The proposed agreement has also
been widely discussed and commented upon in the media. Since the
JPEPA will have far reaching impact on the totality of relations
between the Philippines and Japan, it is but right that it has been
closely scrutinized by a wide variety of concerned groups and personalities.
Introduction
In consonance with the worldwide
trend toward regional integration, Japan’s external economic
policy, in recent years, seeks to establish an East Asian region-wide
strategy for sustained economic growth and development. This strategy
is rooted in a clear recognition of the region’s immense resources
and long-term potential as a base for improving industrial productivity
and accelerating economic growth.(1)
Through closer economic integration with the region’s key
players, Japan also seeks to enhance not only its economic power
but also its political and diplomatic capabilities in an increasingly
competitive global environment.
A key aspect of this East Asian
strategy seeks to set up economic partnership agreements (EPA) at
the level of regional groupings such as the ASEAN as well as individual
countries. From the perspective of developed economies like Japan,
this pursuit of EPAs is driven not only by the perceived broader
gains from regional economic partnerships but also as an alternative
to the stalemates in decades of multilateral tariff-reductions in
WTO negotiations. Moreover, Japan’s pursuit of EPAs is also
a response to China’s initiatives to work out economic agreements
with various countries in the region including the ASEAN as a bloc.
In November 2002, Japan and the ASEAN countries signed a Joint Declaration
to draft a framework for the realization of a Comprehensive Economic
Partnership. Since 2001, Japan has concluded or been actively negotiating
EPAs with various countries including Singapore, Mexico, the Philippines,
Malaysia, Thailand, Indonesia, South Korea, India, and Chile.
As a regional economic grouping,
the ASEAN as a bloc is also involved in six free trade agreements
(FTAs) with Japan, China, the EU, India, South Korea and Australia
and New Zealand. Moreover, ASEAN’s individual member countries
are also pursuing various bilateral FTAs in varying stages of development.(2)
This paper examines some of the
most contentious issues involved in the negotiations for the Japan-Philippines
Economic Partnership Agreement (JPEPA) formally signed between the
two countries in September 2006 but awaiting ratification by the
Philippine Senate before it could be fully implemented. The JPEPA
represents the most comprehensive bilateral agreement between the
Philippines and another country. It provides detailed specific agreements
on several areas including: trade in goods, rules of origin, customs
procedures, paperless trading, trade in services, investments, movement
of natural persons, intellectual property rights, government procurement,
competition, financial services cooperation, information and communications
technology, energy, science and technology, human resources development,
trade and investment promotion, small and medium enterprises, broadcasting,
tourism, dispute avoidance and settlement and improvement on business
environment.(3) A number of these same
issues concerning investments, competition, and government procurement
(the so-called Singapore issues) were left unresolved in the World
Trade Organization (WTO) multilateral talks and the critics of JPEPA
point out that the Philippines would in effect be committing itself
to a far wider range of liberalization agreements than currently
agreed upon by the WTO if JPEPA is ratified.
Economic Relations between
Japan and the Philippines
Japan is the Philippines’s
2nd largest trade partner (after the United States). About 75 percent
of exports from the Philippines to Japan consist of industrial manufactures
of re-exported electronics (semi-conductors and electronic data
processing) machineries and transport equipment and parts, chemicals
and construction materials mostly from foreign-owned companies operating
in the Philippines. The remaining 25 percent of exports to Japan
consist of consumer manufactures (garments and housewares) food
and food preparations (fresh and processed foods and marine products)
and resource-based products (coconut products, minerals, and forest
products).(4)
About 96 percent of all merchandise
imports from Japan to the Philippines consist of industrial manufactures
such as electronics, machineries, transport equipment and parts,
metal manufactures and chemicals.(5) During
the last ten years, Japan has also been the second largest source
of net foreign direct investments (FDI) in the Philippines.(6)
Since the 1990s, Japan has also been consistently the Philippines’
largest source of official development assistance (ODA) from a single
country.(7)
Competing Development Strategies
and JPEPA
The ratification process for JPEPA
in the Philippine Senate showed contentious responses to the proposed
EPA. The Philippine government agencies directly involved in the
negotiations and its primary supporters from leading business groups,
think tanks and some academics argue that JPEPA will be beneficial
on the whole as it will increase incomes, reduce poverty and improve
the investment climate even while conceding that there will be costs
such as foregone tariff revenues. They also argue that the Philippines
