THE Philippines stands to lose nearly $2 billion worth of shipments if the country loses its trade incentive from Washington, as the government hopes Democrats would set aside their critical view of President Duterte in favor of economic cooperation.
Estimates by the Department of Trade and Industry’s Export Marketing Bureau (EMB) showed the Philippines may have to cut its exports to the United States by $1.87 billion if it loses its preferential treatment. The Generalized System of Preferences (GSP) granted by the US to developing nations, including the Philippines, expired on December 31 of last year.
As such, GSP beneficiaries are waiting for the US Congress to pass a new bill that would reactivate the trade privilege for another three years.
According to the EMB, the Philippines was the fifth top beneficiary of the US GSP in 2019, and it posted a utilization rate of 74 percent of the mechanism. The GSP allows Manila to export a total of 5,057 products, or close to half of the 10,600 US tariff lines, to the US market at zero or reduced tariff rates.
Most of Philippine exports that employ the GSP are leather products, such as trunks, suit cases, vanity cases, executive cases, brief cases, school satchels and spectacle cases.
Lopez: Renew, expand
Looking forward, the EMB hopes American legislators expand the list of products authorized to use the GSP to include footwear. Trade Secretary Ramon M. Lopez himself said he expects the US Congress to renew the GSP, as well as improve the export categories under it.
“We are hopeful that the next US Congress will expand its coverage, to include footwear, in the next GSP reauthorization,” EMB said in an e-mail to the BusinessMirror. “All countries with GSP are expecting a renewal of the GSP. We hope it would be again for three years or more,” Lopez told reporters last Friday.
However, the Philippines may face a legislative challenge in its bid to have its GSP renewed on political differences between the Duterte administration and the Democratic Party.
Last year six Democratic senators appealed before the Office of the US Trade Representative (USTR) to suspend the Philippine GSP over Duterte’s human-rights record. They said extending the trade incentive in the face of extrajudicial killings under Duterte could be mistaken for condoning the bloodshed.
The Democratic Party, where US President Joseph R. Biden is a member of, controls majority of the House of Representatives and holds a split control of the Senate.
In spite of the Democratic takeover in the White House and Capitol, the Philippine government expects its US counterpart to look beyond their political disputes in these trying times. For one, Manila is trying to arrange a free trade agreement (FTA) with Washington, although negotiating a new FTAs appears to be out of Biden’s priorities as he looks to resolve domestic issues first.
Last year, bilateral trade between the Philippines and the US took a dive of almost 17 percent to $16.34 billion, from $19.63 billion in 2019.
Exports to the US slipped more than 16 percent to $9.7 billion, from $11.56 billion, while imports dropped roughly 18 percent to $6.63 billion, from $8.07 billion. According to the EMB, majority of American firms transacting with Philippine manufacturers operate below their usual capacity, as they face difficulty in sanitizing their facilities and allowing all of their workers to return.
The US is close to breaching 27 million Covid-19 cases, with close to 462,000 deaths, to lead all countries on both number of infected persons and fatalities.