F 20140506 112705 gsp waltervanhattum

The New GSP and Potential Benefits for the Philippines ECCP Exporters' Forum, 29 April 2014

Walter van Hattum EU 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.

2.

3.

4.

5.

6.

PH-EU: How are we doing?

PH–EU trade policy options GSP and changes since 1 January 2014 GSP+ and potential for the Philippines Concrete actions Q and A

EU-PH GOING, CAN BE STRONGER 18 16 14

USD, billions

12 10 8 6 4 2 0 2006

2007

2008

Japan

2009

China

2010

2011

USA

2012

EU

2013

EU 4th LARGEST EXPORT DESTINATON 12

USD, billions

10 8 6 4 2 0 2006

2007

2008 Japan

2009 USA

2010 China

2011

2012 EU

2013

EU 3rd LARGEST SOURCE OF IMPORTS 9 8

USD, billions

7 6 5 4 3 2 1 0 2006

2007

2008 China

2009 USA

2010 EU

2011

2012 Japan

2013

PH MAJOR EXPORT PRODUCTS TO EU 7

Euro, billions

6 5 4 3 2 1 2007 Agri prods

2008

2009

Electr.& Electronics

2010

2011

Transport eqpt

2012

Textiles & clothg

2013 Others

EU LARGEST INVESTOR IN PH Switzerland S. Korea 2% others 2% Australia 8% 3% China (incl HK+Macao) 8%

EU-27 30%

ASEAN 13%

USA 17%

Japan 17%

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 1.

2.

3.

4.

5.

6.

PH-EU: How are we doing?

PH–EU trade policy options GSP and changes since 1 January 2014 GSP+ and potential for the Philippines Concrete actions Q and A

PH TRADE: IS IT ENOUGH?

EU-ASEAN TRADE IN GOODS 2013 (billions of euro)

EU goods imports to ASEAN MS (€bn)

25

VN

20

MY

15

ID

SG

TH

10

PH

5 KH 0 0

5

10

15 20 25 EU goods exports to ASEAN MS (€bn)

30

35

12

EU FDI TO ASEAN 140 Singapore 120

Euro, billions

100 80 60 40 Indonesia 20

Malaysia

Thailand Philippines

0

EU – PH TRADE POLICY OPTIONS • Join forces in the multilateral system: WTO Trade Facilitation Agreement (July), but also plurilateral agreements 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: −

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

• Indonesia: − Initial scoping 15

CONTENTS 1.

2.

3.

4.

5.

6.

PH-EU: How are we doing?

PH–EU trade policy options GSP and changes since 1 January 2014 GSP+ and potential for the Philippines Concrete actions 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 noncompetitive products; none for GSP+ • More transparent and predictable for economic operators

NEW GSP 90 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 “nonsensitive”).

• 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 2,000

8,000

1,750

7,000

1,500

6,000

1,250

5,000

1,000

4,000

750

3,000

500 250 -

GSP eligible Actual GSP exports Total exports (rhs)

20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12

EURO, millions

PHL total and GSP exports to EU

2,000 1,000 -

GSP UTILISATION COULD IMPROVE 1,750 1,500

EURO, millions

1,250 1,000 750 500 250 2003

2004

2005

2006

2007 GSP eligible

2008

2009

2010

Actual GSP exports

2011

2012

IN KEY SECTORS (â‚Ź1000) 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%

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%

256,224

72,994

42,574

58%

5,114,787

1,611,894

1,075,982

67%

Machinery and mechanical appliances

Transport equipment Total

CONTENTS 1.

2.

3.

4.

5.

6.

PH-EU: How are we doing?

PH–EU trade policy options GSP and changes since 1 January 2014 GSP+ and potential for the Philippines Concrete actions 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 6%

7%

11%

49%

27% ZERO

< 5%

5% to < 10%

10% to < 20%

>= 20%

EXAMPLES OF POTENTIAL (indicative only) • 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%)

EXAMPLES OF POTENTIAL (indicative only) • 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

EXAMPLES OF POTENTIAL (indicative only) • 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 1.

2.

3.

4.

5.

6.

PH-EU: How are we doing?

PHâ&#x20AC;&#x201C;EU trade policy options GSP and changes since 1 January 2014 GSP+ and potential for the Philippines Concrete actions 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 1.

2.

3.

4.

5.

6.

PH-EU: How are we doing?

PHâ&#x20AC;&#x201C;EU trade policy options GSP and changes since 1 January 2014 GSP+ and potential for the Philippines Concrete actions Q and A