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Eight reasons to reject the JPEPA

IBON statement / April 16, 2008

Reference: Sonny Africa (IBON research head) Mobile 0928-5053550


The Japan-Philippines Economic Partnership Agreement (JPEPA) can be best described in three words: unequal, defeatist and destructive.

Recent government propaganda, however, has been trying to depict the JPEPA as an indispensable agreement— even as the country is currently reeling from a food crisis brought about by the same neoliberal framework that JPEPA was designed from.

With this, IBON is again releasing this summary below, which briefly explains why the country stands to lose from JPEPA and why the Philippine Senate should reject this patently unequal deal.

1. The JPEPA is a grossly unequal deal.

Under the JPEPA, Japan protects numerically more sectors of its economy from investment liberalization than does the Philippines and in addition is also very specific in protecting what it deems as vital sectors.

Advanced Japan lists at least 16 sectors to be so protected, many of which even require a minimum of 66% of full national ownership. Japan rightly includes such strategic areas as mining, telecommunications, air and water transport, shipping, and banks and financial institutions for small businesses.

Underdeveloped Philippines, on the other hand, lists just five specific sectors: mining, rice and corn, geothermal energy, atomic energy and shipping. The other items are just formulated generically and are meaningless in terms of explicitly supporting and protecting specific sectors of the economy.

2. The JPEPA gives false or marginal gains for the Philippine economy.

There is much hype that Japan will open its doors to Filipino nurses and caregivers under JPEPA provisions on "movement of natural persons" .The pact allows for the entry and temporary stay of persons who engage in supplying services as nurses or certified caregivers for one to three years (which may be extended). There are, however, strict requirements that must be fulfilled as well as regulations to be followed under Japanese law.

Among the prerequisites are that nurses and caregivers should be proficient in both spoken and written Japanese and be qualified under Japanese law. Although these professional and language requirements are not unreasonable, they are limiting as far as deployment of Filipino health workers to Japan are concerned.

In all likelihood very few nurses and caregivers will be able to surmount the considerable language, technical and cultural barriers. Even assuming Japan lifts its quota limits, only a few thousand health workers may hurdle these barriers.

3. JPEPA lays the basis for increased toxic waste from Japan.

Under JPEPA, the country risks becoming a big dumpsite for Japanese waste materials, not just the recyclable ones but also toxic materials only fit for disposal such as clinical and chemical wastes. Once the pact is ratified and implemented, these wastes can be imported tariff-free, from their original tariffs of 3% to 30% set under the Most Favored Nation treatment of the World Trade Organization.

In the face of widespread protests against JPEPA, the two governments have since come up with a side agreement that supposedly addresses these issues. However, this does not detract from how the Philippine government, under the pretext of developing local waste treatment and disposal capacity, did concede to the entry of these wastes by lowering existing tariffs to zero, notwithstanding the provision on “non-relaxation” of environmental protection.

4. "Free trade" has not resulted in development for the Philippines.

On the contrary, historical and current experience show that: 1) industrialized countries like Japan developed on the basis of protection and discriminatory support; and 2) Third World countries like the Philippines that prematurely liberalized have suffered.

Japan certainly has more to gain from so-called free trade with the Philippines. The Japanese economy’s gross domestic product (GDP) of US$4.4 trillion in 2006 is 50 times larger than that of the Philippines. Japan is also the biggest foreign investor in the Philippines with a cumulative US$3.9 billion as of 2005, constituting over one-fifth of the country’s foreign investment stock. Japan accounted for 17% of the Philippines’ total trade in 2005 and is its second largest trading partner, while the Philippines accounted for just 1.4% of Japan’s total trade.

Underlying these figures are economies of vastly different industrial, agricultural and service sector strength. The myth of "comparative advantage" and the so-called "level playing field" between such economies is merely a smokescreen for giving the stronger economy free rein to profit from the other.

5. The JPEPA’s liberalization agenda severely limits the Philippines’ freedom to set economic policy.

Government controls on how foreign investors operate in the country are necessary to ensure that the Philippines gets concrete and substantial benefits from such investments. This means, among others, ensuring control over investors’ operations through equity and ownership requirements or joint ventures. It also means ensuring benefits to the domestic economy through local content requirements and technology transfers.

These linkages between foreign investors and domestic entrepreneurs will not spontaneously arise and have to be consciously built, yet the JPEPA would disallow policies to build these. Investment provisions on "National Treatment" and "Most Favored Nation Treatment" will prevent the Philippines from favoring Filipino entrepreneurs over Japanese investors. There are also explicit "Performance Requirement Prohibitions" which disallow the Philippine government from requiring Japanese investors to achieve a certain level of domestic content, purchase goods and services in its area of operations, among others.

All these are designed to give Japanese investors greater protections, to ensure that they retain their advantages and to enable them to extract the maximum profit from their operations.

6. The JPEPA will worsen Philippine de-industrialization and cause job losses.

The government claims the local exporters would gain through export growth as tariffs are reduced and removed altogether. But the majority of Philippine exports to Japan are industrial manufactures that are actually subcontracted from Japanese transnational corporations (TNCs) and assembled using imported inputs while taking advantage of cheap Filipino labor.

If anything, the JPEPA actually raises the danger that some electronics and auto parts suppliers based in the country, whether TNCs or any genuinely Filipino enterprises, will be affected. Of course, there is no genuinely Filipino electronics or auto industry to speak of. But there are still such suppliers based in the country that import raw materials or components and assemble them either for re-export or as inputs to other electronics or auto assemblers in the country.

Such firms may have to close down if the removal of tariffs on these items makes them cheaper to import than procure from locally based manufacturers. Local steel makers will also be facing steeper production from Japanese producers. The resulting plant closures and layoffs could well mean some tens of thousands of jobs will be lost.

7. The JPEPA will increase landlessness and undermine agricultural livelihoods.

There is also much hype about supposed export gains from a more open Japanese market for Philippine bananas and pineapples. However, food exports are actually a small and even diminishing share of total Philippine exports to Japan, accounting for only 7.4% of total exports to it from 2001-2006. While food exports potentially have high local linkages to the local economy, grassroots farmers and farm workers are unlikely to benefit from JPEPA.

Agriculture in the Philippines, including that of bananas and pineapples, is in general very backward and underdeveloped because of the lack of true land reform and the absence of government support and extension services. Further, foreign agri-business TNCs, such as Dole and Del Monte and their big domestic corporate growers, account for virtually all banana and pineapple exports from the Philippines.

Local farmers are reduced to entering into oppressive contract growing and farm lease arrangements with these TNCs. These arrangements place all the risk of cultivation onto the farmers and force them to buy overpriced inputs. Such arrangements raise the high possibility that small farmers may lose their lands and become workers for hire or join the exodus to the cities.

8. The JPEPA is not about Philippine development.

The JPEPA’s provisions on trade and investment liberalization are designed to give Japan’s corporations the greatest benefit to make huge profits, at the expense of the greatest damage to the Philippine economy.

The pact also contains other measures that complement that central thrust. While packaged as being aimed towards developing domestic productive capacity, their real objective is to make it even easier for Japanese firms to trade and invest in the Philippine on terms that are the most beneficial to them.

These include the supposed cooperation in trade and investment promotion, trade facilitation, technical assistance to meet Japanese requirements and regulations, capacity building in paperless trading, training to facilitate improvements in the competitiveness of workers, human resource development and language proficiency training. (end)

IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.

 source: IBON