Corruption barrier to trade with the Philippines – Office of U.S. Trade Representative

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By Corina Oliquino | FilAm Star Correspondent

MANILA — A new report by the Office of the U.S. Trade Representative (USTR) revealed corruption continues to be a “major headache” for the U.S.-PH trade.

According to its 2018 National Trade Report of Foreign Trade Barriers, USTR said “corruption remains a pervasive issue in the Philippines, which the U.S. intends to continue urging the country to address.”

“National and local government agencies, particularly Bureau of Customs, are beset with various corruption issues,” USTR said.

According to a report by The Philippine Star, just like its 2017 report, USTR again emphasized the concern expressed by both foreign and domestic investors about “the propensity of Philippine courts and regulators to stray beyond matters of legal interpretation into policy-making, as well as the lack of transparency in judicial and regulatory processes.”

“Investors have also raised concerns about courts being influenced by bribery and improperly issuing temporary restraining orders to impede legitimate commerce,” the USTR told The Philippine Star.

“Reports of corruption and irregularities in customs processing persist, including undue and costly delays, irregularities in the valuation process, 100-percent inspection and testing of some products, and customs officials seeking the payment of unrecorded facilitation fees,” USTR added.

U.S.-PH trade
According to USTR data, the United States and the Philippines have had a very close trade relationship dating back for more than a hundred years.

“The Philippines has bilateral and regional FTAs with many countries across the Asia Pacific, including with Australia, New Zealand, India, Japan, China, and Korea, as well as with the 10-member Association of Southeast Asian Nations. It is party to the 16-member Regional Comprehensive Economic Partnership negotiations, and is currently negotiating an FTA with the EU,” USTR said.

“U.S. goods and services trade with Philippines totaled an estimated $27.0 billion in 2016. Exports were $10.8 billion; imports were $16.2 billion. The U.S. goods and services trade deficit with Philippines was $5.4 billion in 2016,” the agency added.

According to USTR, the Philippines is the U.S.’ 31st largest goods trading partner with $18.2 billion in total (two-way) goods trade during 2016.

“Goods exports totaled $8.2 billion; goods imports totaled $10.0 billion. The U.S. goods trade deficit with Philippines was $1.8 billion in 2016,” the Agency said.

“According to the Department of Commerce, U.S. exports of Goods and Services to Philippines supported an estimated 58 thousand jobs in 2015 (latest data available) (42,000 supported by goods exports and 16,000 supported by services exports),” USTR added.

In the same report by The Philippine Star, under the leadership of President Donald Trump, the USTR said it would build upon enforcement efforts and break down foreign trade barriers for American exporters.

The new USTR report will classify foreign trade barriers into 10 different categories, which cover government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services.

“In terms of technical barriers to trade, the U.S. continues to press the Philippine government to remove unjustified requirements that treat frozen meat differently from fresh meat,” the USTR report said.

“The U.S. also seeks to ensure that the Department of Agriculture’s requirement that importers should obtain a sanitary and phyto-sanitary permit prior to shipment of any agricultural product and to transmit the permit to the exporter, will not hamper trade,” the report added.

In terms of intellectual property rights protection, USTR said U.S. rights holders have expressed concerns about the “continued availability of pirated and counterfeit goods in the Philippines, the Department of Justice’s slow investigation of IPR-related cases, and judicial inexperience in handling IPR enforcement cases, both civil and criminal.”

The USTR report also noted the significant restrictions on foreign investment in the country as a barrier to investment.

Despite its report, the USTR has recognized the Duterte government’s efforts through Order No. 16, which was issued by President Rodrigo Duterte in November 2017, directing the National Economic and Development Authority (NEDA) and member agencies to “take immediate steps to lift or ease existing restrictions on foreign participation” in certain investment areas, including certain professional services, construction, retail trade enterprises and domestic market enterprises.

“The Philippines requires government agencies to procure cloud computing services from the Government Cloud, a cloud infrastructure set up by the Department of Information and Communications Technology. These restrictions could prevent Philippine government agencies from accessing best-in-class cloud services,” the USTR report said.

“In 2017, the Land Franchising and Regulatory Board prohibited service providers from activating new drivers on their platforms and making those drivers available to provide trips. Other regulations have put maximum limits on dynamic pricing and minimum limits on driver hours. Together, these restrictions limit the value that these services are able to provide to consumers and undermine the competitiveness of these services vis-a-vis local alternatives,” the USTR report added.

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