The government will “actively seek” exemptions for European Union Generalized Scheme of Preferences-Plus (EU GSP+) as rules of origin requirements of the EU hampers the local garments sector’s utilization of the special incentive arrangement, according to the Philippine Development Plan 2023-2028.
“The double transformation rules of origin requirements of the European Union [EU] hampers the local garments sector’s utilization of the highly advantageous EU Generalised Scheme of Preferences+ [EU GSP+],” the PDP 2023-2028 document read.
The government said this puts the competitive position of local manufacturers at risk.
Hence, the government said it will “actively seek derogations for EU GSP+ and similar mechanisms [e.g., cumulation], pursue liberal rules of origin for products of interest, and seek inclusion of export pillars in zero tariffs product liberalization of countries’ FTAs.”
According to a document published by the European Union in November 2020, double transformation requires that two stages of production take place in a free trade area region.
Meanwhile, the same document states that under cumulation rules, contracting parties to a preferential trade agreement or beneficiary countries under the GSP schemes may source non-originating raw materials or components from specified countries and count them as originating.
Trade Secretary Alfredo E. Pascual said in October that the unilateral trade arrangement “not only strengthens the bilateral economic relations of the EU and the Philippines but it also promotes socioeconomic development in the country.”
The GSP+ allows the duty-free entry of over 6,000 products from the Philippines to the EU, on the condition that the government upholds 27 international conventions on human rights, labor, environment and climate action and good governance.
The Department of Trade and Industry (DTI) noted that the Philippines recorded its “highest utilization rate” in EU GSP+ at 76 percent.
However, the EU has been vocal in their criticism against the Philippines due to its alleged human-rights violations and suppression of freedom. Compliance with international convention on human rights, labor, environment, and good governance is a “major criteria” for a beneficiary of EU-GSP+.
The GSP+ took effect in 2014 and allowed the country to raise the value of exports to the EU from 5.3 billion euros that year to 7.77 billion euros in 2021.
In October this year, the DTI said the government is trying to negotiate for the extension of the trade privilege, which is set to expire in December 2023.
Also in October, Marites Jocson-Agoncillo, executive director of Confederation of Wearable Exporters of the Philippines (CONWEP) stressed that the wearables export sector needs “trade preferences programs” to be able to “survive competitiveness.”
She also stressed that “because with these trade preferences programs, we will be able to entice investors.”
Jocson-Agoncillo earlier said that being part of trade agreements can make the sector “vertically integrated” and will enable it to put more value in its exports to its major market.