THE PHILIPPINES stands to lose about $93.2 million worth of exports should the United Kingdom (UK) exit the European Union (EU) without a deal, with developing countries automatically losing their preferential trade status with the EU, according to a recent United Nations Conference Trade and Development (UNCTAD) report.
The report, “Brexit Implications for Developing Countries” issued this month, indicates that the Philippine losses are equivalent to 13% of total exports to the UK, according to UNCTAD.
“In the event of a no-deal Brexit, European Union preferential trade agreements with third countries will abruptly cease to apply. In such a case, United Kingdom market access conditions could take on MFN (most-favored nation) terms,” it said.
Overall, the report said repercussions of a no-deal Brexit will be “immediate” while “significant concerns” remain even for an orderly Brexit with an implementation period of nearly two years to give the UK more time to draft new policies.
Earlier, UK Trade Envoy to the Philippines and Parliament Member Richard Graham assured that the post-Brexit period will not disrupt operations of businesses taking advantage of the EU’s Generalized System of Preferences Plus (GSP+) program.
Mr. Graham said the UK will draft a framework that will replicate the trade program.
However, UNCTAD said that “trade agreements are not often easy to replicate, and negotiations can carry on for a very long time.”
Overall, the EU has about 70 trade agreements and the UK has signed continuity agreements “with relatively few countries.”
Asked if a continuity agreement is in the works between the Philippines and the UK, Angelo B. Taningco, an assistant secretary with the DTI Secretary’s Office, said both sides are “in an ongoing discussion” to draft a document that will enforce the UK’s implementation of a status quo on market access and preferential trade arrangements, in line with assurances to the Philippines by the British Embassy, adding the agreement “might be called a different name” instead of a “continuity agreement.”
“Ina-assure kami na ‘di mawawala ang mga GSP and then mag-i-increase ang mga bilateral trade relations, so tataas ‘yung market access kahit magkaroon ng worst case scenario na no-deal Brexit (We were assured we would not lose GSP and that bilateral trade would increase, and that market access would increase even in a worst-case Brexit scenario),” Mr. Taningco told BusinessWorld in Makati City on Wednesday.
Asked to comment on the UNCTAD report, Mr. Taningco said: “[The report’s estimates are] still premature in assuming a no-deal Brexit but such a scenario doesn’t seem likely.”
Philippine Exporters Confederation, Inc. (PHILEXPORT) President Sergio R. Ortiz-Luis, Jr. said he remains unsure how a no-deal Brexit will affect exporters.
“At the moment, I frankly don’t see how it will affect us. But as a matter of fact wala naman implication (there are no implications),” Mr. Ortiz-Luis said in a phone interview on Wednesday.
“It’s just a question of whether they will order. I don’t think the exporter will lose just because of Brexit. The British economy will not stop,” he added.
The report recommended affected developing trading partners to consider the extent to which the UK’s market access conditions can change their exports as well as their preferential margins — the difference between a tariff imposed on a given country and the tariff applied by their competitors.
“A reduction in preferential margins will divert trade to the advantage of foreign competitors. All things considered, it is most likely that Brexit would penalize some trading partners to the advantage of others,” it added.
The report also recommended that developing countries watch how the UK will shape its trade policy, whether it intends to reduce its MFN tariffs.
It also advised affected countries to push for an acceleration in clinching replacement agreements with the UK.
“Tariff rate quotas and rules of origin would possibly be the thorniest issues, as they would be more difficult to replicate under the same terms as existing European Union commitments,” it added.
Under the EU GSP+, the Philippines enjoys tariff-free exports of over 6,274 products to the EU on the condition that the country complies with 27 core international conventions that cover human and labor rights, environmental protection and good governance.
Franz Jessen, ambassador of the EU delegation to the Philippines, earlier said that 25% of the 7.2 billion euros’ worth of Philippine exports to EU in the 11 months to November 2018 were shipped under GSP+. — Janina C. Lim