the Philippines committed itself to reducing the tariff rates of some 188 ICT product lines to zero by 2000 and of 47 ICT product lines by 2005.

⁷In 2007, the Philippines won (over the PRC) a 1 billion US dollar (US$) semiconductor test and assembly plant planned by Texas Instruments. Meanwhile, Intel Corp. used to be one of the biggest exporters in the Philippines and one of the first to set up semiconductor manufacturing facilities (35 years ago).

⁸For instance, Baldwin (2007) cited less than 3% AFTA utilization in the 1990s, while Avila and Manzano (2007) cited an overall utilization rate (computed based on the amount indicated in certificates of origin over value of trade) of 15% for Philippine exporters, mostly in the transport sector.

⁹Avila and Manzano (2007) also observed that the high adoption rate of the CEPT scheme by the transport sector suggests that auto sector firms realize savings costs through AFTA. Transport firms avail themselves of CEPT arrangements for moving parts across ASEAN boundaries.

¹⁰The major privilege of membership in the new scheme is that AICO products, upon approval, enjoy preferential tariff rates of 0–5%. Other incentives include local content accreditation, where applicable, and other nontariff incentives provided by participating countries. The preferential tariff rate is also applicable to imported intermediate products and raw material inputs for the manufacture of AICO Final Products and AICO Intermediate Products. In 2006, Philippine firms entered into at least 20 AICO arrangements with Indonesia, Malaysia, and Thailand (ASEAN Secretariat 2009; Philippine Tariff Commission 2009).

¹¹Designated areas in countries that possess special economic regulations (e.g., tax exemptions).

¹²This supports the conclusion arrived at by Austria (2004) that two of AFTA's great achievements are the development of an international production base and the acceleration of extra-regional trade. AFTA has created an environment in which MNCs are freer to choose their cross-border bases and conduct their economic activities.

¹³Models with the same specification were also estimated separately for small and medium enterprises (SMEs) and large or giant firms. Results revealed that size matters for SMEs but not for large or giant firms, suggesting that because larger firms are already at a sufficient operating capacity, variation in firm size does not affect their propensity to use AFTA. In contrast, SMEs are more sensitive to variation in operational capacity (affected by the number of workers they employ).

¹⁴Firms were asked if they have in any way responded to FTAs by changing their business plans or strategies.

¹⁵See Kawai and Wignaraja (2009) for a summary of the FTA “noodle bowl” phenomenon.

¹⁶Notably, 32% of AFTA users also cited a lack of information as an issue.

¹⁷ROO refers to the set of criteria used to determine the country or customs territory of a good's origin. See Lazaro and Medalla (2006).

¹⁸The extent to which information is available varies by sector. While certain automotive parts suppliers seemed to be very conscious of ROO and/or origin certification procedures and just request their customs brokers to submit their completed origin applications for them, some electronics companies (particularly those working in EPZs) seemed unaware of origin requirements.

¹⁹The BOC conceptualized the Selectivity, Post-Audit, Advance Processing, Client Self-Assessment, and Electronic data interchange (SPACE) program as early as 1998 to implement a cargo clearance procedure. SPACE covers the five general principles underlying the progressive clearance procedure.

²⁰Singapore's TradeNet System (now expanded and renamed the TradeExchange) links multiple parties involved in external trade transactions to a single point of transaction that includes the processing of certificates of origin and import and export permits. The system enables the applicant to obtain the necessary papers within minutes rather than days or weeks. See ADB (2005b) for more information.

²¹An unpublished internal BOC report, however, reveals that exporters have begun to explore FTA preferences available through other “ASEAN plus” FTAs, such as the ASEAN-PRC and ASEAN-Korea agreements.

²²Namely, Form D (ASEAN-CEPT scheme); Form E (ASEAN-PRC FTA); Form AK (ASEAN-Korea FTA); Form JP (JPEPA); and Form AJ (ASEAN-Japan Comprehensive Economic Partnership Agreement [CEPA]). Additional forms are expected when the ASEAN-Australia-New Zealand FTA and ASEAN-India FTA are implemented.

²³While the ASEAN-Japan CEPA and JPEPA use the CTC rule, the earlier concluded ASEAN FTAs have alternative or coequal rules. This could result in some confusion or an additional burden on firms exporting to multiple markets.

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