F 20140506 112705 gsp waltervanhattum

The New GSP and Potential Benefits for the

Philippines

ECCP Exporters' Forum, 29 April 2014

Walter van HattumEU Delegation Manila

MY MESSAGES

1. EU-Philippines: a strong commercial relationship, but we can take more advantage

2. Options include FTA, GSP, WTO, etc.

3. GSP and GSP+ is one means that, if approved, has a direct impact on key sectors. It is temporary and should be seen as intermediary – early preparation key to take benefits!

4. Given PH strong indicators, longer-term, domestic reforms should do the trick to attract major new FDI and trade

5. Business (you) should do your part in promoting PH to EU (and vice versa) – ECCP can help!

CONTENTS

1. PH-EU: How are we doing?

2. PH–EU trade policy options

3. GSP and changes since 1 January 2014

4. GSP+ and potential for the Philippines

5. Concrete actions

6. Q and A

EU-PH GOING, CAN BE STRONGER

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2006 2007 2008 2009 2010 2011 2012 2013

USD

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Japan China USA EU

EU 4th LARGEST EXPORT DESTINATON

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2006 2007 2008 2009 2010 2011 2012 2013

USD

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Japan USA China EU

EU 3rd LARGEST SOURCE OF IMPORTS

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9

2006 2007 2008 2009 2010 2011 2012 2013

USD

, bill

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China USA EU Japan

PH MAJOR EXPORT PRODUCTS TO EU

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3

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5

6

7

2007 2008 2009 2010 2011 2012 2013

Euro

, bill

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Agri prods Electr.& Electronics Transport eqpt Textiles & clothg Others

EU LARGEST INVESTOR IN PH

EU-27

30%

Japan

17%USA

17%

ASEAN

13%

China (incl

HK+Macao)

8%

Australia

3%

S. Korea

2%

Switzerland

2%

others

8%

STRONG GROWTH / OPPORTUNITIES

1. Services Exports + 24% (total €2.6 billion) –travel, tourism, transport, BPOs

2. Agriculture – fish +32%, Coconut Oil

3. Footwear + 98%

4. Manufacturing: electronics still 36% of overall exports

CONTENTS





5. Concrete actions

6. Q and A

PH TRADE: IS IT ENOUGH?

EU-ASEAN TRADE IN GOODS2013 (billions of euro)

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SGTH

MYVN

ID

PHKH

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0 5 10 15 20 25 30 35

EU

go

od

s i

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orts

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EA

N M

S (

€b

n)

EU goods exports to ASEAN MS (€bn)

EU FDI TO ASEAN

Singapore

IndonesiaMalaysia Thailand

Philippines

0

20

40

60

80

100

120

140

Euro

, bill

ions

EU – PH TRADE POLICY OPTIONS

• Join forces in the multilateral system: WTO Trade Facilitation Agreement (July), but also plurilateralagreements on services, ITA, or green goods or the Government Procurement Agreement � Integration

• Longer-term and linked to readiness (ambition levels): a bilateral FTA (in regional / ASEAN) context

• Shorter-term: GSP and potentially GSP+ - get ready and take more advantage! (utilisation)

• Dialogue (G-to-G and B-to-B) to discuss opportunities and regulatory issues – EU Philippines Business Network

Bilateral FTAs as building blocks ASEAN

• Singapore:

• Malaysia:

• Vietnam:

• Thailand:

• CLM:

• Indonesia:15

− launched March 2010, concluded in 2012− FTA initialled September 2013− negotiations on investment protection− launched October 2010− 7th round held April 2012− Negotiations to resume− launched June 2012− Concluding round September 2014?− launched March 2013− Fourth round last month − EBA + Myanmar Investment Protection

− Initial scoping

CONTENTS





5. Concrete actions

6. Q and A

GSP FROM 1 JANUARY 2014

• 10 year duration: predictability, transparency and stability

• To those who need it most: from 177 to 90 beneficiaries � PH to jump ranks (now #20 beneficiary � #10?)

• graduation of sectors : timely exclusion of competitive products; avoids "overshoot“ to non-competitive products; none for GSP+

• More transparent and predictable for economic operators

NEW GSP90 countries which need GSP trade preferences the most:

• 49 least developed countries under EBA

• 41 Low income' and 'lower middle income' countries

� These countries may benefit from standard GSP and/or GSP+

Partners which are no longer eligible:

• 33 Overseas countries and territories (already access—do not need GSP)

Partners which no longer benefit:

• 34 Partners which have been granted preferences through other tracks (e.g. bilateral agreements, autonomous arrangements—do not need GSP).

• 20 'High income' or 'upper middle income' partners, as listed by the World Bank

FOCUS ON NEED

• Standard GSP: just under 66% of tariff lines covered (reduction or 0%)

• GSP+: just over 66% of tariff lines covered (zero tariffs), both sensitive and non-sensitive duty-free

• Everything But Arms: 99.8% of tariff lines covered

New

• GSP: 15 more tariff lines (6-digit) under the scheme, 4 tariffs lines (8-digit) move from “sensitive” to “non-sensitive”).

• GSP+: 4 more tariff lines (6-digit) under the scheme.

