Preliminary comments on the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEPA)

Joseph Purugganan
Focus on the Global South

1. Japan has concluded bilateral negotiations for economic partnership agreements with Singapore, Thailand, Malaysia, Indonesia and the Philippines. The comprehensive agreement with ASEAN would add to the fold the five other Member countries of ASEAN (Brunei, Vietnam, Cambodia, Laos, and Burma).

2. The AJCEPA represents a mandate and a mechanism to push the agenda for further liberalization of goods and services as well as investments beyond the scope and quality of the bilateral EPAs. The agreement pushes for the establishment of a legal framework for such comprehensive economic partnership among the parties which would institutionalize trade and investment liberalization as guiding principle in the regional integration process.

3. With the inclusion of Least Developed Countries (Cambodia, Laos, and Burma) and to a lesser extent Vietnam, which is pushing to be recognized as a “market economy”, the comprehensive agreement incorporates the following principles which are not outlined in the bilateral EPAs.

(a) focus on liberalization, facilitation and economic cooperation
(b) special and differential treatment is accorded to ASEAN Member States, especially the newer ASEAN Member states; additional flexibility is accorded to the newer ASEAN Member states.
(c) Recognition of provisions in the WTO in favor or LDC
(d) Flexibility should also be given to address the sensitive sectors in Japan and each ASEAN Member state;
(e) Technical assistance and capacity building

4. Notwithstanding these flexibilities, the objectives of the AJCEPA to 1. Progressively liberalize and facilitate trade in goods and service, 2. Improve investment opportunities and ensure protection of investments and investment activities, and 3. establish a framework for the enhancement of economic cooperation are almost identical to the objectives outlined in JPEPA except that the agreement is couched in a more “developmental” language with references to bridging the development gao among ASEAN Member states.

5. The AJCEPA incorporates certain provisions that are meant to address issues and concerns raised during the bilateral negotiations.

(a) Transparency and Participation— There is a provision on Non-Governmental Bodies (Chapter 1 Article 9) which mandates the parties to in fulfilling its obligation and commitments under the agreement to “endeavor to ensure their observance by non-governmental bodies in the exercise of powers delegated by the central, regional or local government or authorities..”

(b) Import of hazardous wastes- Under Article 16 on the Elimination or reduction of customs duties, there is mention and recognition of obligations and commitments of parties who are signatory to the Basel Convention on the Control of Transboundary Movements of Hazardous Wasters and their Disposal and other relevant international agreements. [Although Article 25 of AJCEPA (Goods Wholly obtained or produced) sections (i) and (j) still lists waste materials (articles fit only for disposal, for recovery of parts or for recycling purposes) and (j) scrap or waste derived from manufacturing (including mining, agriculture, construction, sewerage treatment, etc fit only for disposal or for recovery of raw materials as part of trade-able goods

(c) In the Chapter on Rules of Origin there is a clear adjustment downward (a softening of regulations) of the requirements in the definition of originating goods with respect to factory ships. Whereas in the JPEPA, a factory ship is considered originating from a Party if it is 60 % owned by nationals of the party, the ownership requirement was reduced to 50 % ownership by nationals. Another change is in the requirement on crew, in JPEPA the requirement for a factory ship to be considered Filipino is that 100 % of masters and officers should be Filipino. In AJCEPA, a factory ship would already be considered by a party if at least 75 % of the total of master, officers and crews are nationals of one ore more of the parties.

(d) AJCEPA contains whole new chapters on Sanitary and Phytosanitary measures (Chapter 4) and Standards, Technical Regulations and Conformity Assessment Procedures (Chapter 5)

(e) In Trade in Services, AJCEPA would provide a mechanism for parties to “take further step towards the expansion of trade in services. It provides the mandate for ASEAN Members and JAPAN to “continue to discuss and negotiate measures towards further liberalization and facilitation of trade in services, and enhance cooperation in order to improve efficiency and competitiveness of services and service suppliers of Japan and ASEAN Member states. It creates a Sub-Committee on Trade in Services to pursue further negotiations.

(f) The investment chapter of AJCEPA also provides the mechanism and mandate for further negotiations on ways to “improve the efficiency and competitiveness of the investment environment of Japan and ASEAN Members states through progressive liberalization, promotion, facilitation and protection of investments. A Sub-Committee on Investment is also created.

(g) In AJCEPA, the Chapter on Cooperation focuses on Economic Cooperation. While there is a catch all provision for adding other fields of cooperation that would be mutually agreed upon, there are noticeable additions and deletions in the areas of economic cooperation in AJCEPA compared to JPEPA. The common areas are in : Energy, Environment (in JPEPA Energy and Environment are lumped together, this may reflect Japan’s focus on the energy sectors and also in response to issues and concerns on the environmental sector), Information and Communication Technology, Human Resource Development, Small and Medium Enterprises, Tourism (and Hospitality) and Transportation and Logistics. The additional areas of cooperation are in: Trade Related Procedures, Business Environment (in JPEPA these two could fall under Trade and Investment Promotion), Intellectual Property, Agriculture, Fisheries and Forestry, and Competition Policy.

(h) The chapter on Cooperation in JPEPA has been alluded to in reference to Japanese ODA to the Philippines. AJCEPA however is rather vague on the issue of resources/ It states that “resources for economic cooperation shall be provided in such a manner as may be mutually agreed upon among the parties”

(i) AJCEPA is silent on the issue of migration and migrant labor. There is no chapter dealing with movement of natural persons.

6. There are references to AJCEPA supporting the ASEAN economic integration process. It would be interesting to review the ASEAN Economic Community Blueprint in relation to the extent of Japanese interests in the priority areas of integration defined by ASEAN. One report concludes that “AJCEPA could enhance ASEAN’s role as an exporter of technology-intensive products to the rest of the world giving Japanese manufacturers a greater incentive to fragment their production value chains across ASEAN instead of locating in bilateral EPA partners’ .

Conclusions

AJCEPA is meant to broaden the scope of economic partnership to include the other Members of ASEAN that have not yet signed bilateral EPAs with Japan.

Bringing in the LDCs within ASEAN necessitates a change in language and framework. While AJCEPA remains by and large a WTO plus agreement pushing for progressive liberalization of trade in goods and services as well as investment, these objectives are couched in a more developmental language. AJCEPA provides for more flexibilities and special and differential treatment in recognition of the asymmetries within ASEAN.

AJCEPA provides the mandate and the mechanism for further discussions and negotiations aimed at further liberalization of trade in goods and services and of investment.

AJCEPA adopts certain provisions with regard to NGO bodies and importation of toxic wastes that are clearly in response to issues and concerns raised in the bilateral negotiations.

AJCEPA however is silent on the issue of migrant labor. This could mean that Japan is more comfortable dealing with this issue on a country to country basis at the bilateral level.

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