Business Mirror | 13 Jun 2014
What you should know about the unusual Jpepa
Written by Cecilio T. Arillo
FOR those unfamiliar with the acronym, Jpepa stands for the Japan-Philippines Economic Partnership Agreement, which was signed on September 10, 2006, at the Asia-Europe Meeting in Helsinki, Finland.
What makes this agreement unusual is that, after negotiating it for four years (beginning in 2002), government officials at the time—and up to now—provided only scant details for people to understand it and its implications for the country’s economy.
Although both governments have said at its signing that the agreement will be positive for both Japan and the Philippines in terms of trade and investment, the pact is actually lopsided in favor of the more powerful Japanese economic interests.
Why? Because the biggest gainers under the pact are Japanese investors who set up export enclaves in the country, which are inextricably linked to the Philippine economy, as they will import most of their inputs from other countries; hire labor as cheap as they can get; and exploit fiscal incentives, including tax perks and privileges.
The two countries are such unequal partners that their economies can never result in an even playing field, as Japan’s gross national product of almost $5 trillion is more than 100 times bigger than the Philippines’s. Japan accounts for about one-third of foreign investments in the Philippines, and one-fifth of its external trade—worth over $15 billion—in total Japan-Philippines trade in 2012.
Under the Jpepa, Japan will also allow a yearly quota of an unspecified number of Filipino nurses and caregivers, and remove mutual restrictions on Japanese and Philippine investors, as well as prohibit performance requirements.
Economic protection compromised
ACCORDING to a study by Sonny Africa of Ibon Foundation, the Philippines has inordinately compromised policy tools under the Jpepa that, ironically, Japan itself used heavily.
“The Japanese government greatly protected its domestic industries from the late 19th century until the early 1980s. Japan’s industrial might in cars, trucks, shipbuilding, computers and consumer electronics was built up in through almost a century of sustained intervention and protection, especially in their early stages,” Africa said.
“Average weighted industrial tariffs reached as high as 30 [percent to] 40 percent. The Japanese government required technology transfers from US, French and UK investors, or brazenly pirated technology through so-called reverse engineering. Government agencies were obliged to procure goods and services strictly from Japanese firms. Japanese technological and productive capacity would not have developed if not for these many decades of active state support,” he added.
In contrast, Africa said, the Philippines does not even have a national industrial program that it can use to negotiate over its industrial trade policy. “The government, therefore, cannot expect to achieve a level playing field with only a foreign investments-driven medium-term plan that targets tourism and business-process outsourcing projects as sources of economic growth,” he added.
Africa also explained that “the far-reaching Jpepa is also dangerous step toward complete government renunciation of developing the Philippine economy. What little public information there is about the Jpepa indicates about a dozen areas for liberalization that collectively go far beyond anything proposed, even in the currently dormant World Trade Organization [WTO].”
“These include the elimination or reduction of tariffs on industrial products and agriculture, forestry and fishery products; liberalization of [the] services sectors, such as construction, outsourcing, air transport, health-related and social services, tourism and travel-related services, maritime-transport services, telecommunications, and banking; national treatment, MFN [most favored nation] treatment and performance-requirement prohibitions; and supposedly easier entry of qualified Filipino nurses and certified caregivers,” he said.
THE Jpepa includes various provisions on government procurement, competition policy, intellectual property, dispute avoidance and settlement, improvement of the business environment, mutual recognition, and bilateral cooperation.
“As the country’s first full-fledged bilateral free-trade agreement [FTA], the benchmark it sets for liberalization will determine the shape of all FTAs to come, including the continuation of the stalled WTO talks. If the Philippine government sets high trade- and investment-liberalization standards in the Jpepa, then it will be obliged to also give these to partners in subsequent FTAs, lest it be accused of discrimination,” Africa said.
“The country’s negotiating position in all subsequent trade and investment agreements will be gravely undermined. The end result of the Jpepa and other such agreements will be to shut the door to real domestic industrial growth and economic progress,” he added.
Africa also said that, unknown to many people, “the government is also treating our health professionals and caregivers as mere commodities when it touts the ‘quotas’ supposedly being given by Japan for these jobs as a good thing. The reality is that these mostly [female] health workers and caregivers will bear the burden of overcoming formidable language, certification, and even [racial] and patriarchal barriers—considering that Japan’s young population have already expressed concerns over their government’s offer to open up sectors for foreign employment.”
Because of its desperation for quick sources of foreign exchange, the Philippine government is placing the burden on the cheap export of skilled Filipinos. It should, instead, focus on creating the strong domestic economy that will create opportunities for Filipinos at home,” he added.
It’s really unfortunate that the Philippines, “instead of using the collapse of the WTO Doha Round talks as an opportunity to rethink its commitment to globalization, it is giving up its sovereignty piecemeal on a country-by-country basis through bilateral and regional economic agreements,” Africa said.
“Japan, on the other hand, makes further headway in consolidating Southeast Asia as a source of cheap agricultural, mineral and other raw materials for Japan, as well as a captive market for Japanese industrial goods. Aside from the Philippines, Japan has already signed or is negotiating FTAs with Singapore, Malaysia, Indonesia, Brunei [Darussalam] and Vietnam,” he concluded.