will be left behind its neighbors in the region in terms of accessing
these perceived benefits since Japan has already concluded or about
to finalize similar EPAs with other countries including Singapore,
Indonesia, Malaysia, and Thailand.(8)
The critics of JPEPA which include
advocacy NGOs, peoples’ organizations and parties, critical
academics, and some of the senators themselves argue that the EPA
prejudices the Philippines in terms of several one-sided economic
provisions, violates a number of constitutional provisions, and
endangers the environment by allowing for the importation of toxic
and hazardous wastes.(9) A stronger
line of opposition to the JPEPA and similar EPAs argues that economic
growth and development can be better assured if states exercise
enough flexibility in their development strategies in terms of balancing
state protectionism for certain industries with trade and capital
liberalization rather than being completely exposed to unregulated
free markets.(10)
Trade in Goods
One major point of contention concerns
the market access provided to the products of both signatories with
the critics of JPEPA arguing that the EPA clearly favors Japanese
agricultural and industrial goods. Under the agreement, the Philippines
will eliminate tariffs on agricultural products except for rice
and salt. On the other hand, Japan is able to exclude 238 tariff
lines including a wide range of fish and marine products from “any
commitment of reduction or elimination of customs duties”.
Among marine products excluded from tariff elimination are various
species of salmon, trout, herrings, cods, sardines, mackerel, frozen
fish fillets, and some livers and roes of fish. Bluefin, bigeye
and yellow tunas are also subject to tariff negotiations.
Bananas, the Philippines’
top agricultural export, will have its tariff rates eliminated only
after 11 equal annual installments. Fresh pineapples, another leading
agricultural Philippine export, is subjected to quantitative quotas
for up to 5 years (from the date of treaty enforcement) and negotiations
after the 5th year. Tariff rates on sugar will be renegotiated four
years after the implementation of the agreement. Moreover, tariff
rate quotas will be imposed on other agricultural products such
as small pineapples, muscovado sugar, and sausages. Thus, specifically
for agricultural and marine products, Japan seeks to exempt from
tariff elimination or prolong the phasing out of tariff for several
products in which the Philippines has a competitive advantage or
capability to export more with the elimination of either customs
duties or quantitative restrictions.(11)
For almost all imported industrial
products and manufactures from Japan including heavy and light machineries,
electronics and electrical appliances, automobiles and automobile
parts, the Philippines has agreed to eliminate customs duties immediately
when the agreement comes into force. JPEPA also allows for the trade
of used four-wheeled motor vehicles (second-hand vehicles) in spite
of the existence of Executive Order 156 which prohibits the importation
of these products. The Philippine Supreme Court has upheld the validity
of E.O 156. The importation of used four-wheeled motor vehicles
poses a serious threat to about 80,000 workers directly hired by
local automotive assembly plants and thousands of others in related
industries.
Thus critics of JPEPA point out
that the Philippines has failed to negotiate favorable key tariff
reduction for major Philippine exports such as in agricultural and
marine products while readily giving in to immediate reductions
or removal of tariffs on major Japanese products. It is conceded
even by supporters of JPEPA that the Philippines will lose something
like P3.7 – P.4.2 billion pesos annually in foregone tariff
revenues but its supporters stress that this will be more than offset
by an improved investment climate that will attract more foreign
direct investments, in turn creating new jobs and raising incomes.
Constitutional and Statutory
Issues Against JPEPA
Some leading constitutional lawyers
and international law specialists in the Philippines have raised
a number of issues against JPEPA which supposedly infringe certain
constitutional and statutory (formally approved laws) principles
governing the Philippine economy.(12)
Critics of JPEPA have raised at least six constitutional provisions
which JPEPA may have violated.(13)
First, there is the constitutional provision (Article XII, Section
2) which reserves the acquisition of land and the utilization and
exploration of all natural resources within the archipelago for
Filipino citizens and Filipino corporations or associations at least
60 percent of whose capital is owned by Filipino citizens. Government
officials have responded by pointing out that this principle is
duly recognized in JPEPA’s Annex 6 Part 1-B on services and
in the Philippine reservations for the manufacturing sector in Annex
7 Part 1-B.
Second, critics point out that JPEPA
violates Article 12, Section 11 of the Philippine constitution by
opening the operation of public utilities to Japan. In response,
state officials say that limitations provided in Annex 6 of the
treaty recognize that foreigners, including Japanese nationals,
can only have a maximum 40 percent participation in the operation
of public utilities.
