Economic Impact of the ASEAN-China Free Trade Agreement on Philippine Fresh Banana Exports

Abstract

The study determined the economic impact of the Association of Southeast Asian Nations (ASEAN)-China Free Trade Agreement (ACFTA) on Philippine fresh banana exports covering the period 1990-2013. Results of the shift and share analysis revealed that ACFTA was not trade creating but rather diverted the trade of the Philippines from Japan to ASEAN member countries and to China. The country’s fresh banana exports to China were also not price competitive before and after the zero tariff regime in ACFTA. In terms of quality competitiveness, the Philippine fresh banana exports to China were also not competitive due to the stricter sanitary and phytosanitary (SPS) measures adopted by China for the country’s fresh banana exports. Using multiple regression analysis, the volume and value of Philippine fresh banana exports to China were significantly affected by tariff, real domestic price, trade disputes, and SPS measures. It was recommended that the Philippines should improve local production of fresh bananas, reduce marketing costs in the fresh banana chain, address trade dispute with China, improve and harmonize SPS standards, and explore other markets for fresh banana exports.