I have thus been following the progress of the "Save Our Industries Act" whose progress has been mixed in the American legislature. Alike nearly every other country in the world, the Philippines and the United States' textiles and garments industries have not been faring well in the face of Chinese competition, especially since the phase-out of textile quotas (the Multi-Fibre Agreement or MFA) in 2005. Go ask Brazil. Sensing an opportunity to ride the wave of Sinophobia as well as industrial survival instincts, both countries have teamed up to try and beat China at its own game by tilting the playing field via political shenanigans. What does this bill involve? Essentially, US-made fabrics and yarns sent to the Philippines for assembly (undies, t-shirts, trousers, etc.) would be able to claim duty-free re-importation back into America. From the blurb of the "Save Our Industries" website (yes, its proponents have put up an entire site). There is, unsurprisingly, a lot of buddy-buddy rhetoric involved -
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A Historical Partnership: the United States and the Philippines
• The United States and the Philippines share enduring historical and cultural ties. The Philippines, a former U.S. colony, continues to share goals and foster strong political, economic and security relationship with the United States.
• The United States maintains special preference trading relations with all its former colonies, but not the Philippines.
• The Philippines maintains a fair and balanced trading relationship with the United States: In 2008, U.S. exports to the Philippines were US $8.3 billion and the U.S. imports from the Philippines amounted to some US $8.7 billion, while the U.S. trade deficit reached as high as US $10-18 billion with other ASEAN countries.
• The program would continue this balanced, mutually beneficial trade relationship.
SUMMARY OF THE PROPOSED SAVE OUR INDUSTRIES ACT OR THE SAVE ACT
THE 809 COMPONENT:
• Under the 809 component of the program, if the eligible garment’s essential character is comprised of U.S.-made fabrics and yarns and is cut and wholly assembled in the Philippines, then it would qualify to re-enter the United States free of duty.
• In addition, if the eligible garment’s essential character is comprised of U.S. spun yarn or extruded yarn formed in the Philippines, it may re-enter the United States at 50 percent of the most favored nation (MFN) duty.
CUT & SEW RULES FOR SELECTED PRODUCTS:
• Recognizing the success of the 809 component requires a competitive Philippine sewing industry to provide U.S. retailers with a variety of products, the program would also provide duty-free benefits for a limited number of non-import sensitive apparel articles.
ENFORCEMENT:
• Ensuring strict customs enforcement and preventing transshipment of apparel articles is central to the proposed program. The Philippines continues to enforce the Memorandum of Understanding Concerning Cooperation in Trade in Textile and Apparel Goods it signed with the United States in August 2006.
• The Philippines would also establish procedures to allow the U.S. Government access to information for shipments before they reach U.S. Customs, similar to the Electronic Visa Information System (ELVIS), which had previously been in force in the Philippines.
MUTUAL BENEFITS FOR U.S. & PHILIPPINE INDUSTRIES & WORKERS
• U.S. textile and Philippine apparel manufacturers share the same challenges and risks stemming from the end of the U.S. quota system that controlled apparel imports from China until the beginning of 2009. Moreover, over the past several years both industries continued to incur substantial job losses.
• Under the SAVE Act, for the first time, U.S. textile manufacturers would have a meaningful opportunity to compete in Asia in the higher end fashion market in addition to their already established market presence with Western Hemisphere countries, which account for 75 % of U.S. fabric exports.
• The proposed program is designed to facilitate higher levels of trade in textiles and apparel between the United States and the Philippines, to enhance the commercial well being of their respective industries, and to sustain and create jobs in times of global economic hardship.
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And now for the bit I promised with the title on famed boxer / congressman / budding protectionist Manny Pacquiao. The man who's arguably the world's most famous pugilist has been approached by those championing this bill. They're betting on Manny delivering the goods Stateside where they assume he's popular, too. Boxers not being well-known for their modesty, Manny claims that he helped deliver the sizable Filipino-American vote, ensuring electoral wins for Senate Majority Leader Harry Reid and new California Governor Jerry Brown:
“[Reid] was behind 4% in the polls before I got out there,” Pacquiao told The Times on Wednesday before a workout at Wild Card Gym in Hollywood, where he’s preparing for his Nov. 13 junior-middleweight title fight against Mexico’s Antonio Margarito. “There’s a lot of Filipinos in Las Vegas.” Population figures show an estimated 30,000 Filipinos in Las Vegas, with perhaps triple that in all of Nevada. Reid defeated Tea Party candidate Sharron Angle by 40,000 votes, with three-fourths of Asians reporting at exit polls that they voted for Reid.
