The US Generalized System of Preferences (GSP) is a trade program that allows duty-free entry of certain products from designated countries into the United States.
The program, which expired in 2020, previously covered 122 beneficiary countries, including the Philippines. Its renewal could provide significant relief to exporters, particularly in the hard goods and garment sectors.
If reauthorized, the GSP could help increase Philippine export revenues by 5% to 10% in 2025, particularly for hard goods like:
- Furniture
- Housewares
- Baskets
- Garments
Without the GSP, Philippine exporters face higher tariffs, making it harder to compete with other countries that have free trade agreements with the US.
How Important Is the US Market for Philippine Exports?
The United States accounts for 90% of the Philippines’ total exports in hard goods and garments. The remaining 10% is split between Southeast Asia and the European Union.
According to Robert Young, President of the Foreign Buyers Association of the Philippines (FOBAP) and trustee of Philexport, the loss of duty-free access under the GSP has negatively impacted exports, particularly in garments.
Without a renewed GSP or a new bilateral free trade agreement (FTA), Philippine exports could remain flat at around $900 million in 2025.
Current Status of Philippine Exports
| Export Category | Projected 2025 Export Value | Potential Growth if GSP Is Renewed |
|---|---|---|
| Hard Goods | $900 million | 5-10% increase |
| Garments | Declining due to high costs | Likely to stabilize |
The hope is that a renewed GSP or a formal FTA could restore growth and make Philippine products more competitive in the US market.
Will the US-Philippines Sign a Free Trade Agreement (FTA)?
In addition to lobbying for GSP renewal, the Philippine Department of Trade and Industry (DTI) is pushing for a bilateral free trade agreement (FTA) with the United States.
Why Is an FTA Important?
- It would provide permanent duty-free access to the US market.
- Philippine exports would not be dependent on GSP renewals.
- It could increase foreign direct investments (FDI) into the Philippines.
Ceferino Rodolfo, Undersecretary of the DTI, has stated that the Philippines is actively working with the Trump administration to pursue a new trade agreement.
However, it remains unclear if the US government will prioritize an FTA with the Philippines, as previous discussions under Trump’s first term did not materialize into concrete policies.
Why Are Hard Goods and Natural Fibers Gaining Popularity?
One sector that continues to perform well is the hard goods market, particularly products made from natural fibers like abaca and tikog (native reed).
International buyers, especially from top furniture and houseware retail stores in the US and Europe, have placed new orders worth $2 million for these products.
Why Is There a Shift Toward Natural Fiber Products?
- Sustainability: Consumers prefer eco-friendly alternatives to synthetic materials.
- Aesthetic Appeal: Natural fibers provide an organic and handcrafted look.
- Durability: Materials like abaca are stronger and longer-lasting than synthetic alternatives.
To meet demand, Philexport and FOBAP are investing in:
- Training 250 weavers in Eastern Visayas to improve product quality.
- Bridging the skills gap to enhance craftsmanship and export competitiveness.
If GSP is renewed, exports of natural fiber-based housewares could see a substantial boost.
Challenges Facing Philippine Exporters
Despite positive trends in some sectors, Philippine exporters still face key challenges:
1. High Production Costs
- Garment manufacturers are struggling to meet US buyer demands due to rising costs.
- If tariffs remain in place, it will be harder to compete with Vietnam and Bangladesh, which enjoy preferential trade agreements.
2. Uncertainty Over US Trade Policies
- The US government has yet to finalize plans for renewing the GSP.
- Negotiations for a bilateral FTA remain uncertain, despite active lobbying from the Philippines.
3. Skills Shortage in the Handicraft Industry
- Demand for hard goods made from natural fibers is growing, but a lack of skilled workers makes it difficult to fulfill large orders.
To address this, training programs for weavers and craftsmen are being implemented to ensure Philippine exports remain competitive.
Frequently Asked Questions
What is the US Generalized System of Preferences (GSP)?
The GSP is a trade program that allows duty-free entry of specific goods from eligible developing countries, including the Philippines, into the United States.
Why is the renewal of the GSP important for Philippine exporters?
The GSP’s renewal would allow Philippine exports to enter the US without tariffs, making them more competitive and increasing export revenues by up to 10%.
Has the US renewed the GSP for the Philippines?
As of now, the GSP remains expired since 2020, and discussions on its renewal are ongoing.
What products from the Philippines benefit the most from GSP?
Key export products that previously benefited from the GSP include:
- Garments
- Furniture
- Housewares
- Natural fiber products
What is the current status of the Philippines-US Free Trade Agreement (FTA)?
The Philippines is lobbying for a bilateral FTA with the US, but negotiations are still in early stages.
What alternative markets can Philippine exporters explore?
Aside from the US, Philippine exporters can target growing markets in:
- Southeast Asia (ASEAN nations)
- European Union (via the GSP+)
- Middle Eastern and Latin American markets
What is the outlook for Philippine exports in 2025?
Without a renewed GSP or FTA, exports are expected to remain flat at $900 million, with only natural fiber-based products seeing growth.
How can exporters stay competitive in the absence of the GSP?
- Focus on cost efficiency and quality improvements.
- Expand exports to new global markets.
- Invest in training skilled artisans to meet global demand for handicrafts and natural fiber products.
Conclusion
Philippine exporters are at a critical juncture, with hopes resting on the US GSP renewal or the signing of a bilateral free trade agreement. While hard goods and sustainable materials like abaca are gaining traction, the garment industry is struggling due to high production costs and trade barriers.
With 90% of Philippine exports reliant on the US, a revived GSP or new trade policies could be the key to stimulating economic growth and securing more international orders. Until then, exporters must adapt to market trends, enhance craftsmanship, and explore new trade opportunities.
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Aanchal is a passionate writer with a keen interest in storytelling, content creation, and creative expression. She enjoys exploring diverse topics and crafting engaging narratives that captivate readers.
