Manila Bulletin | 30 August 2006
RP proposes phased-in bilateral FTA with US
By BERNIE CAHILES-MAGKILAT
The Philippines has formally proposed to the US for a phased-in bilateral free trade agreement (FTA) starting out with the garment and textile sector in an effort to protect the country’s advantages in this sector in the US market, which accounts for over 70 percent of the country’s total garment exports.
Trade and Industry Secretary Peter B. Favila raised the Philippine proposal during a bilateral meeting with US Trade Representative, Ambassador Susan Schwab on the fringes of the 38th ASEAN Economic Ministers (AEM) Meeting held recently in Kuala Lumpur.
"I asked Ambassador Schwab to join the Philippines in considering some form of staged FTA without prejudice to other sectors’ interest," Favila said.
"You can call this progress in the sense that I have formalized our position in a bilateral talk," Favila said. The FTA on this sector was an initiative by the local garment and textile export since last year.
Both sides, however, were careful not to prejudge the proposal, especially because of the WTO principle of comprehensive coverage for FTAs, but Schwab expressed the US preference for a comprehensive FTA as she suggested that both parties should first explore other options.
"I felt the US might be more inclined towards some other arrangement even if they are not rejecting any proposal outright," said Favila. "But evidently the US understands our situation and the desire of certain sectors—like garments—to arrive at a solution to the tariff advantage of our competitors who have FTAs with them."
Favila at the AEM explained that he had instructed them to continue discussions with their counterparts.
Favila explained that sectors like garments might start off the first stage of the proposed phased-in FTA. Subsequent stages might involve the time-bound negotiation of FTA concessions for other sectors.
Under the proposal, if beyond the time allotted parties could not agree further products for liberalization, earlier-stage concessions can be dismantled.
Favila further explained to Schwab that the Philippines prefer this process because a comprehensive FTA would take a longer time and that the country’s advantages in the garment and textile in the U.S. market may be gone before the FTA could take effect.
Favila also informed Schwab that the Philippines had already sent two missions to the U.S. and the private sector had done initial groundwork for an FTA on the garment and textile sector.
The Philippines also showed its strong interest in the garment FTA when Favila signed a Memorandum of Understanding with Schwab for the Philippine Customs to conduct special inspection visits to curtail transshipments of garments from China, which the U.S. imposed higher tariffs on its garment export.
The Bureau of Customs had already seized three containers of garments from China transshipped through the Philippine ports en route to the U.S. market.
Initial figure, however, points to less than 5 percent share of "transshipped" goods to the monthly exports of $ 300 million.
The agreement may prove helpful in curtailing transshipments and other possible violations. It would be a good development for the garments sector, which has been performing laudably since the quota regime ended and now deserves all the help it can get.
The Philippine side is aiming to have an FTA on garments with the U.S. signed in 15 months or before the full lifting of quota restrictions on China takes effect by 2008.
At present, the U.S. slapped between 2 to 32 percent tariffs on Philippine garment exports or an average of 17 percent tariff and the private sector is pushing for duty-free status of its exports to its largest market, which accounts for 70 percent of the $ 2.8 billion annual exports.
Without the agreement, the industry, which now employs around 400,000 workers, expects to lose 200,000 jobs, a 20 percent immediate reduction in domestic garment business and export revenue loss of between $ 1.2 billion to $ 1.5 billion by 2007 or about half of last year’s garment exports at $ 2.8 billion.
But once the proposed agreement pushes through, this means the inflow of $ 550 million new investments into the industry and hiring of additional 100,000 employes.
Once the U.S. agrees to a phased-in FTA, this would be the first of its kind for both the U.S. and the Philippines.(BCM)