Many barriers continue to hamper trade with US

COMPLEX barriers continue to hamper the expansion of trade between the Philippines and the United States as American exporters still face restrictive policies and regulations that make it more difficult for them to do business here.

In the 2016 National Trade Estimate Report on Foreign Trade Barriers, the Office of the US Trade Representative said these barriers included foreign investment restrictions; pervasive corruption; the country’s sanitary and phytosanitary regulations; continued imposition of high in-quota tariffs for agricultural products and quantitative restrictions; irregularities in customs, and government procurement laws that reportedly tend to favor local firms.

Also identified by the USTR as barriers were the subsidies being provided to local firms; possible lapses in intellectual property rights (IPR) protection, and foreign equity restrictions in service-related industries such as telecommunications.

The report explained that in terms of sanitary and phytosanitary policies, the Philippines maintained a two-tier system for regulating the handling of frozen and freshly slaughtered meat for sale in local “wet” markets. Under this system, the Philippines imposes more burdensome requirements on the sale of frozen meat, which was primarily imported, than it did on the sale of freshly slaughtered meat, which was only raised domestically.

The local Department of Agriculture also required importers to obtain a permit prior to shipment of any agricultural product and to transmit the permit to the exporter. This adds costs, complicates the timing of exports and prevents the transshipment of products to the Philippines intended for other markets.

In terms of tariffs, the USTR said the Philippines continued to implement high in-quota tariffs for agricultural products under the Minimum Access Volume (MAV) system, which significantly inhibited US exports to the Philippines. Under the MAV system, the Philippines imposes a tariff rate quota ranging from 30 to 50 percent on agricultural products like sugar, corn, coffee and coffee extracts, potatoes, pork and poultry products. Sugar has the highest in-quota tariff at 50 percent, followed by rice, coffee, poultry, and potatoes at 40 percent. The in-quota tariff for corn is 35 percent, while pork and raw coffee have 30 percent.

The USTR also lamented the country’s significant restrictions on foreign investment as stated under the Foreign Investment Negative List (FINL) as well as on the ownership of land and equity in service-related sectors such as telecommunications.

Also, the local Board of Investments imposes a higher export performance requirement on foreign-owned enterprises (70 percent of production) than on Philippine-owned companies (50 percent of production) when providing incentives under the Investment Priorities Plan.

The USTR further claimed that the Philippines also provided subsidies through a wide array of fiscal incentives offered for export-oriented investment, particularly investment related to manufacturing. These incentives are available to firms located in export processing zones, free port zones and other special industrial estates registered with the Philippine Economic Zone Authority. The Philippines, however, has maintained that it did not provide export subsidies.

Reports of corruption and irregularities in customs processing persist, resulting in undue and costly delays for American exporters.

Meanwhile, government procurement laws and regulations tend to favor Philippine companies and locally produced materials and supplies.