JPEPA critics play charter card

Published frontpage in the October 9, 2007 issue of BusinessWorld

CRITICS OF THE JAPAN-PHILIPPINES ECONOMIC PARTNERSHIP AGREEMENT (JPEPA) yesterday added “unconstitutional” to their long list of arguments versus the wide-ranging free trade deal.

The Senate, which has threatened to scuttle the Philippines’ first bilateral trade pact, conducted its fifth public hearing on the JPEPA yesterday, supposedly the last before a committee report is drafted for plenary debate.

Foreign relations committee chief Senator Miriam Defensor-Santiago, however, said another hearing would be staged in November at the request of Senator Edgardo J. Angara.

The claim that the JPEPA violates the constitution came as the trade deal’s supposed benefits were touted by the country’s largest business group and a Japanese trade promotion office.

JPEPA opponents zeroed in on a “national treatment” provision which they said means Japanese nationals get the same rights as Filipinos. Article 89 of the trade deal states that each party “shall accord to investors of the other party and to their instruments treatment no less favorable than that it accords, in like circumstances, to its own investors and to their investments.”

Roberto San Juan, who represented former Supreme Court associate justice Florentino P. Feliciano; former University of the Philippines law dean Merlin M. Magallona; and former senator Wigberto E. Tañada of the Fair Trade Alliance said non-Japanese firms could also exploit the parity provision by forming various companies with interlocking ownerships.

Mr. Feliciano, in a position paper, pointed out that “It is common knowledge that entry into certain sectors of economic activity in our country is constitutionally restricted to natural persons who are Philippines citizens or to juridical persons which are at least 60% owned by Philippine citizens.”

“Clearly the constitutional and statutory provisions… are inconsistent with the obligation to give Japanese investors ’national treatment’ established in Article 89 of JPEPA,” said Mr. Feliciano, a former member of the World Trade Organization’s (WTO) appellate body and who is credited for contributions to international law.
Trade, proponents of the JPEPA claim, will be boosted if the bilateral deal with Japan is approved. The agreement’s critics, however, insist otherwise. The trade deal’s fate now lies with the Senate.

He noted that while the JPEPA allowed the Philippines to cite constitutional provisions that would be in conflict with the treaty, the Philippines did not draw up a comprehensive list.

“Should JPEPA come onto legal effect, Japanese investors would be entitled to own more than 40% of a public utility enterprise in the Philippines under the JPEPA. This result would be in direct contravention of our Constitution,” Mr. Feliciano said.

Mr. Magallona, meanwhile, said the JPEPA transgressed Congress’ power to exercise its taxation power as it will reduce tariff rates applicable to imported goods from Japan immediately to 0%.

He pointed to Article VI, Sec. 28 (2) of the Constitution which states that Congress “may by law, and not by treaty, authorize the President to fix within specified limits tariff rates, import and export quotas and other dues.”

But Manuel A.J. Teehankee, the country’s permanent representative to the WTO, said Article 87 of the JPEPA clearly recognizes Article 12 of the Philippine Constitution which gives priority to Filipino corporations.

Filipino firms will be protected because foreign ownership restrictions will still be followed, he said.

Mr. Teehankee said that generally, business activities were excluded from Japanese equity under a provision of “very strong general reservation” in the JPEPA.

Ms. Defensor-Santiago, however, appeared unconvinced by the government representative’s arguments.

“If we go by the objective analysis of these independent experts, the JPEPA is dead,” Mrs. Santiago said.

“I for one confess that I will not be able to defend the constitutionality of the JPEPA on the Senate floor.”

She noted that administration senators dominated the public hearing and were unanimous that some JPEPA provisions are unconstitutional.

“I am very worried of the fate of JPEPA even on the committee level.”

Trade lawyer Jeremy I. Gatdula said it was wrong to dwell on the constitutional aspect of the agreement, as the JPEPA is a treaty having the level of a statute.

“It does not touch on a constitutional level the areas of expropriation and investment. It does not also touch on Congress’ tariff setting power because in the end, it will be the Senate action that will allow the operation of the schedule.”

All stakeholders and government agencies were ordered to submit position papers on October 23. — from reports by A. D. B. Romero and RJMD


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