Pacquiao smiled at the thought of how the assistance he provided a major Washington player could benefit his country in the future. “I also helped Brown here,” Pacquiao said, referring to the governor-elect who defeated Meg Whitman by a more lopsided margin Tuesday. “I helped him campaign. I gave a message to the Filipino community to support Gov. Brown, and they did.”
In addition to recruiting Pacquiao, Philippine trade promotion authorities are spending big on US lobbyists despite taking it on the chin the last time around:
The Department of Trade and Industry (DTI) believes it has a better chance of passing its proposed "Save our Industries Act" bill, which has been refiled in the US Congress recently, as the new bill presents a more comprehensive strategy to justify its passage. "At this point, our chance is 50-50, but I believe we will improve our chances as more sponsors of the bill come in," Trade and Industry undersecretary Cristino L. Panlilio told reporters.
The proposed legislative measure was refiled recently by Senator John Ensign of Nevada. "We are still seeking for additional sponsors to help push this bill," Panlilio said. While the "Save Act" bill is a stand-alone legislative measure, Panlilio said it could still be incorporated or as a rider in other proposed trade bills [whoa, talk about the rest of the world learning dirty tricks of American politics].
In the last US Congress, the Save Act bill was principally authored by Senators Jim McDermott, Daniel Inouye, Kit Bond and Harry Reid. It also gained support from 15 representatives. This time the DTI has adopted a comprehensive approach including the bill’s champion, the extent of activities to be undertaken and a mapping operation of the local industry.
Earlier, Panlilio said that DTI has spent P60 million [about USD 1.4M] in the last two years, including that of the DTI leaders of the past administration and the new government in pushing for the passage of the bill. Panlilio said the bulk of this money went to Washington consultants who helped in the crafting of the bill, but which failed to pass in the last US Congress.
The P60 million formed part of total of P250 million that have been spent on various initiatives for the garment sector out of the P650 million industry fund, which represents the revenues generated from the fees in administering the garments export quota by the defunct Garments and Textile Export Board.
The lobby to push for the bill in the US Congress started in 2009 that resulted in the filing of the bill in June of that same year. The DTI had mounted several initiatives to lobby for the passage of the bill including tapping the Filipino-American communities in the U.S. and a viral marketing campaign that also involved Rep. Manny Pacquiao, who is again endorsing the bill. “Last year this administration conducted two missions to the U.S. for this bill, but the bulk of the expenses involved the consultancy fees for the experts that the government had to hire,” Panlilio said.
Under the Save Act bill, the Philippines will produce garments using American textile, yarns and fabrics. The finished product would then be exported to the U.S. duty-free. This bill is seen as a win-win solution to revive the ailing textile industry in the U.S. and revive the garments manufacturing of the Philippines. The passage of the Save Act is expected to revive the country’s garment industry that used to export over $3 billion and employ over 600,000 people because exports of garments to the U.S. using American yarns and fabrics would be allowed duty-free access in the U.S. market.
For those of you who are trivia buffs, IPE junkies, or textile industry followers, the Garments and Textile Export Board mentioned above was a Marcos-era creation designed to administer Philippine garments and textiles export quotas during the Multi-Fibre Agreement (MFA) era. With the lapse of MFA in 2005 under WTO strictures, it is not only developed but also developing countries who've been scrambling to contain China's exporting powerhouse.
This bill is interesting as a collaboration between a former textile oppressor (the US which largely set up the MFA) and the oppressed (the Philippines) when faced up with an even more formidable foe in China. Still, I have some simple questions I'd particularly like Philippine trade officials to answer:
- Isn't this Act a blatant violation of WTO principles of non-discrimination?
- Given its lack of American legislative success and possible WTO litigation, aren't limited Philippine trade promotion funds better spent elsewhere?
- What is the wisdom in the Philippines siding with a falling world power (the United States) and offending a rising one (China)?
Given the likely answers to these questions, I think "Save Our Industries Act" is a really bad idea. Then again, I don't set Philippine policy--but I'll bet a boxer seeking to KO Chinese imports does [!?]
UPDATE: After consulting with Simon Lester of the IELP blog, he suggests that US/Philippine attempts to include this Act under the Generalized System of Preferences (exemptions from WTO rules) is unlikely. Given that the phasing out of MFA was meant to remove such exceptions, I'd say international momentum is against this bill's champions.
UPDATE: After consulting with Simon Lester of the IELP blog, he suggests that US/Philippine attempts to include this Act under the Generalized System of Preferences (exemptions from WTO rules) is unlikely. Given that the phasing out of MFA was meant to remove such exceptions, I'd say international momentum is against this bill's champions.