US-EU trade spat reignites investment relocation talks

us eu trade spat reignites investment relocation talks - US-EU trade spat reignites investment relocation talks

By Jenina P. Ibañez, Reporter

THE TRADE department is positioning the Philippines as an investment destination amid brewing tension between the United States and the European Union (EU) by leveraging its tariff perks in both economies.

The World Trade Organization (WTO) has given the EU permission to impose tariffs on $4 billion worth of US products per year in retaliation against US subsidies for aircraft maker Boeing Co. The EU could be cleared to impose tariffs after it requests authorization at the Oct. 26 meeting.

The Department of Trade and Industry’s Export Marketing Bureau (DTI-EMB), in e-mailed comments, said the Philippines can gain opportunities in both economies since it can export at reduced tariffs under the US Generalized System of Preferences (GSP) and the EU Generalized Scheme of Preferences Plus (GSP+).

US-based firms, the bureau said, may move manufacturing to other countries to avoid EU tariffs.

“Certain lines of handbags are covered under the EU GSP+ which the Philippines is a beneficiary of. This makes the Philippines an attractive location for exporting to the EU of these products,” the bureau said.

US manufacturing firms will be increasingly encouraged to relocate to the Philippines, DTI-EMB Director Senen M. Perlada said in a phone interview.

“In fact that’s happening, and it’s happened now. US brands like the Coach bags, and that’s going into the EU, and the reason why is precisely because of the EU GSP+,” he said.

The Philippines has also been touted as a beneficiary of the US-China trade war, but has taken a backseat as a relocation destination to countries like Vietnam and Thailand. The local Japanese business chamber in April noted that the country is not a top destination for relocating Japanese firms due to local problems in the supply chain and raw material production.

The Board of Investments (BoI) had recently disclosed 14 leads on businesses that could possibly relocate to the Philippines.

Continued Philippine export perks to the EU are also uncertain after the European Parliament voted to ask the European Commission to remove the country’s GSP+ access, citing human rights concerns. The country can export with reduced duties under GSP+ as long as it follows a set of international human rights conventions.

Other countries that have EU GSP+ benefits include Armenia, Bolivia, Cape Verde, Kyrgyzstan, Mongolia, Pakistan, and Sri Lanka.

SUPPLY CHAIN DISRUPTION
Mr. Perlada said trade impact on the Philippine supply chain depends on taxed US exports to the EU that incorporate Philippine parts and components exports. The preliminary list of products that could be taxed include fish, fruits, ketchup, wine, handbags, road tractors, helicopters, bicycle parts, and airplanes.

The Philippines exports aircraft parts to both economies, sending 45% of the goods to the US and 21% to the EU.

“The Philippines is one of the newcomers to aerospace (global value chain). Its participation is concentrated in the manufacture and assembly of a small number of components and subassemblies in the interiors and flight controls systems and (maintenance, repair, and operations) activities,” DTI-EMB said.

Exports under “other parts of aeroplanes and helicopters” to the US last year were valued at $345 million, or around three percent of $11.6 billion in total exports to the US, government data showed.

The local aircraft parts industry, however, is not concerned about the effect of the trade tensions on Philippine exports, explaining that the bigger concern of the industry is the country’s inability to attract investments.

“I don’t think we have any problem there… we’re too small (an industry) because we gave up all our business to — Vietnam is taking most of the aerospace business,” Aerospace Industries Association of the Philippines President Dennis Chan said in a phone interview on Friday.

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