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PH faces possibility of higher export costs to US

/ 05:20 AM January 01, 2020

The Philippines may have to brace for higher export costs to the United States this year in case US President Donald Trump takes away the low tariffs currently being enjoyed under Washington’s Generalized System of Preferences (GSP), according to Maybank Kim Eng Research.

“Trump may remove GSP preferences for more developing countries, including Indonesia and Philippines. In October 2019, the United States suspended $1.3 billion in trade preferences for Thailand under the GSP effective April 2020 due to the lack of progress in meeting internationally recognized worker rights,” Maybank Kim Eng analysts Chua Hak Bin, Lee Ju Ye and Linda Liu said in a Nov. 29, 2019 report tiled “Year Ahead 2020: Asean Recovery and Reconfiguration.”After India’s US GSP privileges were removed in May last year, the Philippines became the fourth-biggest beneficiary of the trade perks, after Thailand, Indonesia and Brazil.

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As of September last year, Philippine exports that enjoyed US GSP perks rose 11.9 percent year-on-year to $1.22 billion.

In 2018, $1.46 billion in Philippine-made goods entered the US with reduced tariffs, equivalent to 2.1 percent of total exports and 0.4 percent of the country’s gross domestic product (GDP).

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Last year, the US government renewed the GSP privileges being extended to developing countries such as the Philippines for another three years, or until Dec. 31, 2020.

“The US may pressure smaller Asian countries to take sides against China, including on tech (Huawei) and via free trade agreements (FTAs). Vietnam’s carriers announced that they will not work with Huawei for their 5G rollout, opting for Nokia and Ericsson from Europe. On the other hand, the Philippines, Thailand and Malaysia are open to deploying Huawei technology,” Maybank Kim Eng said.

Also, the United States “may review FTAs with countries to include clauses that pressure the signatories to choose sides, as was the case of the US-Mexico-Canada Agreement,” Maybank Kim Eng added.

The US and the Philippines had been looking into entering a bilateral FTA, with Philippine officials hopeful of negotiations starting this year. —Ben O. de Vera

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TAGS: Generalized System of Preferences (GSP), Maybank Kim Eng Research
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