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USTR Removes Philippines from Special Watch List; Big IPR Reforms

The Office of the United States Trade Representative (USTR) announced on Monday that it removed the Philippines from the Special 301 Watch List.

USTR created a “Priority Watch List” and a “Watch List” under the Special 301 provisions in 1989. The placement of a trading partner on the Priority Watch List or Watch List indicates that problems exist in that country or economy with respect to intellectual property rights (IPR) protection, enforcement, or market access for persons relying on intellectual property. Any trading partner placed on the list immediately becomes a subject of intense scrutiny, steadily appraised for its progress in remedying its faults.

The Philippines has been on the Watch list continuously since 1994. According to USTR, the Philippines’ government has passed legislation and regulatory reforms that have significantly improved its protection of intellectual property. A press release from the USTR stated: “Philippine authorities have also made laudable civil and administrative enforcement gains. Although significant challenges remain, the commitment of Philippine authorities and the results achieved merit this change in status. The United States will continue to engage with the Philippines to address unresolved and future challenges.”

Many experts believe that its removal from the Watch List will help the Philippines continue to raise its profile as an emerging player in the textile and apparel industry and strengthen its commercial ties with the U.S. For some time now, looking to bolster its garment manufacturing industry, the Philippines has been requesting duty free access to U.S. markets. The country is also seeking preferential treatment for some apparel goods exported to the U.S.

Gregory Domingo, Secretary of the Department of Trade and Industry in the Philippines, said that he is already in negotiation with garment factory owners regarding the establishment of manufacturing facilities in places like Samar and Leyte. The primary concern factory owners have about Domingo’s proposal is that these areas generally have minimum wages that are considerably higher than the national average. There is some discussion about the possibility that government granted subsidies to the factory owners for locating their business to these areas could make up for the hit they’ll take from higher labor costs.

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Also, The Philippines has been aggressively seeking free trade arrangements with both the U.S. and E.U. recently in an effort to rehabilitate its central garment industry, beleaguered as a result of a typhoon that ravaged it last year. The Philippines has officially applied for GSP Plus status with the E.U. The government formally announced its intent to file for the first time last August after the E.U. revised GSP criteria to emphasize the inclusion of “countries most in need.” Currently, the Philippines enjoys regular GSP, which applies to more than 6,029 products. Within that group, 2,442 products can be exported into E.U. territory completely duty free.

The U.S. is the largest foreign investor in the Philippines and one of its key trading partners. The Philippines is currently the United States’ thirty-sixth largest goods trading partner with $17.6 billion in total (two ways) goods traded during 2012. Goods exports totaled $8.1 billion; goods imports totaled $9.6 billion. The U.S. goods trade deficit with the Philippines was $1.5 billion in 2012.