A third objection raised is that
the treaty opens up to foreigners the practice of all professions
which is limited by Article 12, Section 14 of the constitution.
Related to this issue is the fourth objection raised by critics
who affirm that the treaty also opens up ownership, control and
administration of educational institutions to foreigners in violation
of Article 14, Section 4 (2) of the constitution. Again, government
officials argue that all these concerns are all duly recognized
and protected in appropriate sections of Annex 6 of the treaty.
The final two constitutional issues
concern the mass media and the advertising industry. Critics of
the treaty stress that JPEPA opens up ownership and management of
mass media and the advertising industry to foreigners in violation
of the constitution. To allay fears on these issues, state officials
point out that the treaty makes no specific commitments on the mass
media and that Annex 6 also contains the specific limitation that
only up to 30 percent foreign equity is allowed to foreigners in
the advertising industry.
In addressing these issues, the
leading international law expert in the Philippines, former Justice
Feliciano has stated in his position paper submitted to the Philippine
Senate that the list of reservations found in Annex 6 of the treaty
may not be adequate in protecting Philippine interests.(14)
Feliciano has also been quoted affirming that “if
the treaty can no longer be renegotiated in view of its ratification
by the Japanese Diet, the best alternative is a qualified concurrence,”
and that “suggested revisions and insertions could be included
as ‘qualifications’ in the Resolution of concurrence”.(15)
Investment Issues(16)
Critics of JPEPA stress that the
treaty provides for a very broad definition of investments covered
by the agreement in the Philippines, much broader than the existing
bilateral investment treaties with other countries. In light of
this, the Philippines will have to extend national treatment to
more investment related activities than what the country has traditionally
committed in its bilateral investment treaties with other countries.
For instance, JPEPA includes as investments such assets as “bonds,
debentures and loans and other forms of debt; rights under contracts,
including turnkey, construction, management, production or revenue-bearing
contracts; all kinds of intellectual property rights; profits, capital
gains including dividends, royalties, interests, fees and other
current incomes accruing from investments”. Moreover, JPEPA
critics also counter that the best way to attract foreign investments
is still the old, tested formula by which the recipient country
ensures political stability, the predictability of laws, a well-trained
labor force, reliable infrastructure and communications facilities,
and good governance practices as a whole. Thus, if a country is
able to provide these public goods then a special bilateral economic
agreement to attract more investments becomes superfluous.
Movement of Natural Persons:
The Case of Nurses and Caregivers
JPEPA’s provisions on the
movement of natural persons apply to the entry and stay of six categories
of natural persons in both the Philippines and Japan: 1) short-term
business visitors; 2) intra-corporate transferees; 3) investors;
4) those engaged in professional services; 5) those supplying services
requiring advanced knowledge or specialized skills under contract
with public or private organizations; and 6) nurses (kangoshi) and
careworkers (kaigo fukushishi).(17)
The new opportunity opened up by JPEPA is the entry of nurses and
careworkers.
Not surprisingly, supporters of
JPEPA have pointed out that Japan’s readiness to admit nurses
and careworkers is a golden opportunity that should be seized by
the Philippines. But what are the requirements and conditions attached
to these new work positions made available by JPEPA? A closer look
at these requirements reveals a set of demanding conditions that
include not just the routine academic credentials and work experience
from the home country but also language competency in Nihongo, work
and on the job training in Japan and the passing of a national examination
for nurses or careworkers (exam in Nihongo).
A person applying as a nurse (kangoshi)
in Japan must have the following credentials and comply with the
following requirements: 1) a qualified nurse (must have passed the
Philippine Licensure Examination for nurses) with work experience
as a nurse for at least 3 years; 2) nursing training including language
training in Japan for 6 months; 3) work and on-the-job training
in a public or private hospital or social welfare institution; 4)
passing of the National Examination for Kangoshi. A nursing applicant
is initially given a visa for up to three years. Passing the national
examination entitles applicants to a new residence status that will
enable them to work with the same pay and benefits as their licensed
counterparts. However, a candidate who fails the national exam is
required to go back to the Philippines. A kangoshi applicant is
given a maximum of three opportunities to take the national examination
within three years from the first entry period to Japan.
