US, PHL to open talks on free-trade deal

US, PHL to open talks on free-trade deal
BusinessMirror 25 Nov 2019

WASHINGTON will begin negotiations for a free-trade agreement (FTA) with Manila next year in a move that will secure market access for Philippine exporters to the United States in the face of global trade uncertainty.

American Chamber of Commerce of the Philippines Executive Director Ebb Hinchliffe said the US government is prioritizing the conclusion of its regional trade deal with Canada and Mexico. As such, all efforts to negotiate a bilateral FTA with trading partners, including the Philippines, are suspended to make way for the North American agreement.

However, in his recent meeting with Office of the US Trade Representative (USTR) executives, Hinchliffe said he was informed negotiations for an FTA with the Philippines will begin after the US finalizes its trade deal with Canada and Mexico.

“I met with the USTR here one on one just recently in the last couple of days, and it’s true that the US-Philippines trade agreement is not imminent. The major cause to that, I don’t believe it’s the China trade war, [but] has more to do with the passing of US-Mexico-Canada Agreement, the USMCA,” Hinchliffe told reporters last week.

“I do know from USTR, I believe that I can fairly confidently say after USMCA is done, the next country that the US would be looking at would probably be the Philippines ahead of Vietnam and possibly ahead of the United Kingdom for obvious reasons,” he added.

The USMCA was projected to be ratified in either September or October, Hinchliffe said, but it is facing rough sailing in the US Congress. With the delay accounted in, he estimated the trade deal will be finished no later than December, after which the US government will begin looking into the proposed FTA with the Philippines.

The business leader argued the only challenge the trade deal between Manila and Washington could face is that it’s election season in the US next year, and “free-trade agreements are not necessarily a very popular topic to talk about.”

“There’s always these issues, but the basic agreements can get started. I would confidently state there will be a free-trade agreement between the US and the Philippines coming. I hope it would be in sometime 2020, but it could be as late as 2021. When they start the negotiations, it will take a couple of years, but the trade agreement between the US and the Philippines will not take a long time,” Hinchliffe said.

“We are common partners, we know each other very well, we know our needs and wants very well. I don’t think once these trade agreement talks begin, it should not take a very long time, unlike TPP [Trans-Pacific Partnership] that took 10 to 12 years, or the other trade agreements. This trade agreement should happen very quickly,” he added.

US-Asean Business Council Senior Vice President and Regional Managing Director Michael W. Michalak in September told the BusinessMirror the US is prioritizing the resolution of its trade conflict with China over anything else. As such, its planned trade deal with the Philippines has to take a back seat for the meantime.

Without an FTA, Trade Secretary Ramon M. Lopez said Manila will just maximize its trade perks with Washington under the Generalized System of Preferences (GSP).

“We will maintain a healthy trading relationship with the United States under the current GSP trading arrangement. Philippines will maximize usage of the program,” Lopez said in an earlier text message to the BusinessMirror.

The GSP allows the Philippines to ship a total of 5,057 products—or nearly half of the 10,600 US tariff lines—to the US at zero or reduced tariff rates.

However, the Philippines could lose this preferential treatment once it has been classified as an upper middle income by the World Bank, which the government is targeting to achieve by 2022 under the Philippine Development Plan 2017-2022. The FTA, as such, should secure exporters market access to the US even without the GSP.

Based on records from the Philippine Statistics Authority, goods trade between the Philippines and the US last year grew 7.16 percent to $18.69 billion, from $17.44 billion in 2017, making it the country’s third-largest trading partner next to China and Japan.