ADVICE FROM THE EUROPEAN UNION

Trade facilitation, customs modernization drive trade and growth

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REMARKS by Ambassador Guy Ledoux of the delegation of the European Union to the Philippines on October 23 at the 40th Philippine Business Conference and Expo.

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It is a pleasure to be with you this morning on the topic of “Trade Facilitation and Customs Modernisation: Driving Trade and Growth”

Let me use this opportunity to say a few words on the strength of our commercial relations; how it can grow even stronger and why trade facilitation plays such a key role in this.

The EU and the Philippines are strong partners in trade and investment.

The Philippine economy is growing stronger, more than doubling its size in the last decade to Euro205 billion. The recent visit of President Aquino to four EU member states showed a keen interest of our leaders to increase trade predicting there is a lot more to come – and rightly so.

Remarkable growth in our trade can be noted during the first six months of 2014, where EU-PH trade increased by 21% to US$ 7 billion. More importantly, this trade is in value-added products: EU imports from the Philippines include electronics, appliances, optical and photographic instruments, and food. The EU supplies about 30% of total FDI to the Philippines, providing over 400,000 jobs. Likewise, Philippine investors have invested some €1.4 billion in the EU, a positive contribution to our economy!

We can bring our relationship to a new level
But our potential is much higher. Philippines application to GSP+ will – if approved by the European Parliament – play a big role in strengthening this relationship. It would see a full removal of tariffs on 2/3 of products exported to the EU, including products where the Philippines has a natural competitive advantage such as garments, processed fruits and fish, woven fabrics, footwear, fruit jams and jellies. Philippines ambition to embark on free trade talks could support this process even further, while Philippines’ economic reform agenda would eventually be the key decisive factor to attract more FDI and help create more jobs and welfare.

Trade facilitation and customs modernization can help achieve our ambitions
The benefits of trade facilitation are enormous and might even be more important than a further reduction of import tariffs! For example, revenue loss from inefficient border procedures is estimate to be above 5% of GDP in some countries. Implementing the trade facilitation agreement that was agreed to in Bali last year would support trade in goods by improving transparency, streamlining customs procedures and eliminating red tape. Some studies (Peterson Institute) estimate the benefits to global GDP of such an agreement to be as high as US$ 960 billion. The OECD in its turn estimated that trade cost reductions from the Agreement would be over 15% for lower middle income countries like the Philippines. These benefits would come from measures related to documentation, automation and information availability as well as other simplifications.

And indeed, in some countries like Mozambique, customs revenues increased by over 50% following a customs reform program – despite a significant cut in tariffs! In Morocco, releasing a container from the main port of Casablanca used to take 18 days in 1996 – today customs clearance takes 2 hours! But it can be even better: In Costa Rica, customs clearance fell from 6 days to 12 minutes following an overhaul of procedures! Can you imagine the equivalent port facilities expansion needed to achieve such impact!

Unfortunately, the current stalemate in the WTO to adopt the Trade Facilitation Protocol has put a delay on the adoption of the TFA and I hope the Philippines will join us in the advocacy for making this deal happen as soon as possible, (even) after a positive/negative outcome of WTO General Council on 21 October.

Let me conclude with some suggestions for today’s discussion:

First, The Philippines submitted an ambitious schedule for implementing the WTO trade facilitation agreement. As you know, the WTO – honoring its commitment that this is a development agenda – provided developing countries the opportunity to indicate which parts of the agreement they could commit to and for which parts more time or technical assistance would be needed. The Philippines came forward with a strong package. I regret that a few WTO members (one in particular) are now stalling the progress made in Bali and I hope the Philippines will chose to implement its commitments with or without the adoption of the WTO protocol. As you know the EU is ready to support with technical cooperation as we have done in the past!

Second, customs modernization and trade facilitation are not limited by the adoption of the WTO Trade Facilitation Agreement. Philippines’ work on a Customs Modernization and Tariff Act is timely and includes numerous provisions of the TFA. Congress and Senate – both present here by its Committee chairs – can do the country an enormous favour by fast-tracking this important bill, including its planned revision of procedures to harmonize and standardize, doing away with manifold import declarations, letting go of “de minimis” value for reported (and taxed!) imports and imposing revenue objectives. These objectives could still be met by such a bill as the case of Mozambique showed. The CMTA would support IPR enforcement, trade data collection, risk management (instead of full screening) linked to post-clearance audit and automation through a national single window. I know many operators are keen to see the CMTA put in place, especially those whose containers are piled up in the port right now.

Third, in addition – and this is a sensitive issue – let’s not take any measures that would go against the spirit of the Trade Facilitation Agreement. The Philippines has plans to expand Pre Shipment Inspections (Port Load Surveys) to deal with some of the pressure faced in the Ports. While I understand the reasons behind introducing PSI, alternatives should be explored that could help with some of the necessary reforms in customs and ease the port congestion. Commissioner Sevilla, I would welcome a further dialogue with you on this topic.

My wish is that more European companies find their way to your magnificent country and contribute to help create jobs and added value to your economy. Trade facilitation is the oil that makes our trade and investment machine work – let’s make this a joint effort!

Thank you.

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