JPEPA: Para Saan? Para Kanino?
The Japan-Philippines Economic Partnership Agreement or JPEPA is by far the most comprehensive bilateral economic agreement that the country has entered into since the RP-US Parity Agreement of 1946. It combines a bilateral investment treaty (BIT) and a bilateral free trade agreement (BFTA) on goods (manufacturing, agriculture and fisheries) and services. It also has provisions on intellectual property rights, movement of natural persons, mutual recognition and bilateral cooperation. Further, it covers the so-called Singapore issues: trade facilitation, government procurement and competition policy.
As the country’s first comprehensive bilateral in the new millennium, JPEPA is seen as a template for other BFTAs and BITs which are now placed on the Philippine trade negotiating table. But is it a good template? Is it a sound compass to national development? Will it redound to the nation’s best interests?
We, at the Fair Trade Alliance (FairTrade), are not convinced that the JPEPA is a good template for a productive, balanced and win-win trade and economic partnership between two countries. A closer scrutiny of the 1,000-page partnership text shows that there are imbalances which need to be corrected.
First, the agreement liberalizes trade in goods in a one-sided way (See tables 1 and 2). Under the agreement, the Philippines will liberalize 98 per cent of its 5,900+ tariff lines (upon entry into force of JPEPA and under a staged reduction phase). The exclusion consists of only six (6) tariff lines covering rice and different salts (under the chapter of mineral products) which is 0.10 per cent of total tariff lines.
Japan, on the other hand, will eliminate tariffs on 90 per cent of their 9300+ tariff lines, also upon entry into force and under a staged reduction while three per cent of their tariff lines are under renegotiations and a tariff-rate quota. Moreover, the Japanese side, in excluding 651 tariff lines, sought to protect their most sensitive sectors like fisheries (tuna and mackerel), leather products, and agricultural products (rice and leguminous vegetables),). This is surprising because as a developed country, with less economic vulnerabilities, Japan should have a shorter list of excluded, especially on products involving food and livelihood security. It is even Japan, not the Philippines, who reasoned that they cannot open up their agriculture and fishery because of the multi-functionality of these sectors such as its role in fostering food and livelihood security in their country.
JPEPA has managed to maintain - and expand a bit — the existing market access to Japan for Philippine agricultural products such as bananas, pineapples, tuna, crustaceans, chicken, and muscovado sugar. Theoretically, gaining market access is a welcome development; however, translating this into ‘actual’ market access for our products, which have to pass the bureaucratic sanitary and phytosanitary standards of Japan, is an entirely different matter. This is why, the projected increase in agricultural exports to Japan because of JPEPA is still an uncertain proposition.
Further, our negotiators also claim that Japanese agricultural machineries and inputs such as fertilizer will come to the Philippines duty free to provide the needed relief to farmers. But these farming inputs have already been subjected to zero duties under the Agricultural Fisheries and Modernization Act (AFMA) of the l990s.
On the other side of the ledger, the cement, textile, footwear, steel and iron industries will be completely liberalized at the expense of some of our local producers. In fact, the SteelCorp, PhilSteel, and Global Steel have pointed out that the tariff rate quota and the preferential treatment for Japanese steel imports will produce dire consequences to our steel manufacturers and will run contrary to the mandate of the Iron and Steel Industry Act. What is also troublesome is that JPEPA encourages trade in used clothing and automotive, or ukay-ukay, which has contributed to the further underdevelopment of the economy. While most inputs for electronics manufacturing have been lowered down, this is not useful because most of the Japanese assembling companies are located in export processing zones and are already enjoying duty-free importation of their inputs
As a sweetener, Japan offers to open its doors for our nurses and caregivers. However, Japan will only allow a maximum of 1000 of these health workers in the initial two years of the agreement. Moreover, there are serious obstacles. Until our nurses are able to pass the Japanese nursing exam in Nihonggo, they will be considered as trainees, under the supervision of the Japanese nurses. As such, they will receive a much lower salary than what a regular Japanese nurse gets. But what should be looked into is how welfare policies can be promoted in order to safeguard the rights of nurses and caregivers once they are deployed in Japan.
But there are other fundamental questions in JPEPA.
First, JPEPA covers the Singapore issues - investment, competition policy, government procurement, and trade facilitation. These are the very issues thrown out by the developing countries, including the Philippines, during the Cancun Ministerial in 2003 because they directly impinge on the flexibility of developing countries to determine their own development priorities without being haled by the multinational companies in international courts. For example, JPEPA will force amendments to the Government Procurement Law in order to liberalize government procurement markets. This will limit our flexibility to give preferential treatment to Filipino suppliers in government bidding.
Second, the Philippines gives the Japanese full repatriation rights of profits and capital. This is anti-development. We feel that part of such profits should be retained and reinvested in the Philippines to discourage speculative short-term investments and encourage fuller sharing by the Japanese of their technical know-how with the local producers.
Third, JPEPA’s provisions allowing Japan’s factory ships and fishing vessels in the Philippines are downright unconstitutional and illegal under the Philippine Fisheries Code. Imagine Japanese factory ships, freely roaming around our own 200-mile exclusive economic zone, depriving our own fishermen of catches and livelihood? Also, the risk of depleting our reserve tuna stocks in the Philippine EEZ is a great cause of concern. What is amazing is the creativity of the Japanese negotiators (with the cooperation of the Philippine negotiators?) to put the different unequal provisions on factory ships and fisheries under seemingly separate chapters of the draft treaty.
On JPEPA as a template for future BFTAs and BITs, it should be pointed out that even without any new BFTAs and BITs being concluded there is a danger that the JPEPA itself will be used by other Philippine trade partners to claim similar trade preferences outlined in the JPEPA. This is because the most-favored nation (MFN) clause under the JPEPA may be interpreted by these trade partners, especially those with existing bilateral investment agreements with the Philippines, as a privilege that should be extended to them as well under the terms of their existing BITs and the WTO’s MFN or equal treatment principle. As it is, the Philippines has bilateral investment treaties with other 47 countries. If this is the case, then the nightmarish possibility of extending the same investment concessions to these 47 countries is there.
The point that we are raising is that: is this the way to for the Philippine economy to develop? Is this the way to promote economic partnership? We, at the Fair Trade Alliance, say there ought to be a better way.
It is clear that Japan knows their development priorities. They know where they are coming from. Japan wants the ASEAN region to be firmly in its sphere of influence, to support its trade and development agenda. It wants the region to remain a reliable source of agricultural and raw materials for Japan, a secure market for Japanese goods and an integral part of the global production chain of Japanese multinational companies. The question is, do we also know where we are coming from? Do we have a clear vision of what we want this country to achieve with the various trade agreements and not just JPEPA?
We should be reminded of the mandate of the Constitution Article 12 Section 13 which states that: “The State shall pursue a trade policy that serves the general welfare and utilizes all forms of arrangements on the basis of equality and reciprocity.” The Fair Trade Alliance believes that there are huge imbalances in the agreement and these imbalances should first be purged if we want to grow economically and reduce poverty in the countryside. The bottomline is that JPEPA, like other trade agreements, should pass the ultimate test - Will it serve the best interests of the Filipino nation?
Presented in a Press Conference: JPEPA — Para Saan? Para Kanino? at Marina Restaurant, Jupiter St., Makati City, September 12, 2007.
