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PH garment exports rising on US-China trade war

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By Bernie Cahiles-Magkilat

The country’s garment and textile export is expected to post between 10-20 percent increase this year as some orders are now being shifted from China to the Philippines to avoid the high tariffs imposed by the US on Chinese goods, including garments and textile.

Maritess Agoncillo, executive director of the Confederation of Garment Exporters of the Philippines (Congep), told reporters covering the press launch for the Philippine Garment Leather Goods Industries & Fabric Expo on the 23rd this month at the SMX Convention Center they are hoping for a surge in exports to the US, which engages in a trade war against China.

“We are looking at 10 to 20 percent increase ideally this year from last year’s $1.02 billion,” Agoncillo said noting that some of the big local garment manufacturers exporting to the US have also factories in China.

In fact, luxury bags brand Coach is expanding its existing four sourcing groups from the Philippines. One of the suppliers of Coach is Luenthai, the country’s biggest garment manufacturer with 8-10 factories mostly in Bataan for leather bags although the first factory was in Concepcion, Tarlac. Michael Kors was sourcing here in 2011-2012 while Kate Spade was here also four years ago.

This makes Coach the volume importer of luxury bags in the country with roughly $70 million to $80 million in 2009 and 2010. In 2017, their volume of importation has reached $498 million. Coach is also the largest employer in the industry. Luenthai and Suntex, which supply to Coach, employ 92,000 to 95,000 workers, roughly half of the 180,000 industry workers.

The US has remained the Philippines biggest export destination for garment, wearables and textile accounting for more than 60 percent of total.

Data from the Confederation of Wearable Exporters of the Philippines showed the US accounts for 67 percent of the total $1.022-billion apparel exports in 2017. This includes the $541 million worth of leather goods it imported in that same year. In addition, the US also accounted for 27 percent of the country’s total $198-million textile, fiber and fabric exports in 2017.

While some factories in China are slowly transferring some orders here, there are still other consideration and competitiveness issues the domestic industry is facing.

One of the major hurdles is that the Philippine exporters is the Rules of Origin in Europe because even as the country enjoys the EU GSP Plus, its textile and fabric are sourced elsewhere and are therefore slapped with higher taxes. The EU GSP Plus, however, is expected to lead to more garment and textile investments into the country.

In addition, the least developed countries enjoy zero duty when they export to the US as against the Philippines’ 33 percent duty on garment, making the Philippine garment more expensive than the LDCs. Now, the industry is seeking for the inclusion of shoes in the US GSP program.

“Blouse has a tax of 12 percent going to the US, while the suit and blazer at 33 percent if coming from the Philippines as against zero duty from LDC countries,” she pointed out. Mexico is also duty-free because of the North America Free Trade Area.

That is why, she said, the local industry is supportive of the proposed bilateral free trade agreement with the US and the Philippines.

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