PCCI, JETRO tout deal’s benefits

Published frontpage in the October 9, 2007 issue of BusinessWorld

A STUDY COMMISSIONED by the country’s largest business group claims benefits of nearly $1.5 billion in added exports and up to 150,000 new jobs under the Japan-Philippines Economic Partnership Agreement (JPEPA), which the Senate has threatened to reject.

The analysis, by the Universal Access to Competitiveness and Trade, a nonprofit think-tank, estimated benefits to four industries — electronics, automotive, garments, and furniture — and found that investments could also increase by nearly $300-445 million.

Upstream industries could also benefit to the tune of $500-751 million when exporters purchase more inputs or raw materials, said the think-tank, which is connected to the Philippine Chamber of Commerce and Industry (PCCI).

The study assumed that exports of the four “vital” industries would go up by 20-30% with easier market access to Japan. Under the JPEPA, tariffs on 95% of Philippine exports to Japan will be scrapped immediately, while duties on many industrial goods will be phased out in ten years. The new study was submitted to the Senate yesterday.

Much of the increase in export output and employment will come from semiconductor exporters (up to $1.26 billion in additional value and 135,549 new jobs), as the sector, on the average, accounts for 7% or $2.7 billion of total exports to Japan, the study said.

From 2001 to 2005, electronics, automotive, garments, and furniture exports to Japan reached an average of $6.2 billion annually, accounting for nearly 17% of the total.

Ryan Patrick G. Evangelista, who headed the private sector study, said the assumed 20-30% growth was based on exporters’ expectations and was feasible considering average growth in the four sectors covered was already 10.4%. Semiconductor and automotive exports grew by more than 16% annually from 2001 to 2005.

The study did not take into account whether other industries would be displaced by the JPEPA, but the think-tank said it expects the negative impact to be “very minimal.”

“The study only considered the static effects of the possible impact of JPEPA [on] the four sectors; figures and growth rates are assumed to be much larger and more robust if the dynamic effects will be included; [examples] of these are technology transfer and market creation, which could only happen overtime,” it said.

Sought for comment, Rene E. Ofreneo, executive director of the Fair Trade Alliance, said the study seemed to have assumed that Japan would import only from the Philippines, and that zero tariffs in Japan will automatically translate to more exports.

“I don’t know what is the basis of the 20% to 30% growth. Growth will also depend to a large extent on whether [Japanese] demand will go up,” he said.

Mr. Ofreneo’s group is campaigning for a renegotiation of the JPEPA, claiming Filipino negotiators were sloppy in dealing with Japan.

The Japan External Trade Organization (JETRO), meanwhile, yesterday said the Philippines should look at Malaysia’s experience under the Japan-Malaysia Economic Partnership Agreement which took effect in July last year. The Japanese government’s trade promotion agency noted that Malaysian exports to Japan “clearly increased” after the free trade pact took effect.

JETRO data showed that Japanese imports from Malaysia went up by 12% after July 2006, inching up from 11.2% before the trade deal took effect.

Hiroshi Yoneyama, director for research of JETRO-Manila, said the JPEPA would provide more opportunities for Filipino nurses and would assure the Philippines a market for its exports.

The JETRO cited data from Japan’s Ministry of Health, Labour and Welfare, which said Japan would need an additional 400,000 to 600,000 caregivers by 2014.

“For Japan, JPEPA is the first bilateral [economic partnership agreement] that includes a provision of opening its labor market to foreign nurses and caregivers. This is a symbolic and historic event between the two countries, therefore, there is a high expectation for JPEPA in Japan considering the shortage of medical human resources and preparation for [an] aging society.”

Filipino farm products would benefit from the JPEPA, the JETRO said, citing the case of Philippine mangoes popular in Japan. It noted that the Philippines accounts for 35.25% Japanese mango imports in terms of value and 44% in terms of volume.

“The Philippines now enjoy the Generalized System of Preference (GSP) status or exemption from import duties. This has been provided by the Japanese government to developing countries as well. However, GSP has limitations therefore it is necessary to secure zero tariff through JPEPA to keep the competitiveness of the Philippine mango,” the JETRO said.

The JPEPA will also provide security and certainty for Japanese investors and enhance the attractiveness of the Philippines as an investment destination, it claimed.

“JPEPA will boost this momentum and send a strong signal to more Japanese investors to revalue investment climate and market opportunity in the Philippines. Japan is one of the largest source of [foreign direct investments] in the Philippines and through JPEPA, the Philippines can retain this standing,” Mr. Hiroshi said.

Adding its voice to the lobby seeking the trade deal’s approval, the Department of Agriculture yesterday claimed that $419 million worth of Philippine agricultural and fishery exports would be allowed to enter Japan through tariff elimination and other improved market access concessions.

In a statement, Agriculture Secretary Arthur C. Yap said $353 million worth of duty-free tariffs of major farm and fishery exports would immediately be “locked in” once the Senate approves the agreement.

Japan already allows Philippine exports such as shrimps, prawns, lobster, fresh and chilled asparagus and okra, fresh guavas, mangoes, papayas, coconut products and mixtures of fruit and vegetable juices to come in duty-free under its GSP program.

Mr. Yap said tariff cuts under the JPEPA could make Japan a profitable market for Philippine farm exports worth an extra $66 million. These include live rabbits, ornamental fish, milkfish, mushroom spawn, among others.

“The Philippines can also potentially take further advantage of more open Japanese markets in which Japan is importing in large volumes and which the Philippines has little or no exports at this time but can potentially supply,” he said.

Japan was said to have offered market access improvements to potential export products, which include live eels, carp, beans, ginger, and processed meat.

“The import value of Japanese imports for such products in 2005 reached $763 million. Realizing just a 5% share of this market can help increase the value of Philippine agricultural and fishery exports by almost 10%,” Mr. Yap said.

The Philippines, meanwhile, agreed to eliminate tariffs on Japanese products such as turkey meat, duck meat, fresh grapes, apples, pears and quinces. But this will not necessarily kill local producers, the Agriculture chief claimed.

“Considering that Japan is not known to be a competitive exporter of agricultural products, we do not expect the influx of cheap competing Japanese agricultural imports as a result of JPEPA,” he said. — FFS, ADBR, and MFMB

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