Diversifying PHL exports: The US Generalized System of Preferences
Business Mirror
November 2, 2016
IN today’s marketplace of sophisticated consumers, efficient supply chains and advanced logistics, exporters are constantly searching for new opportunities to expand their businesses globally. With the recent manufacturing resurgence in the Philippines, our country is steadily establishing itself as a major exporter of quality goods to different parts of the world. Due to economies of scale and a cost-effective manufacturing environment, our major trading partners look to the Philippines as a major source of electronics components, automotive parts and processed foods.
Generalized System of Preferences (GSP) programs were established by countries, such as Australia, Canada, Japan, the European Union and the United States, to allow for reduced or zero tariff rates on selected products, when imported from developing and least-developed countries. According to the United Nations Committee on Trade and Development (Unctad), the general objectives of GSP programs are to assist developing countries “to increase their export earnings, promote their industrialization and accelerate their rates of economic growth.”
The United States GSP program was instituted on January 1, 1976, and authorized under the Trade Act of 1974. US Congress renews GSP periodically, and the current authorization of the program expires on December 31, 2017. The Philippines has been a US-GSP beneficiary since the program’s inception.
Looking at our utilization of US GSP, United States International Trade Commission (USITC) data showed US total imports from the Philippines in 2015 stood at $10.2 billion, with $1.3 billion of those imports claimed under the program. The top 10 imports from the Philippines subject to GSP treatment in 2015 were valued at $504.3 million, which would have been imposed tariffs ranging from 2 percent to 14.9 percent under the Most Favored Nation (MFN) rates.
On the one hand, Philippine exporters realize advantages over other country suppliers through this enhanced market access into the US.
On the other hand, our exporters claimed only 586 of the total 3,500 tariff lines eligible for GSP treatment, while India and Thailand claimed around 1,800 and 1,060 tariff lines, respectively. While not all GSP tariff lines are products of interest to the Philippines and would be subjected to other nontariff measures when exported to the US, there are certainly opportunities to expand our utilization. We can move toward this goal by ensuring our exporters claim GSP benefits for qualified products and making our micro, small and medium enterprises (MSMEs) aware of the opportunities under GSP. Beneficiary countries and interested parties may also petition to add products of interest into the GSP scheme, subject to an approval process by the US government.
GSP programs, such as the one provided by the US, are nonreciprocal, nondiscriminatory, and have the potential to expand the reach of Philippine products to major foreign markets, and cultivate opportunities for our exporters and MSMEs to participate on the global stage. Increasing the Philippines’s utilization of the scheme is another tool for our exporters to internationalize as the Philippines continues on its path to expand its market access through trade agreements with our economic partners.□
Raymond Batac, Foreign Trade Service Corps, Department of Trade and Industry