For those applying to come in as
careworkers (kaigo fukushishi), the initial academic requirement
is a 4-year university bachelor’s degree plus a careworker
certification from the Philippines’ Technical Education and
Skills Development Authority (TESDA); or a Bachelor of Science Nursing
degree from a duly accredited nursing school in the Philippines.
After entry to Japan, the applicant needs to comply with the following
requirements: 1) careworking training, including language training
for 6 months; 2) work and on-the-job training with a public or private
caregiving facility for up to 4 years; 3) passing of the National
Examination for kaigo fukushishi. Those who fail the national examination
are also required to go back to the Philippines.
The opportunity of working as nurses
and careworkers in Japan does not seem to offer enough incentives.
For instance, the competence in Japanese language that is expected
to be mastered in a short period of time for work purposes and passing
the national examinations is a daunting prospect. This problem could
be better addressed by adequate institutional and social support
systems. But as some analysts have pointed out, a number of Japanese
hospitals and medical institutions themselves concede that they
lack adequate human and financial resources to meet government requirements
to receive and train foreign candidates.(18)
One of the long-term benefits that could be gained by the health
workers lies in the skills training and transfer of technology during
their work period. However, given the difficulty they face in mastering
the Japanese language and passing the national examinations, there
is uncertain prospect for the health workers for a fairly stable
and reasonably long work stint in Japan.
More fundamentally, the Philippine
government does not seem to have carefully considered the long-term
impact on the country’s health and medical situation of the
continuing massive outflow of health care workers in the Philippines,
including its best doctors. At present, the massive brain drain
for this sector has already reached critical stages and the Philippine
government needs to reassess the implications of the Japanese opening
for these jobs not just for the economy but also for the country’s
overall health environment.
Environmental Issues
In the Philippines, one of the
most contentious issues raised against JPEPA is its inclusion of
toxic and hazardous wastes in its list of tradable goods. Both Japan
and the Philippines are signatories to the Basel Convention on the
“Control of Transboundary Movements of Hazardous Wastes and
their Disposal”. Moreover, the Philippines has a national
law, Republic Act 6969 which seeks to “Control Toxic Substances
and Hazardous and Nuclear Wastes”.
JPEPA supporters argue that there
are “sufficient provisions to protect the environment and
prevent any illegal trade that may arise from the zero tariff imposed
on hazardous and toxic wastes”.(19)
Thus, provisions are cited such as Article 102 (Environmental Measures)
which enjoins the parties not to relax environmental measures to
encourage investment; and Article 23 (Trade in Goods), Article 66
(Mutual Recognition), Article 83 (Trade in Services), Chapter 8
(Investment) and Article 114 (Movement of Natural Persons) which
all allow exceptional measures to be taken for health, safety, and
environment-related concerns. Moreover, government analysts also
assert that the inclusion of toxic and hazardous wastes as tradable
goods or the tariff elimination on these products are not a cause
for alarm since there are far more binding existing import controls
and regulations on trade in these waste materials. They further
affirm that the challenge lies in strengthening the “technical
and regulatory capacity to manage hazardous wastes and effectively
implement import controls”.(20)
JPEPA critics point out that there
are loopholes in JPEPA provisions for protecting the environment
and that these could be the bases for the entry of toxic and hazardous
wastes. For instance, the Magkaisa Junk JPEPA Coalition singles
out Article 102 as one of these weaknesses since this provision
limits the non-relaxation of environmental measures to only three
out of 11 investment-related activities provided for in JPEPA.(21)
Thus Article 102 identifies three such investment activities (establishment,
acquisition, and expansion) as ones where environmental measures
may not be waived or relaxed but is silent on eight other investment-related
activities (management, operation, maintenance, use, possession,
liquidation, sale, or other disposition) cited in Article 89. These
investment-related activities are part of the national treatment
arrangement extended to Japanese investors.
In response to the mounting concern
on trade in waste products allowed by JPEPA, then Japanese minister
for foreign affairs, Taro Aso, sent a diplomatic note on May 23,
2007 to the Philippine secretary of foreign affairs, Alberto G.
Romulo, which stated:(22)
