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Fair Trade Statement on JPEPA, October 2006

The Japan-Philippine Economic Partnership Agreement (JPEPA), signed on the sidelines of the Helsinki’s ASEAN-Europe Meeting (ASEM) held in September this year, sidelines the development needs of the Philippines and further enhances the imbalances in the economic relations between the two countries.

This is not surprising given the cloak of secrecy that surrounded the JPEPA talks. In fact, it was the Fair Trade Alliance (FairTrade) which called the attention of Congress, during the first JPEPA hearing of the Committee on Globalization, that the Department of Trade and Industry, through its focal JPEPA negotiator Undersecretary Tomas Aquino, had been sharing with the policy makers only selective overview slides and tidbits of information on the proposed agreement. Neither the draft of the agreement nor specific details on the scope of the JPEPA negotiating agenda were disclosed to the public from the time the talks were announced in 2002 up to the Helsinki signing last September. Non-transparency unlimited indeed!

Now that the full text of the JPEPA is out, what we at FairTrade see is a highly unequal and one-sided agreement.

First, the agreement virtually transforms the Philippines into a duty-free dump site for Japanese industrial, municipal, clinical and household toxic wastes, ashes and residues. Ginawang basurahan ang Pilipinas. Despite the protestations by the DTI leadership that trade in wastes is limited by international protocols on environment, the very inclusion in JPEPA of the long list of wastes Japan wants to dump into the country and the reduction of the tariffs for most of these wastes to ZERO give clear and contrary signals on where the direction of trade in wastes is going.

Second, JPEPA is more than a bilateral free-trade agreement. It supplements and updates the old Japan-Philippine Treaty of Amity, Commerce and Navigation decreed by President Ferdinand Marcos during the early years of martial law. A proviso in the JPEPA states that should there be ‘any inconsistency’ in the old Treaty of Amity and the JPEPA, the latter prevails (Section 3, Article 11). In short, JPEPA is the NEW Treaty of Amity, Commerce and Navigation. This means JPEPA should not only be subjected to the Senate ratification process but, more importantly, it should also be scrutinized chapter by chapter given its comprehensive coverage. This is where the question posed by FairTrade to the JPEPA negotiators acquires renewed significance - “Where is the development framework?”.

For as illustrated by the waste issue, it is not clear where our negotiators are taking Philippine trade and economic relations with Japan. For example, JPEPA covers the ‘Singapore issues’ - investment, government procurement, trade facilitation and competition policy. These are the very issues the Philippines and other developing countries rejected in the WTO’s Cancun Ministerial in 2003, for these issues adversely affect the capacity and flexibility of developing countries to determine their own development priorities without being accosted by the developed countries and their multinational corporations for violating international agreements and rules. The Singapore issues are repugnant precisely because these are limitations on the right of developing countries to freely chart their domestic economic policies. The Singapore issues are similar to the policy impositions made by the IMF and World Bank (and look how these twin institutions have managed to arrest Philippine development!).

In addition to the above Singapore issues, JPEPA has a long chapter on intellectual property rights (IPRs). Again, this is what the developed countries want - to expand the ‘rights’ of these countries and their multinational corporations for longer and more ‘protection’ (in the name of intellectual property) for their patents and technological innovations which give them prolonged monopolies on the production of certain products such as drugs, whose prices have become prohibitive to the ordinary people. While the JPEPA text is ambiguous about these multinational rights, there is no guarantee that the IPR section can be transformed into an anti-development program.

This brings us to another aspect of Japan-Philippine economic relations. Apart from the abhorrent trade in wastes, JPEPA will not bring in any new substantial Japanese investments nor open up new and bigger markets for Philippine products. Over three decades of investment, debt and trade relations between the two countries under the old Treaty of Amity have transformed the Philippines into a junior economic partner of Japan, producing for the latter assembled electronic and auto components (such as the semiconductor devices and wire harnesses) and select agricultural and fishery products (such as banana and tuna). The Philippines has also become an additional market for Japanese cars, appliances and a whole range of industrial products.

The point is — can the Philippines become less ‘junior’ and become a mature and more equal economic partner of Japan, just like what happened to South Korea and Taiwan? In the l960s and l970s, South Korea and Taiwan were assemblers-subcontractors of labor-intensive products for Japanese companies. But through hard work, purposive acquisition of technology and skills and with governments bent on making their countries industrially advanced, South Korea and Taiwan succeeded in becoming ‘newly-industrialized countries’ (NICs) and are now competing head-to-head with Japan in areas such as computers, steel and electronic appliances.

Under JPEPA, it is not clear how the Philippines can become less junior. What the government is trumpeting as gains are really miniscule and will not transform the Philippines into a more industrially advanced country or a more prosperous agricultural producing nation. For example, JPEPA gives market access for ‘small’ pineapples and ‘small’ bananas and a few other agricultural such as muscovado sugar. The operative word is ‘small’. In industry, there is a comprehensive liberalization of tariffs on electrical, electronic and auto products and parts. However, most of these products and parts are already being produced by Japanese companies duty-free in Philippine export processing zones; thus, the treaty benefits mainly Philippine importers of the final Japanese electrical, electronic and auto products and parts. On the other hand, the liberalization of trade in iron, steel, automotive, textile, petrochemical, cement and other industrial products within the ten-year time horizon has to be studied closely for their potentially adverse impact on the local producers of these products. What is troublesome is that JPEPA also encourages trade in used clothes and automotives, or ukay-ukay, which has contributed to the further underdevelopment of the economy.

On the hiring of Filipino workers, JPEPA supposedly liberalizes the entry of an unspecified number of health workers and caregivers (augmenting the community of Filipino entertainers in Japan); and yet, JPEPA at the same time states that the door is open only to those who can speak Nippongo and those who can pass the Japanese professional standards.

Overall, therefore, JPEPA will not necessarily make the Philippine economy a lot stronger nor will it really spur the flow of huge Japanese investments as bruited about. JPEPA is not likely to alter the existing pattern of Japanese-Philippine trade and economic relations; JPEPA simply reinforces this existing pattern. Additionally, JPEPA transforms the Philippines into a duty-free dump site for wastes, used clothes and used cars and appliances.

Is this the chosen road to higher development? Is this what bilateralism is trying to promote? We, at the Fair Trade Alliance, say there ought to be a better way.

We, at the Fair Trade Alliance, therefore, call on the government, both at the executive and legislative branches, to subject the agreement to strict scrutiny. It should be purged of its offensive features.

We ask the government to hold frank and exhaustive dialogue with concerned domestic producers and other stakeholders on how to maximize Philippine trade benefits and minimize Philippine trade losses under JPEPA in the context of a clear development framework Filipinos can identify with.

We also call on the legislature to immediately pass a law creating the Philippine Trade Representative Office to strengthen coherence in trade and development policy formulation and to institutionalize a mandatory, transparent and coordinated system of consultation with all the stakeholders in society. We need to get our act as a nation, if we do not want the Philippines to be the doormat and dump site of Asia.

 source: Fair Trade Alliance (FairTrade-Philippines)