‘Brexit has little impact on exports’
Credit to Author: ANNA LEAH E. GONZALES| Date: Wed, 23 Oct 2019 16:21:59 +0000
A week before the latest deadline set for the United Kingdom to leave the European Union (EU), the Department of Trade and Industry (DTI) allayed concerns that this move, dubbed “Brexit,” would somehow put the Philippines at a trade disadvantage, saying it would have little or no effect on the country’s exports.
Trade Secretary Ramon Lopez said Brexit — a portmanteau of Britain, another name for the UK, and “exit” — won’t “have an impact, because the UK said it would keep the EU GSP+ trade concessions to the Philippines.”
He was referring to the Generalized Scheme of Preferences Plus, an expansion of the EU GSP, which the regional bloc’s executive branch, the European Commission, defines as a scheme that partially or totally “removes import duties from products coming into the EU market from vulnerable developing countries.”
It describes GSP+ as a “special incentive arrangement for sustainable development and good governance,” under which these same duties are cut to zero percent “for vulnerable low and lower-middle income countries that implement 27 international conventions related to human rights, labor rights, protection of the environment and good governance.”
The Philippines is one of eight countries that enjoy the benefits of GSP+.
A total of 6,209 Philippine products are covered under the GSP. Of this number, 2,442 have zero duty and the rest have reduced tariffs. Under GSP+, 6,274 other products are qualified for zero tariff.
These items include agri-oil products, electrical machinery, processed meat and fish, optical products, automotive parts, leather, textiles, footwear, processed vegetables, fruits, and nuts.
The Trade chief said earlier that “the retention of the Philippines’ GSP+ level preferential market access to the UK is a huge assurance for [Filipino] exporters. For products that are not covered by the GSP+, [the] Most Favored Nation (MFN) rates will apply.”
“On this front, [the country] is also actively engaged in negotiations in the WTO (World Trade Organization) for the final MFN bound rates that [the] UK will apply after Brexit to ensure that products of interest for the Philippines will not be prejudiced by any changes,” he added.
Lopez said another reason Brexit would not have a significant impact is the fact the EU is not a big market for Philippine exports.
Data from the Philippine Statistics Authority (PSA) show that East Asia is these exports’ top market, accounting for more than half — 51.4 percent or $3.21 billion — of the total as of August. Exports to members of the Association of Southeast Asian Nations accounted for 15.3 percent or $954 million and to EU member-states, 11.4 percent or $709.57 million.
Not substantial
Nicolas Antonio Mapa, senior economist at ING Bank Manila, shared Lopez’s view, saying Brexit’s impact on the real economy would mostly likely be indirect and, perhaps, not even substantial.
“The Philippines is generally less susceptible to external headwinds, given our reliance on the domestic economy for growth,” Mapa said. “That being said, on the trading side, the UK is not one of our major trading partners and the flows between the UK and the EU may not be affected by the former’s exit from the union.”
The Philippines, he added, may continue these trade relations bilaterally, with the real impact likely centered on trading and financial market stress.
For his part, an economist from the Rizal Commercial Banking Corp. (RCBC) warned that Brexit could leave the country’s leading export products to the European bloc vulnerable.
“These leading Philippine exports to the EU remain vulnerable to any slowdown in demand amid some economic uncertainties related to Brexit,” said Michael Ricafort, head of RCBC’s economics and industry research division.
He said that, based on available PSA data from January to June 2019, the biggest Philippine exports to the EU are electronics, which accounted for about 64 percent or $2.6 billion of total Philippine exports to the bloc.
Exports of machinery and transport came next at 5.8 percent or $238 million; coconut oil, 5.5 percent or $224 million; other manufactured goods, 4 percent or $165 million; and tuna, 2.8 percent or $116 million.
Ricafort also said Brexit-related uncertainties could also have an impact on the money sent home by overseas Filipino workers (OFWs).
“OFW remittances from Europe from January to August 2019 declined by 2.7 percent year-on-year to $2.7 billion, or about 14 percent of” the total, he noted.