Footwear, garments sectors not ready for US-led TPP
Business Mirror
April 13, 2016

EXPORTERS said that it would be difficult for local manufacturers to meet the requirements of foreign buyers for footwear and garments under a free-trade agreement (FTA) in Asia Pacific, led by the United States.

Philippine Exporters Confederation Inc. (Philexport) President Sergio R. Ortiz-Luis Jr. said the World Bank may have failed to factor in a ?domestic dilemma,? when it said that local apparel and footwear exports will be affected if the Philippines will sign the Trans-Pacific Partnership (TPP) deal.

The World Bank report, titled ?East Asia and Pacific Economic Update,? noted that Philippine apparel and footwear exports could decline by 19 percent due to increased competition from TPP members.

?As far as garments and footwear are concerned, the problem is not the absence of the market but [local] production,? Ortiz-Luis said in an interview.

?We?ve been egging shuttered garments makers to increase shipments to European countries and the US, but we have difficulties meeting their requirements,? he added. Under the TPP, the World Bank said the textile and garments sector could see a relatively large increase in output and exports, owing to the high level of reductions in import tariffs and nontariff measures, coupled with the comparative advantage of many TPP members in the sector.

?For example, Vietnam?s textile and garment exports could expand by as much as 70 percent by 2030, following the reduction in import tariffs of up to 25 percent on some product categories in export markets such as the US,? the report read.

The local garments industry has been on the decline since the mid-2000s, owing to cheaper labor costs elsewhere in Asia, and the decision of the US to lift global textile quotas in 2005, allowing China?s apparel sector to flourish.

The TPP aims to reduce import tariffs to zero for between 95 and 100 percent of tariff lines of its signatories, and reduce tariffs for several products that are considered sensitive, such as agriculture products for Japan and the US, dairy for Canada, and automotive for the US.

?For nonmembers, the tariff-reduction schedules in the TPP could have potentially negative impacts, particularly in Japanese and US markets. These two markets account for about 80 percent of total GDP and 56 percent of the total population of TPP countries,? the report read.

While the government mull over the country?s membership in TPP, Ortiz-Luis said exporters are banking on the European Union?s Generalized System of Preference Plus (EU-GSP+) scheme to boost shipments.

EU-GSP+ is a preferential trade scheme being enjoyed by the Philippines since December 2014. It allows for the export of some 6,200 tariff lines to the EU at zero duty.

Locally made garments, footwear, and processed food are some of the products that were seen as having ?significant export potential? under the EU-GSP+.

Economic and Trade division chief of the European Union delegation in Manila, Walter van Hattum, earlier said Philippine textiles exports to the EU in January to September 2015 rose by 15 percent. Van Hattum said footwear exports to the EU also doubled during the period.

Despite the existence of these preferential trade schemes, the Department of Trade and Industry (DTI) said the country cannot afford to exclude itself from the TPP.

?FTAs like the TPP are more permanent and predictable. Perhaps, in the short term, we can manage because we have the GSP with the US and a preferential trade treatment with Canada for the North American market,? DTI-Export Marketing Bureau Director Senen M. Perlada said.

?But there?s no question that over the long term, we will lose competitiveness in that market if we?re not part of the TPP,? Perlada added.

The World Bank noted that the TPP is one of the biggest trade deals in history, involving 12 Pacific Rim countries that together account for about 40 percent of global economic output and 20 percent of world trade. It was signed on February 4 and will enter into force within two years. ?

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