MAKATI CITY Philippines — Filipino exporters to America received a reprieve with the U.S. government extending the duty-free export status on a number of local goods for another two years.
The generalized system of preferences is a program designed by the U.S. to promote economic growth in U.S. territories and developing nations like the Philippines. The general system of preferences was supposed to expire Dec. 31 2006 but was extended when President George W. Bush signed Dec. 20 2006 the Tax Relief and Health Care Act of 2006 which contained a rider on general system of preferences provisions.
Thomas G. Aquino senior undersecretary for the international trade group of the Philippine Department of Trade and Industry; welcomed the development but added that local exporters shouldn’t breathe easy just yet. Extension of the general system of preferences program under the new law was a unilateral action by the U.S. government he said therefore the program can be removed immediately again. He advised Filipino exporters to use the two-year window given by the U.S. government to build up their competitiveness versus other exporting countries and strengthen their ties with their American buyers.
“Considering the uncertainty as to how the GSP will evolve in the future exporters should use this opportunity to their fullest advantage. Philippine exporters concerned should continue to build on their existing competitiveness to maximize the economic opportunities in the U.S. market ” he said. Thirteen countries including the Philippines were supposed to have been stripped of duty-free export status.
Philippine products covered by the generalized system of preferences program are wiring sets raw sugar cane unmounted spectacle lenses and other imitation jewelry. In 2005 the Philippines was able to export some $1 billion worth of products to the U.S. without tariff accounting for 13% of the country’s total exports to the U.S. The U.S. is the Philippines’ top trading partner buying 20% of the latter’s total exports.
In a press statement issued in December Susan C. Schwab the U.S. ambassador and trade representative; said while the generalized system of preferences program was extended the law now allows the U.S. president to revoke competitive need limitation waivers in effect for at least five years if a generalized system of preferences program-eligible product from a specific country has an annual trade level in the previous calendar year that exceeds 150% of the annual trade cap or comprises 75% of all U.S. imports of that product. A competitive need waiver allows some products of an exporting country to enter the U.S. duty-free even though the export volume exceeds specified limits.
Nineteen countries hold a total of 83 such waivers according to the U.S. Trade Representative office. A total of 15 Philippine product lines are covered by competitive need limitation waivers some of them in effect since 1989 and include ignition wiring sets raw cane sugar baskets and bags of rattan or palm leaf cigarette lighters super-heated water boilers etc.
“The GSP program has proven to be very successful in creating U.S. trade with and development in developing countries ” Schwab said. “Congress provided new guidance to address product competitiveness when it extended the program. We will ensure that the program adapts so that it continues to assist developing countries in becoming more active participants in the global trading system.”
The U.S. Trade Representative will be issuing a Federal Register notice in late February “when full-year 2006 data are available ” that will identify those waivers that meet either of the new thresholds and thus subject to potential revocation the press statement said. Based on preliminary data however the U.S. Trade Representative cited Philippine wiring harnesses for potential revocation of its competitive need limitation waiver in effect since 1991. From January to October 2006 the U.S. imported $329 million of Philippine wiring harnesses which was way above the permitted level of $125 million in 2006 under the program’s competitive need limitation restriction. The Department of Trade and Industry said that the Philippines always exceeded the allowed level for wiring harnesses.
Aquino said the generalized system of preferences program helped widen the bilateral trade between the Philippines and the U.S. thereby boosting the economic growth by encouraging investments and generating jobs.
The U.S. Congress created the generalized system of preferences program as part of its Trade Act of 1974 to create economic opportunities in developing countries while expanding the choices of American industry and consumers. The GSP program provides duty-free treatment for 3 400 products from 133 beneficiary developing countries and territories. Least-developed beneficiary developing countries (accounting for 42 of the 133 generalized system of preferences beneficiaries) can export an additional 1 400 articles to the U.S. sans tariff under the program.
In 2006 the U.S. imported $26.7 billion of products under the generalized system of preferences program up 18% from 2004. From January to October 2006 the U.S. imported $27.2 billion in GSP-eligible products up 25.1% over generalized system of preferences imports during the same period in 2005. U.S. imports under the generalized system of preferences program comprised 1.8% of total U.S. imports from January to October 2006 up from 1.6% for the same period in 2005.
Seeing the impending removal of the generalized system of preferences program the Philippines is negotiating with the U.S. for a free trade agreement. The U.S. already has a free trade pact with Singapore and is talking with Thailand for a similar arrangement. MBJ