• avoid that more advanced beneficiaries put additional pressure on poorer beneficiaries

Trade preferences under new GSP

• GSP: generous tariff reductions on ~ 2/3 products• Brunei, Malaysia, Thailand will probably be losing GSP treatment• Indonesia, Vietnam will remain beneficiaries

• GSP+: full removal tariffs on ~ 2/3 products• Philippines eligible and meets vulnerability criteria

• EBA: duty-free, quota-free to all products• Cambodia, Laos, Myanmar will remain beneficiaries

20

PH: MOST EXPORTS ALREADY AT 0%

PH TODAY: 20% OF EXPORTS GSP

PHL total and GSP exports to EU

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250

500

750

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1,500

1,750

2,000

2001

2002

2003

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2012

EURO, m

illio

ns

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1,000

2,000

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6,000

7,000

8,000

GSP eligible

Actual GSP exports

Total exports (rhs)

GSP UTILISATION COULD IMPROVE

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250

500

750

1,000

1,250

1,500

1,750

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

EU

RO

, mill

ions

GSP eligible Actual GSP exports

IN KEY SECTORS (€1000)

Total Imports Eligible Preferential Utilisation

Animal or vegetable fats, oils and waxes 353,844 310,310 272,584 88%

Prepared foodstuffs products 205,409 189,206 151,308 80%

Machinery and mechanical appliances 2,943,238 315,501 116,024 37%

Products of the chemical industries 123,623 104,542 101,038 97%

Textiles 220,364 208,754 80,367 39%

Optical , measuring and musical instruments, clocks 362,052 128,055 70,313 55%

Plastics and rubber 111,454 72,615 65,830 91%

Miscellaneous 84,971 55,677 43,460 78%

Base metals 57,839 49,894 43,148 87%

Transport equipment 256,224 72,994 42,574 58%

Total 5,114,787 1,611,894 1,075,982 67%

CONTENTS





5. Concrete actions

6. Q and A

GSP+ NEW

• Graduation no longer applies to GSP+• Entry

• Vulnerability – import share criterion: threshold increases from 1% to 2%

• Vulnerability – non-diversification criterion: number of sectors to cover at least 75% increases from 5 to 7 (neutral)

• No entry windows: can apply any time • New countries which can apply: Philippines, Pakistan,

Ukraine.

All eligible countries need to apply to receive GSP+, even if they are already beneficiary under the present scheme

GSP+ NEW

27 conventions (Apartheid no longer relevant and falls, UN Framework Convention on Climate Change in)

Entry• Binding commitment to ratify conventions, to accept

monitoring, and to cooperate • Commitment to accept without reservations

conventions' reporting requirements• Country has not formulated a reservation which is

prohibited by any of those conventions • No serious problems of implementation

Enhanced monitoring • More scrutiny by Council and EP on the basis of

Commission report, every 2 years

GSP+ APPLICANTS

• Applied and approved: Armenia, Bolivia, Cape Verde, Costa Rica, Ecuador, Georgia, Mongolia, Paraguay, Pakistan and Peru

• Applied and in process: El Salvador, Guatemala and Panama

• Applied and in process: The Philippines

POTENTIAL BENEFITS TO PH

• Duties on key export products could go down substantially, including for instance canned tuna, sardines, pineapple juice, fruit jams as well as garments, bicycles and footwear.

• According to DTI analysis: + 270,000 jobs; + 12% exports

• Fits into overall Trade Policy strategy of diversification and bilateral agreement(s)

• Most of all should help increase FDI

BENEFITS TO PHILIPPINES

Customs duty on PH GSP exports

49%

27%

11%

6%7%

ZERO < 5 % 5% to < 10% 10% to < 20% >= 20%

• Already at 0%: main benefit under GSP+ is the exemption from graduation

• includes electrical products, alcohol, activated carbon, optical products, tyres, tennis balls, and jewellery - Worth €560mn

• 27% OF GSP UNDER 5%, worth €300 mn; includes coconut oil and certain alcohol exports

• most Furniture (HS 9401 to 9406) have zero to minimal (1.2%) GSP duty only

• 24% of PH GSP exports pay (reduced) customs duties of 5% or more � opportunities

EXAMPLES OF POTENTIAL (indicative only)


• Over 1,600 GSP products (at CN8 level) have ‘low' ad valorem duties (5% to less than 10% under GSP)

• Average duty at 7%

• 11 % of PH GSP exports or some €120 mn

• garments: 5%-9.6%

• Preserved fruits : 6.1%-9.5%

• tobacco products: 6.4%-9.1%

• others like plant products, mixed fruits, confectionery products, biscuits, non-alcoholic beverages, nets, woven fabrics (5%-7.4%)

• 390 GSP products (at CN8 level) have ‘medium' duties (10% to less than 20% under GSP)

• average duty at 13%

• 6% of PH GSP exports or some €63 mn

• pineapple products : 14.1%-17.3%

• bicycles: 10.5%

• tobacco products: 11.6%-14.9%

• fish fillet: 14.5%

• footwear: 11.9


• 50 GSP products (at CN8 level) have 'high' ad valorem duties (20% or more even under GSP)

• average duty at 25%

• 7% of PH GSP exports or some €80 mn

• tuna: 20.5%

• sardines/bonito: 21.5%

• pineapple juice: 28.5%

• fruit jams/jellies: 20.5%


CONTENTS





5. Concrete actions

6. Q and A

CONCRETE ACTIONS

• To follow

• Discussion on Rules of Origin –Cumulation/enabling clause

• Regional Trade Agreements (RCEP, TPP, etc.)

• Countries losing GSP!

• Philippines and IUU!

CONCRETE ACTIONS

• For Governments:

• Trade and Investment Working Group

• Agri/food discussion

• Continuation of discussions on scoping (pre-FTA)

• For Industry

• Inform yourself about concrete implications GSP (already benefits) and GSP+

• Utilisation Rate

• Use of Help Desk

• Dialogue – EU Philippines Business Dialogue

CONTENTS





5. Concrete actions

6. Q and A

Documents

F 20140506 112705 gsp waltervanhattum