Carbon emissions, rules of origin on PHL-EU trade talks

ISSUES on the rules of origin concerning the Philippine garments sector and carbon emission standards, among others, are expected to be covered by the talks for a free trade deal between the Philippines and the 27-member bloc European Union (EU), which is set to resume in October of this year, according to Trade Undersecretary Allan B. Gepty, the Philippines’s chief negotiator for the trade deal.

“Well definitely, we’ll have to take that up [garments sector issues] in the negotiation. Because in every negotiation, as much as possible, if it is your interest, you really have to negotiate for the most liberal rules of origin,” Gepty told reporters on Monday.

Robert Young, the trustee for Philippine Exporters Confederation, Inc.’s (Philexport) textile, yarn and fabric sector recently asked the government to build a pilot commercial-scale wearable textile factory, noting that Philippine garments exported to EU are slapped with a 12 percent or higher duty due to the 27-member bloc’s “strict” rules of origin (ROO).  

The rules imposed a ceiling for value-added inputs sourced from a non-Generalized Scheme of Preferences (GSP) beneficiary country.

Young was quoted saying, in a statement issued by the Philexport last month, that the EU prefers that the fabric to be used by the Philippines will be sourced from the country itself.

“So this is one way of saying the Philippines has to produce its own fabric,” he explained, adding, “Which as everybody knows is not possible because we do not have the textile industry in the Philippines right now to be used for these products for exports and therefore, we have to import.” 

“That will be covered in the negotiation,” Gepty stressed.

According to the World Trade Organization (WTO), Rules of origin are the “criteria needed to determine the national source of a product.” The 164-member global trade organization underscored the importance of ROO, saying this is “derived from the fact that duties and restrictions in several cases depend upon the source of imports.”  Apart from the issue on Philippine garments exports to the EU, another concern raised by some business groups pertains to  carbon emission standards.

The heads of two major business groups in the country, the Philippine Chamber of Commerce and Industry (PCCI) and the Philexport, have expressed concern over EU’s imposition of carbon emission requirements.

PCCI President Enunina Mangio said last month, “There are other areas of concern as well: for example, those that impose carbon emission standards that, for emerging economies, are barriers to attaining a higher level of growth.”

Philexport President Sergio R. Ortiz-Luis Jr. said, “I know they’re planning to do a shielding on carbon [emissions]. Personally, I don’t agree. Because we’re a very small contributor of carbon emission here in the Philippines.” The Philexport chief also noted that developing countries find it difficult to catch up on these requirements. (Full story here: https://businessmirror.com.ph/2024/03/21/biz-groups-raise-concerns-ahead-of-resumption-phl-eu-fta-talks/ )

Describing it as “one of the important elements” in the trade deal, Gepty said measures relating to environmental protection ensuring sustainability “will have to be tabled for purposes of negotiation.”

The country’s chief trade negotiator said this while the negotiating team “have yet to receive the draft text.”

“But in terms of elements, we can say that, these are the things that we should anticipate,” said Gepty.

In 2023, EU was the Philippines’s 5th largest trading partner with $16.16 billion in total trade of 8.1 percent share of Philippine total trade.  The bloc was also the Philippines’s 6th export market with $8.37 billion and 6th import supplier valued at $7.79 billion.

Currently, the Philippines’s only platform to gain preferential market access in the EU market is the EU Generalised Scheme of Preferences Plus (GSP+). While the GSP+ has been extended until December 2027, the Trade negotiator said, “the fact remains that if the Philippines will reach the threshold of the upper middle income status, and you maintain that for three consecutive years, then, of course, you will no longer be qualified as a beneficiary of the EU GSP Plus.”

“So we have to really fast-track the PH-EU FTA negotiations so that in terms of trade, particularly exports, there will be no distruptions to our stakeholders or exporters because we want to maintain, at the very least, the same level of preferential arrangement,” Gepty added.

Gepty said the negotiating teams are eyeing to start the negotiation third quarter of this year, or by October.
 

Source:Business Mirror