is the subject of my Trade Tripper column in the recent Friday-Saturday issue of BusinessWorld:
Last 31 July 2013, something significant passed
by with nary a whimper from our part of the world. While we were so
worked up on a pork barrel scam that has yet to see evidence actually
being presented in a court of law and a national basketball team that
ended up with the silver, the US GSP -- that actually meant billions of
dollars for the country -- expired.
As readers of this column will have known, the GSP (or the
Generalized System of Preferences) serves as an exemption from the WTO
obligation of mfn (or “most favored nation”) by giving lower tariffs for
poorer countries (usually those which are classified as “least
developed countries”). The three biggest providers of the GSP are the
US, Japan, and the EU. And, as stated above, the US GSP expired as of
the first minute of this month, with the prospects of a renewal as
concrete as US President Obama’s foreign policy.
According to the US government Web site, the US remains “among the
Philippines’ top trading partners, and it traditionally has been the
Philippines’ largest foreign investor. The Philippines has been among
the largest beneficiaries of the Generalized System of Preferences
program for developing countries, which provides preferential duty-free
access to the US market. Key exports to the United States are
semiconductor devices and computer peripherals, automobile parts,
electric machinery, textiles and garments, wheat and animal feeds, and
coconut oil. In addition to other goods, the Philippines imports raw and
semi-processed materials for the manufacture of semiconductors,
electronics and electrical machinery, transport equipment, and cereals
and cereal preparations.”
When Deputy US Trade Representative, Ambassador Demetrios Marantis,
visited Manila last February, he declared that the “US-Philippines trade
relationship is incredibly important to us. The Obama administration’s
goal is to strengthen and improve our trading relationship, not only to
enhance our nations’ prosperity.” Which makes all the more the
Philippines’ difficulties in getting into the TPP and now the GSP’s
passing harder to comprehend.
Note that to qualify for GSP benefits means having to conform to certain
US desires. As stated by the Coalition for GSP, a “developing country
is not eligible for GSP benefits if:
• It is a country dominated or controlled by international communism (e.g., China);
• It is a member of the European Union;
• It is part of a commodity cartel that limits international supply or
raises prices to “an unreasonable level” and that causes “serious
disruption” of the world economy;
• It has seized property of US citizens or corporations without just compensation;
• It aids or abets any individual or group that has committed an act of international terrorism;
• It is not taking steps to afford internationally recognized worker rights to workers; and
• It has not implemented its commitments to eliminate the worst forms of child labor.”
Unfortunately, even before the GSP expired, the Philippines’ status as a
beneficiary was already running into difficulties due to allegations of
worker rights’ violations. Back in 2007, the International Labor Rights
Forum filed a petition against the Philippines questioning the
country’s designation as a beneficiary under the US Trade Act of 1974.
The ILRF accused the Philippine government of failing “to take steps to
afford its workers ‘internationally recognized worker rights’ as
required under” US law, including claims that “labor leaders and
organizers in the Philippines are subject to widespread, systematic
abuses, including murder, disappearances, torture, violence,
intimidation harassment, and arbitrary arrests. Furthermore, the
Philippine government continues to implement labor laws and regulations
intended to deprive workers of their rights to organize.”
Whatever the merits of that complaint, the foregoing is highly
unfortunate as the Philippines (judging by the US Census data) exports
around $1.2 billion to the US, amounting to almost 13% of total imports
among US GSP beneficiary countries, and with an estimated tariff savings
(translation: lower selling prices for Philippine products and hence
greater export competitiveness) of $48.6 million.
There were supposedly hearings (as well as deadlines for submissions)
held last March and April for the Philippines to address its labor
issues concerns with the GSP Program of the Office of the United States
Trade Representative. The outcome of those hearings is still awaited. A
transcript of the hearings should be available at <http://www.regulations.gov>, while the GSP regulations can be seen at <http://www.ustr.gov/trade-topics/trade-development/preference-programs/generalized-system-preference-gsp/gsp-program-inf>.
The loss of the GSP is certainly lamentable. It deprived the Philippines
an additional path for competitiveness growth, all the more
disconcerting when one considers that African or Caribbean exports have
the advantage of the African Growth & Opportunity Act or the
Caribbean Basin Initiative (which allows their products to continue
entering the US duty free).
All in all, the list of challenges facing Philippine trade is
unquestionably growing. But the supremely asinine thing is this: worse
than an ill-conceived US trade policy is an ill-conceived trade policy
halfheartedly carried out by the US. For a country presumably wanting to
maintain its sole superpower status, such flip-flopping is unbecoming.
