EU cuts tariffs on key PH exports to zero

MANILA, Philippines – Philippine firms will soon be able to export to Europe over 6,200 products at zero duty, after the European Union Parliament approved Thursday night (Manila time) the country’s inclusion to its new generalized scheme of preferences (GSP+).

This move will not only significantly boost investments, job generation and Philippine exports to Europe by as much as 611 million Euros or roughly P38 billion, but will also strengthen the country’s pitch as an attractive production hub in the Asean.

In a statement, the Delegation of EU to the Philippines disclosed that the decision by the European Parliament would provide duty free entry for some of the country’s most important exports, including processed fruit and foodstuffs; coconut oil; footwear; fish and textiles.

“This is very good news for the Philippines as it will bring tariffs to 0 percent for two thirds of tariff lines including strategic products that the Philippines is already exporting to the EU. This will immediately translate into savings of tens of millions of euros per year in foregone customs duties,” EU Ambassador Guy Ledoux said in a statement.

“Apart from giving a dramatic and immediate advantage to Philippine exports, the EU concession significantly improves the attractiveness of the Philippines as a destination for new agricultural and manufacturing facilities for products that will now enjoy duty free access to the EU. This gives the Philippines a comparative advantage and represents very tangible EU support to the Philippine strategy to increase exports and investments, and diversify its industry. The bottom line is more jobs for Filipinos in the Philippines,” Ledoux further explained.

The Philippines was a beneficiary to EU’s precious Generalized Scheme of Preferences (GSP). But this previous GSP program covered only 6,209 tariff lines, of which only 2,442 lines could be exported at zero duties.

Data showed that total exports to the EU that were eligible under GSP in 2013 amounted to €1.69 billion or 33 percent of total exports to the EU. Actual utilization was around 64 percent or €1.08 billion but this figure is set to rise as a result of GSP+.

According to the EU, the greatest benefit that is likely to be gained from GSP+ is the attraction of new industrial investments in sectors where relatively high tariffs are being slashed to zero under GSP+. These include established Filipino exports that are labor intensive such as pineapple juice (currently 28.5 percent); garments (currently 5-9percen t); preserved fruits (currently 6-9 percent); tuna (currently 20.5percent); fruit jams and jellies (currently 20.5 percent) and footwear (currently 11.9 percent).

Based on earlier projections by the Department of Trade and Industry, product sectors with the highest projected increases with the approval of the country’s application were animal or vegetable fats and oils (231.2 million euros); prepared foodstuffs (151.2 million euros); textiles and garments (79.7 million euros); footwear, headwear, umbrellas (28.5 million euros); and chemical products (17.1 million euros).

These projections are also expected to translate to 267,587 additional jobs both in the agriculture and manufacturing sector.

The country’s inclusion in the GSP+ scheme will be a big boost the Department of Trade and Industry’s strategy to further increase bilateral trade and investments between the Philippines and the European Union.

The expanded GSP+ scheme, which took effect in January 2014, will eliminate duties on 61 percent of the Philippine products eligible under the general GSP as it covers a total of 6,274 products, all of which are subject to zero duty.

Trade Undersecretary Adrian S. Cristobal Jr. even led a high level Philippine delegation to a meeting held in Brussels earlier this month to make that final push for the country’s GSP+ application. During the meeting, Cristobal presented the importance of GSP+ to the Philippines, citing the country’s impressive economic gains, good governance and anti-corruption reforms.

“We have the momentum for sustained economic growth that can substantially reduce poverty in the country. A critical element for sustained growth is boosting trade with the rest of the world, and the GSP+ can create over 200,000 new jobs in the agriculture and manufacturing sectors in its early years of implementation. Most of these jobs will be in rural areas outside the major cities where they are needed the most,” Cristobal had explained.

Recalling the devastation wrought by Typhoon Yolanda in the Eastern and Western Visayas last year, Cristobal further pointed out that “the EU GSP+ privilege is really a game changer for us, where hundreds of thousands of jobs in the countryside and in disaster stricken areas will be created in the short and medium term. It complements our growth strategy as well as our rehabilitation efforts in areas hard hit by typhoon Haiyan last year.”

The EU is the Philippines’ fourth largest trading partner in 2013, with total bilateral trade registered at $12.8 billion. It ranked fourth as an export market for the Philippine products, accounting for 11.56 percent of total Philippine exports.