"The DTI and the Garment and Textile Export Board have approved the proposal and will be working with the private sector on the bilateral negotiations as soon as possible," the official said.
At present, the US slapped between 2 to 32 percent tariffs on Philippine garment exports or an average of 17 percent tariff and the private sector is pushing for duty-free status of its exports to its largest market, which accounts for over 70 percent of the industry’s $2.8 billion annual exports.
The negotiation is expected to be completed within a year as the private sector would like the signing of the agreement be done before the full lifting of quota restrictions on China takes effect in 2008.
According to the official, the Philippine proposition is "constituency-based" wherein both parties will consider the private sector stakeholders, the US business and its consumers and the capability of the Philippine business as supplier to the US.
"But we have a very positive attitude because we are offering a unique manufacturing services along the lines of total business fulfillment," the source said.
Given that state of global supply chain and needs of the US and the capabilities of the Philippine industry, he noted, there is a strong possibility the US will agree to the Philippine proposition.
Without the agreement, the industry, which now employs around 400,000 workers, is expected to lose 200,000 jobs, a 20 percent reduction immediate reduction in domestic garment business and export revenue loss of between $1.2 billion to $1.5 billion by 2007.
But once the proposed agreement pushes through, this means the inflow of $550 million new investments into the industry and the hiring of additional 100,000 employes.
Once the US agrees with the Philippine proposal, this will be the first of its kind for both the US. and the Philippines.
The US has been known to pursue a comprehensive or full blown free trade agreement although it had implemented a socalled Qualified Industrial Zone (QIZ) model for some Middle East countries under its peace initiative in the Middle East.
The Philippines is also pursuing the implementation of similar QIZ model.
Under the proposed QIZ model, products in the areas identified as a QIZ will be allowed to enter the U.S. market at preferential tariff rates. The QIZ was authorized by the US Congress in 1996 as part of the Middle East peace process by engaging the troubled countries Israel, Egypt and the US economically instead.
In order for a QIZ article to gain duty-free entry, QIZ factories must add at least 35 percent to the value of the article.
This 35 percent minimum content figure can include costs incurred in Israel, Egypt, or the United States. By agreement between Egypt and Israel, Egypt and Israel must each contribute at least one-third (11.7 percent) of the 35 percent minimum content requirement.
The United States has approved the request of Egypt and Israel to designate three QIZs — the Greater Cairo QIZ; the Alexandria QIZ; and the Suez Canal Zone QIZ that includes an industrial area of Port Said. Until now, QIZs have been established only in Jordan.
Since 1999, thirteen QIZs have been designated in Jordan and during that period exports from Jordan to the United States grew from $31 million in 1999 to $674 million in 2003.
QIZs are Jordan’s strongest job creator. Jordan estimates that more than 35,000 jobs have been created in the QIZs. Investment in Jordan’s QIZs is currently at between $85-100 million and is expected to grow to $180 to $200 million. Similar benefits are expected to flow from the QIZs in Egypt.
