MAKATI CITY Philippines — A U.S. trade official has virtually ruled out a specific free trade agreement between the U.S. and the Philippines on the garment sector and instead pushed for a trade and investment framework agreement as a step toward a wider-ranging FTA.

This developed as American businessmen in the Philippines endorsed the idea of a bilateral FTA albeit cautiously saying it would benefit the Philippines tremendously.

In a roundtable discussion with Philippine media on March 16 Ambassador Karan K. Bhatia deputy U.S. trade representative; said “A preferential agreement on garments would be very difficult politically in the U.S.” He added “Frankly we have good trade with the Philippines on garments notwithstanding the quota-free regime in China.”

Philippine garment exporters have been urging the Philippine government to press for a specific FTA with the U.S. for its sector due to fears of market loss especially to China following the scrapping of worldwide tariffs on garments in January 2005 in adherence to a World Trade Organization agreement among member-nations.

The U.S. is still the Philippines largest market for clothing apparel and last year bought over $1.73 billion (FOB) worth of Philippine made-clothing. The U.S. market accounts for about 23% of total garment exports of the Philippines. Last year’s garment exports to the U.S. were only slightly higher than the $1.16 billion recorded in 2004.

Bhatia said the Philippines should concentrate on “growing and deepening” sector specific Trade Investment Frame Work Agreement’s even without a free trade agreement. He explained that an “FTA takes on a long and rigorous process the best course of action is to continue on building and deepening the trade relationship. We need to focus on certain sectors and put in place initiatives instead of an FTA.” He added that the U.S. is interested in specific Philippine sectors such as mining and tourism which do not necessarily “require preferential access” for the Philippines.

“The Philippines could need improved regulatory framework more investments in capacity building increased promotions. The key here is to match the Philippines’ strengths with the interests of U.S. companies ” he said.

Even without an FTA Bhatia assured that U.S. businesses would still stay in the Philippines as long as the government continues its economic and fiscal reforms as well as vigorously enforce its laws protecting intellectual property rights.
“Trade and investments tend to flow when there is sound fiscal policy ” hesaid.

While he noted some improvements in the Philippine government’s war against piracy it still has a lot of work ahead in terms of prosecuting Intellectual Property Rights violators he said. On Feb. 15 the United States Trade Representative removed the Philippines from its Priority Watch List of IPR violators in recognition of the number of seizures by the government against retailers of pirated materials. The country however remains on the USTR’s Ordinary Watch List.

“The additional steps that the Philippine government should take are to further step up enforcement and prosecution of producers of counterfeit products ” he said.

Bhatia was in the Philippines to attend the Spring 2006 conference of the Asia Pacific Council of American Chambers of Commerce held at the Makati Shangri-la Hotel from March 15 to 17.

In his speech at the APCAC on March 16 he informed American representatives that “We have intensified our work under our TIFA with the Philippines. The dialogue has successfully addressed issues both large and small. For example the Philippines has lifted its ban on U.S. beef passed new IP legislation and increased coordination among its IP agencies; addressed U.S. concerns on planned increases in auto tariffs. While we continue to work on addressing issues that are high priority to U.S. companies including financial services companies and investors the dialogue has benefited both countries.”

George M. Drysdale APCAC chairman — chief executive officer of the Marsman-Drysdale Group in the Philippines — told the Journal that he personally believes an FTA will help boost economic ties between the U.S. and the Philippines.

“If you look at the ones that have already been completed like Singapore (and the U.S.) Australia or Mexico or Canada it had a huge positive impact in trade for both countries.”

He said other Asian countries pursuing FTA’s with the United States such as Thailand Malaysia and South Korea. “So a lot of countries in this area of the world that the Philippines is perhaps competitive with they’re adopting or they’ve decided it would be in their best interest. Why not do a free trade agreement with the United States?’ Why not the Philippines?”

Having been a former colony of the U.S. the Philippines he said “should get first in line” in forging an FTA with the U.S.

Drysdale conceded that not all industries from the Philippines may be able to benefit from an FTA with the U.S. “There’s gonna be some sectors better off some potentially will experience more competition but in general my personal view is free trade is helpful. And the faster the Philippines can get into that kind of environment the better for the Philippines long term. And if all your neighbors are doing it then let’s be the first not the last.”

For his part Robert Sears executive director of the American Chamber of Commerce of the Philippines Inc. said while the FTA was good in principle for the Philippines the Philippines still has a long way to go before it is thoroughly prepared for such a regime.

“It’s good but I don’t think the Philippines is ready for it considering the political (situation) the U.S. domestic politics …. My sense and from what I’ve been hearing from people is that an Asean (Association of Southeast Asian Nations) FTA (with the U.S.) might be easier…because in the States they may or may not get fast track authority again and so why not tackle Asean (FTA) as opposed to country by country (FTA) ” he said in an exclusive interview with the Journal. MBJ