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The Southern India Mills’ Association

Committed to Foster the Growth of the Textile Industry

Free-trade pact with US key to revival of local garments industry–trade chief

What used to be a vibrant local garments industry could return to its heyday if the Philippines could be able secure a free-trade agreement (FTA) with the United States, the country’s trade chief said on Thursday.
At the sidelines of the 1st Philippine Garment, Leather Goods Industries and Fabric Expo, Trade Secretary Ramon M. Lopez said one reason the Philippines is keen for an FTA with the US is to revive the local garments industry. He argued a bilateral trade agreement with the United States will be critical in bringing the labor-intensive industry back to activity.
“Hopefully, [we can revive the garments industry] with the potential FTA with the US. We used to be one of the biggest exporters of garments in the world. We supply the US, but we lost that [a long time ago]. Hopefully, we can bring [it] back with an FTA,” Lopez said in a mix of English and Filipino.
The garments and textile export sector used to be valued at $3 billion and was considered a sunrise industry back in the 1990s, according to a news release by the Board of Investments (BOI). It was heavily relyiant on the Multi-Fiber Agreement (MFA), which allows clothing makers to export with preferential rates to developed countries.
“Our garments industry used to be one of the top-performing sectors both locally and internationally. But, with the challenges brought by the end of the MFA, which grants preferential tariffs to the country’s exports of garments and textiles, we saw a decline in the sector’s general performance,” Trade Undersecretary and BOI Managing Head Ceferino S. Rodolfo Jr. said.
The MFA prescribed quota allocations in identified garments and textiles that are for export to developed economies from developing nations, including the Philippines, India and Vietnam.
However, the industry’s dependence on the MFA ended in 1995 after it was replaced by the Agreement on Textiles and Clothing, which revoked numerous provisions of the MFA. This developed to the full adoption of the General Agreement on Tariffs and Trade and put the quota system to a conclusion in 2005.
Lopez wants FTA talks with the US to begin the soonest possible, as he is keen to bargain for the elimination of tariffs on garments. Clothing is one product group that Washington still slaps with high import duty. Last year it imposed an average most favored nation rate of 11.6 percent on clothing, according to data from the World Trade Organization. It is also one of the four remaining product groups the United States still taxes at an average double-digit tariff, aside from beverages and tobacco, dairy products and sugars and confectionery.
The BOI is currently in the process of helping garment and textile makers rise again, following the string of work force downsizing and factory closures they have to face when the MFA was terminated.
“We focus on securing market access in key export markets, such as Japan, Europe and the United States, to FTAs and preferential trade agreements, including the Generalized System of Preferences [GSP] and the GSP+,” Rodolfo said.
The BOI is also drawing up a road map for the industry, targeted to be released by the end of this year, to chart its growth prospect based on assessment of its present condition, economic performance and challenges. The agency has likewise conducted six focus group discussions with garment makers, other government units and national organizations since December of last year.