Concessions seen needed in new proposed US garment bill

THE PHILIPPINES has to accept the fact that its benefits under a proposed trade scheme favoring its garment exports to the US will have to be cut if the measure is to have a better chance of getting approved by the new Congress there, government and private sector officials yesterday said.

But in the meantime, garment giant Luen Thai Holdings, Inc. said it has shelved plans to put up a $5-million jean factory in the country, after the previous US Congress failed to pass the preferential program before its term ended last month.

The proposed “Save our Industries Act,” first filed in Washington in 2009, would have allowed Philippine-made garment exports to enter the US duty-free as long as these used American textiles.

There were also provisions that would have reduced import duties on Philippine garments that use textiles woven from US yarns.

Competitive

This scheme was supposed to result in competitively priced apparel that are a tenth cheaper than those produced by China-based manufacturers using Chinese textiles, Rick Helfenbein, president of the Luen Thai’s American unit TellaS Ltd., told reporters in a press conference yesterday.

Backers of pending bills in the 111th US Congress, however, will have to start from scratch after the legislature’s term ended last December.

Ready for another round

“We will definitely refile [sic] the bill. The position of the government is we will certainly provide the necessary support,” Trade Undersecretary Cristino L. Panlilio said in the same briefing, noting that the state agency still has some P450 million to spend from the fund of the now-defunct Garment and Textiles Export Board.

The bill is expected to add $1.1 billion to annual export sales which have currently stagnated at $2 billion-$2.5 billion since 2006, according to estimates from the Confederation of Garment Exporters of the Philippines (CONGEP).

The trade incentive granted to the Philippines should also lure $480 million worth of investments for factories in the first two years of the law’s implementation, CONGEP had said.

‘More palatable’ proposal

“But there are some technical things in the bill [that will be changed] to make it more palatable,” said Mr. Helfenbein.

“We will probably delete three to four items,” he said, referring to provisions that would reduce tariffs for Philippine garment exports even if these do not use American textiles but at least those cloth woven from US yarn.

This should pacify American textile groups that had raised objections, Mr. Helfenbein said.

A new provision could also be added that will allow Philippine garment makers to source textiles outside the US in case there is a shortage of these raw materials, Mr. Helfenbein said.

Trade high on the agenda

“It is very clear that trade is on the agenda of the 112th Congress,” he said.

“We believe the opportunity is ripe.”

Luen Thai, which is backing the lobbying effort, has facilities here that make garments and bags for high-end brands like Ralph Lauren, Dillards, Coach and Adidas.

Timing crucial

“Timing is crucial,” Mr. Helfenbein added, noting that rising wage costs in China has prodded multinationals to considering other manufacturing sites.

Otherwise, Luen Thai’s plans to add a jean factory in the Philippines will have to stay on the back burner, Mr. Helfenbein said.

Luen Thai would have hired 2,000 workers for the planned jean factory to produce 150,000 pairs of jeans a week, he said.

“Unless we get the bill, there’s no point in putting up the denim facility,” he said. –JESSICA ANNE D. HERMOSA, Senior Reporter, Businessworld