FairTrade Statement on JPEPA

Japan-Philippine Trade Relations: Where is the development framework?

On the advice of the Cabinet Committee on Tariff and Related Matters (CTRM), the Philippine Tariff Commission is presently reviewing a proposed schedule of tariff reduction on goods traded between the Philippines and Japan. The tariff reduction schedule is one of the two main features of a proposed Japan-Philippine Economic Partnership Agreement (JPEPA), which seeks to reduce to zero the tariffs on Philippine and Japanese goods within a ten-year period (2006-2016). The other feature of the JPEPA is the so-called ‘economic partnership enhancement’, which calls for increased cooperation in the areas of financial services, ICT, energy, science and technology, human resource development, trade and investment promotion, small and medium enterprises, broadcasting and tourism.

We, at the Fair Trade Alliance (FTA), bewail the lack of transparency in the way the executive branch of the government is crafting the JPEPA. In fact, the executive branch is foisting the JPEPA on the nation as if it is a done thing, a fait accompli.

It appears that JPEPA has been the object of negotiation between the Philippine and Japanese governments since 2002, when President Gloria Macapagal-Arroyo visited Tokyo. And yet, neither Malacanang nor any of the concerned economic departments such as NEDA, DTI and DA has bothered to conduct adequate, meaningful and effective consultation with any local industry groups, agricultural producers and other stakeholders since 2002. Even Congress has not been given any copy of the draft JPEPA agreement. DTI Undersecretary Thomas Aquino, the leading government official directly involved in the JPEPA negotiations, has not complied with the request of the House of Representatives for a copy of the latest draft agreement and the list of ‘excluded goods’ made by the two negotiating sides.

As such, neither Congress nor the affected domestic producers can make an informed assessment of the proposed agreement, as the details of the agreement are being treated as sacred secrets by our trade negotiators. What these negotiators and their economic researchers have so far shared are their predictable assumptions that the JPEPA will be good for the Philippines as a whole for it will increase trade and investments in the country and will accordingly alleviate poverty. The liberalized entry of Filipino health and IT professionals into the Japanese labor market is also being mentioned, obviously as a bargaining sweetener given the recent move of Japan to restrict the number of Filipino entertainers or Japayukis. Genuine and meaningful consultations should involve full disclosure of the vulnerabilities to Philippine stakeholders of the Japanese negotiating framework and their specific demands or requests on the various components of the agreement. Only then can the Philippine side also craft a fully coherent strategic negotiating framework that will include tactical measures aimed at reducing the adverse impact of these vulnerabilities while enhancing whatever offensive interests Philippine exporters and service providers may have. Negotiating leverages need to be identified and exploited and defensive positions reinforced or re-calibrated. The latter can only be achieved when the Philippine negotiating team fosters mutual trust with all the affected Philippine constituencies.

As things stand, the overall issue is –

What is the trade and development framework that guides our negotiators in crafting the JPEPA? Are they mandated by the Republic to do the negotiation by their lonesomes and determine, like demigods, what is good and what is bad for the nation? Why are they treating JPEPA as a sanctum sanctorum?

In the first tariff hearing and in the Congressional hearings on JPEPA, it was pointed out that these negotiators have glossed over the adverse impact of the agreement on certain domestic producers. For example, non-Japanese automobile assemblers and auto parts makers are worried that JPEPA will reduce their shares of the market. The impact on local appliance, cement, resin and other industrial producers is also likely to be negative. It is unclear how the agricultural sector shall gain from JPEPA. There is also a reportedly long list of excluded Japanese products which our trade negotiators are reluctant to share.

Given the advanced nature of the Japanese economy and its specialization on the production of more sophisticated industrial products, it is possible that JPEPA can indeed contribute to a mutually beneficial pattern of trade relations between the two countries. But how can we say this with certainty if our own trade negotiators refuse to divulge the details of the agreement? How can we say that JPEPA is good if they have not been forthcoming in sharing the full text of the agreement and in identifying the winners and losers under the JPEPA? Previously, there were concerns that some positions taken by the Japanese would require certain amendments to the Philippine constitution. Apparently, these fears are now unfounded as our negotiating team had reportedly been successful in deflecting any provision that will require Philippine charter changes. However, are the contents of the latest draft agreement consistent with existing Philippine constitutional provisions and standards protecting national agro-industrial development?

As to the Japanese side, it is clear where they are coming from. Materials published by the Japanese MITI and JETRO unequivocably show that Japan is aggressively promoting the enhanced bilateral ‘economic partnership agreements’ (EPAs) with the Philippines and other ASEAN/Asian countries as a way of countering the efforts of China to conclude an ‘early harvest’ (preparatory to full free trade) agreement with these countries as well as the bilateral free trade initiatives being made by the United States and other countries. In short, Japan wants the region to remain firmly under its sphere of influence, in support of its own trade and development agenda. Specifically, it wants the region to remain as a reliable source of agricultural and raw materials for Japan, a secure market for Japanese goods and an integral part of the global production chains of Japanese multinational companies.

The problem is that the Philippines, through its secretive trade officials and neo-liberal economic consultants, does not have a similar trade and development agenda that clearly spells out the national development priorities.

Moreover, there are dangerous and questionable aspects of the proposed JPEPA negotiation process. First, it appears that the Philippines is offering a comprehensive list of goods to be liberalized without any clear reciprocal counter-offer from Japan. If this is so, JPEPA will become a one-sided liberalization agreement, with the liberalization taking place mainly on the Philippine side. Second, it is reported that the JPEPA does not have a ‘safeguard’ or ‘safety net’ clause, which means Philippine industries will have no remedies against import surges and dumping. Third, the JPEPA includes the so-called ‘Singapore issues’ (government procurement, trade facilitation, investment and competition policies), which were thrown out in the failed WTO Cancun Ministerial in 2003 because these issues encroach on the independent capacity of developing countries to determine their development priorities.

Finally, our negotiators, having kept local industry, agriculture and labor in the dark about JPEPA, have not alerted our own people on what is forthcoming under the agreement. Who will lose out and how should they prepare for the JPEPA liberalization? Who are the likely winners and how can they penetrate the impenetrable Japanese market? While its average tariffs are low, Japan maintains an elaborate non-tariff system which keeps imports out, except those coming via intra-Japanese firm trading.

We, therefore, demand

  • a full disclosure of the JPEPA text and the negotiation process,
  • a full listing of the winners and losers under the JPEPA,
  • full government discussion and meaningful consultation with concerned domestic producers and other stakeholders on how to maximize Philippine trade benefits and minimize Philippine trade losses under JPEPA, and
  • a recalibration by the Tariff Commission of the proposed JPEPA tariff schedule based on the foregoing considerations.

Finally, we demand that the JPEPA be submitted for Senate ratification. For like the WTO agreement, JPEPA partakes the nature of a treaty. In Japan itself, the JPEPA is subject to the ratification of the Japanese Diet.

The bottom line is that JPEPA, like other trade agreements, should pass the ultimate test – Will it serve the best interest of the nation? Given the secrecy surrounding its crafting, we are doubtful if the JPEPA in its present form will pass the test

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