Vietnam and Singapore are currently the only Southeast Asian countries that have a free trade agreement with the European Union. But soon, the number will go from two to three.

The Philippines and the European Union have reached a substantial agreement on a free trade deal, opening new opportunities for trade and investment between the two sides. The agreement was announced by EU Commissioner for Trade and Economic Security Maroš Šefčovič and Trade Secretary Ma. Cristina Roque following a conference call, with negotiating teams on both sides set to finalize the fine print of the deal.

The agreement is expected to mutually benefit both markets, as the deal could reduce trade barriers and improve market access for businesses on both sides, including micro, small and medium enterprises (MSMEs), farmers, manufacturers and consumers. For the Philippines, that means greater access to the EU market for locally produced goods and services, while European companies gain improved access to one of Southeast Asia's larger consumer markets. 

For the automotive industry, the potential impact is particularly interesting as European-made vehicles currently face a different tariff environment from brands benefitting from existing Philippine trade agreements. Depending on the final tariff schedules agreed upon by both parties, the automotive provisions could have a direct effect on the price and competitiveness of European cars in the Philippines.

Likewise, the benefits could also extend beyond completely built-up (CBUs) vehicles. Lower trade barriers for automotive components could make it easier for European suppliers to do business with Philippine manufacturers and distributors, while potentially opening opportunities for local suppliers to become part of European-linked supply chains. 

For car buyers, the most visible effect of this FTA could eventually be greater competition in the market. If tariffs on European vehicles and parts are reduced, European brands could have more room to compete on pricing, specifications and model availability.

However, that does not automatically mean every European car will become cheaper, since final retail prices will still depend on the agreement's tariff schedules, excise taxes, VAT, logistics costs, exchange rates and manufacturers' pricing strategies.

European Commission President Ursula von der Leyen says she is looking forward to returning to the Philippines in 2027 to sign the FTA.