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At a Glance
- Without easing the rules of origin, “an FTA might be less useful.” The EU rules of origin is difficult to comply with due to the fact that Philippines has no local textile industry to speak of.
- Young explained that the Philippine-made wearables exported to the EU are currently subject to its GSP+ (Generalized Scheme of Preferences+). This means that Philippine garment exports can enter EU duty free.
- However, these exports are still subject to a 12 percent duty because of EU’s strict rules of origin, which imposes a ceiling for value-added inputs sourced from a non-GSP beneficiary country. Young said that this rule is not always possible, especially that neighboring China is a major textile source and a non-GSP beneficiary country.
The Philippine garment industry is pushing for a waiver on the rules of origin in the proposed bilateral free trade agreement (FTA) with EU to ensure the duty free privileges would benefit Filipino wearables exporters.
Robert M. Young, president of the Foreign Buyers Association of the Philippines (FOBAP), was quoted in an industry newsletter -Just Style – in reaction to the revival of the bilateral FTA trade talks.
“While the revival of the FTA trade deal talks is welcome news, the rules of origin on textile usage for exported garments will need to be waived,” he said.
In saying this, Young explained that the Philippine-made wearables exported to the EU are currently subject to its GSP+ (Generalized Scheme of Preferences+). This means that Philippine garment exports can enter EU duty free.
However, these exports are still subject to a 12 percent duty because of EU’s strict rules of origin, which imposes a ceiling for value-added inputs sourced from a non-GSP beneficiary country. Young said that this rule is not always possible, especially that neighboring China is a major textile source and a non-GSP beneficiary country.
The European market is the Philippines’s third largest export market for Philippine wearables after the US and Japan.
Thus, he said, that without easing the rules of origin, “an FTA might be less useful.” The EU rules of origin is difficult to comply with due to the fact that Philippines has no local textile industry to speak of.
“By contrast, labor supply is not an issue, as the Philippine exports industries presently have a surplus of workforce due to factories experiencing below capacity production caused by weak global sales, especially in the garment sector,” he said.
The initial negotiations for a Philippines-EU FTA began in 2015 under former President Benigno Aquino, with a second round of talks in 2017 before stalling under his successor former President Rodrigo Duterte, who was accused of human rights violations, which precludes countries from gaining GSP+ status. — Bernie Cahiles-Magkilat
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Credit belongs to: www.mb.com.ph
