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EXPECT no free trade agreement (FTA) between the Philippines and the United States under the Biden administration.
Business experts and diplomats interviewed by the Business mirror He said hopes for a US-Philippines FTA should be dimmed with the election of Joseph R. Biden as president. Numerous issues, from the Covid-19 pandemic to the dispute over human rights, can prevent Asia-Pacific allies from forging a trade deal.
Michael M. Michalak, senior vice president and regional general manager for the US-Asean Business Council, said internal problems will prevent Biden’s business officials from negotiating in the early stages of his presidency.
“Biden will be concerned about internal problems for the first few months, if not longer,” he said in an email. “However, you will not be able to ignore trade, [he] it will develop a policy that, hopefully, will lead to something, like rejoining the CPTPP or another, perhaps a new grouping that is similar.
Upon taking the oath of office, President Donald J. Trump withdrew the US from the CPTPP, or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
Without the US, the CPTPP signatories are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Together, the 11 parties to the trade agreement represent around 495 million consumers and 13.5 percent of global GDP.
The American Chamber of Commerce of the Philippines (AmCham) was also pessimistic about the prospect of negotiating an FTA with Biden.
AmCham Senior Adviser John D. Forbes explained that Americans oppose their country’s entry into any new trade deals, especially in the heat of the pandemic. The contagion wiped out the jobs of millions of Americans; then it would be an “unpopular” policy to outsource labor.
“Although AmCham has long supported a bilateral FTA between the United States and the Philippines, we do not believe it will happen anytime soon,” Forbes said.
In October, the unemployment rate in the US shot up to 6.9 percent, from 3.6 percent during the same month last year, and this translated to about 11.1 million Americans. unemployed. Furthermore, the US shows no signs of containing the spread of the virus, leading the world in Covid-19 numbers with more than 10.2 million cases and approximately 240,000 deaths as of Wednesday.
International conventions
Former Tariff Commissioner George N. Manzano raised the possibility that the United States under Biden could begin to enforce the Philippines’ compliance with the conventions on human rights and labor welfare to maintain its Generalized System of Preferences (GSP) status.
However, he said this focus on human rights could be tempered by Washington’s economic and security interests in the region, particularly with the rise of China. Michalak, for his part, noted that Biden, as a Democrat, will do what Trump failed to do in his four-year term: ask trading partners to abide by international protocols to maintain his GSP status.
“With regard to human rights, I think Biden will pay more attention to those issues than Trump, but he will also pay more attention to allies and partners; How you balance those priorities will have to wait a bit while you gather your team, ”Michalak said.
In February, six Democratic senators appealed to the Office of the United States Trade Representative (USTR) to suspend the Philippine GSP over President Duterte’s human rights record. They said granting the commercial privilege against extrajudicial killings under Duterte could be mistaken for tolerating bloodshed.
The GSP allows Manila to export a total of 5,057 products, or almost half of the 10,600 US tariff lines, to Washington with low or no tariffs.
Forbes gave his word that American investors here will block any proposal in their home country to sanction the Philippines. He called on legislators on both sides to negotiate their problems and reach a compromise.
“AmCham will not support any proposal to sanction the Philippines as a country,” he said.
“Legislators who propose drastic action in the congresses of both countries often make their proposals because of their national electoral districts,” added Forbes. “Hopefully, they will be able to get a broader view of the strong bilateral relations that the two countries share.”
If there is one thing the Philippines is sure to benefit from the election of Biden it is when it reverses Trump’s policies against China and stops the trade conflict once and for all.
Forbes and Manzano explained that the Philippines failed to compensate multinationals that fled China after Trump multiplied taxes on Chinese imports, mainly on agricultural and manufactured products. Since Trump took office in 2017, the United States has increased tariffs by as much as 30 percent on Chinese goods worth $ 550 billion.
“If Chinese exports to the United States that contain components made in the Philippines increase, there will be more jobs in the Philippines,” Forbes concluded.
“The cessation of the trade war will reduce the country’s risks in Southeast Asia. Better trade between the United States and China would mean better exports for the Philippines, as the country is part of the Chinese supply chain, especially for electronic products, ”Manzano said.
Bilateral trade
According to USTR records, merchandise trade between Manila and Washington reached $ 21.4 billion last year. Shipments to the US totaled $ 12.8 billion, while imports amounted to $ 8.6 billion. As such, the Philippines maintained a goods surplus of at least $ 4 billion.
However, the capital inflows painted a different picture. Last year, U.S. investments fell about 9 percent to P11.72 billion, from P12.85 billion in 2018, according to data from the Statistics Authority of the Philippines.
In 2017 Duterte conveyed to Trump in a bilateral meeting his desire to conclude an FTA with the US, which the White House leader promised to study.
The Philippines has been trying to negotiate a trade agreement with the United States to remove tariffs on its export interests, such as clothing. The Philippines sees the US as a priority market for wearables as it tries to revive its domestic apparel manufacturing industry.
The United States applies an average MFN rate of 11.6 percent to clothing, making it the fourth-highest tariff group in the country.
On the other hand, Washington has been evaluating the possibility of reaching a trade agreement with Manila for its motor vehicle exports. It has been calling on the Philippines to lower tariff rates on finished cars and motorcycles, in particular 30 percent for passenger cars, 20 to 30 percent for freight vehicles, and 15 to 20 percent for vehicles for the transport of goods. people.
The United States has been demanding that the Philippines reduce tariffs on motor vehicles to about 5 percent, the rate applied to Japanese and Southeast Asian imports, as part of a bilateral and regional trade agreement, respectively.
Likewise, the United States has been pressuring the Philippines to open up its agricultural sector, particularly the meat industry. He has been writing letters and letters to the agriculture agency here to lift the two-tier system for cold storage, in which additional requirements are placed on the sale of frozen meat.
