Briefer on the Japan Philippines Economic partnership Agreement (JPEPA) November 17, 2006

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1 Briefer on the Japan Philippines Economic partnership Agreement (JPEPA) November 17, 2006

2 Background The JPEPA is the first comprehensive bilateral free trade agreement entered into by the Philippines since the Laurel Langley Agreement of 1954 December 11, 2003 (Tokyo) Phil. Pres. Gloria Macapagal Arroyo and Japan Prime Minister Junichiro Koizumi agreed to formally start negotiations for a comprehensive bilateral agreement Japan s EPAs Completed: Singapore (2002), Mexico (2004), Malaysia (2005), Philippines (2006) Negotiations: Thailand, Korea (FTA), ASEAN Exploring: Indonesia, India, Chile February 28, 2005 (Manila) the House Committee on globalization started its investigations on the JPEPA but failed to secure a copy of the draft agreement September 9, 2006 (Finland) both heads of state sign the JPEPA ahead of the Asia Europe meeting September 11, 2006 DTI furnishes Congress a copy of the JPEPA on the first working day after it was signed

3 Features of the JPEPA 153 pages with eight 100 page annexes containing specific list of commitments and reservations and other operational details It is divided into 16 chapters: Preamble General Provisions Trade in Goods Rules of Origin Customs Procedures* Paperless Trading Mutual Recognition Trade in Services Investment* Movement of Natural Persons Intellectual Property Government Procurement* Competition* Improvement of the Business Environment Cooperation Dispute Avoidance and Settlement Final Provisions

4 Characteristics of the JPEPA I. The JPEPA is one sided and is biased towards Japanese goods and investments II. III. IV. The Agreement tends to exacerbate the chronic trade deficit Provisions on toxic wastes pose a threat to the environment, health and safety of Filipinos The Agreement is in the framework of relaxing Constitutional provisions on preferential treatment on domestic labor, products and Filipino companies V. The JPEPA is a bad precedent that will hasten economic liberalization vis a vis other WTO members.

5 Characteristics of the JPEPA Largest Philippine exports to Japan: Bananas (58% of Japan s total fruit imports, 79% of our exported bananas goes to Japan) Pineapple (7%, 98%) Mango (1%, 61%) Avocado (1%,) Papaya (1%, 48%) Aside from electronics and semiconductors (33%) which are basically re exports Largest Japanese exports to the Philippines Vehicles Machineries (farm and construction) Appliances (Domestic and Industrial) Automobile parts Automobile engines (including knocked down engines) Potential Philippine exports to Japan: Tuna, cods, herrings Sugar (the Philippines strongest commodity)

6 Philippine Trade Deficit PHILIPPINE exports to JAPAN: Only 8% of Philippine exports to Japan are of food, including bananas and pineapples How many exporters are Filipino? Agri business TNCs account for some 85% of total banana and pineapple exports Banana Dole, Del Monte, Chiquita, Sumitomo Pineapple Dole, Del Monte 73% of Philippine exports to Japan are industrial manufactures * with production also by corporate growers using contract growers How many are Filipino firms? TNCs account for over 75% of total sales of Top 1,000 manufacturing firms in the country Electronics ex. Toshiba, Fujitsu, Panasonic, Epson, Hitachi Transport eqpt/auto parts ex. Toyota, Honda, Mitsubishi, Isuzu

7 Characteristics of the JPEPA Largest Philippine exports Tariff removal to after Japan: 11 years. Base rate 1 2 Bananas Pineapple Mango Avocado Papaya Quantitative restriction! Negotiations will start after 5 years OTHER Potential markets Not committed!!! Tuna Herrings, sardines, mackerel No commitment, Sugar quantified tariffs of sugar in every commodity applicable! Largest Japanese exports to the Philippines Vehicles Machineries (farm and construction) Appliances (Domestic and Industrial) Automobile parts Automobile engines (including knocked down engines) Immediate tariff removal

8 Annex 1, Part I, Paragraph 1(r): The originating goods classified under the tariff items indicated with X shall be excluded from any commitment of reduction or elimination of customs duties and commitment of negotiation Rice Salt PHILIPPINE exclusions: 2 items excluded Malt, wheat starch, wheat glutten Extracts and juices of meat, fish or crustaceans, mollusks or other aquatic invertebrates Crabs, shrimps, prawns, cuttlefish, squid and jellyfish containing rice Certain preparations for infant use Bread, communion wafers Frozen or chilled pizza Food preparations of flour, meal or starch, Breakfast cereals Tomato puree and tomato paste Prepared or preserved leguminous vegetables Preparations with basis in coffees and teas Sparkling wine, sake Cigarettes, smoking tobacco Some leathers and leather products, ski boots, slippers or other house footwear, footwear made on base or platform of wood, footwear for gymnastics, athletics or similar activities Etc JAPANESE exclusions: Rice Salt Fresh or chilled trout, salmon, herring, cod, sardines, mackerel, livers and roes 239 items excluded Frozen salmon, trout, flat fish, herring, cod, sardines, mackerel, hake, livers and roes Fresh or chilled fillets of bluefin tuna Certain species of live fish Live fresh or chilled mollusks, octopus, shellfish, cuttlefish, squid Smoked salmon, dried cod, salted herring, salted cod Prepared or preserved whole or in pieces: skipjack, eel Flours, meals and pellets of fish, fit for human consumption Certain seaweeds Live swine Meat and boneless meat of bovine animals Edible offal of bovine animals, swine, sheep, goats, horses, asses, mules or hinnies, fresh, chilled or frozen Milk and cream, yogurt Butter and other fats and oils derived from milk; dairy spreads. Shiitake mushrooms, peas, kidney beans Fresh pineapples weighing more than 900 grams Wheat, meslin, barley and wheat, meslin, barley or rice flour

9 JPEPA waste products Tariff Heading No. Description MFN rate (Tariff & Customs Code) JPEPA tariff rate Ash and residues (other than from the manufacture of iron or steel), containing arsenic, mercury, thallium or their mixtures, of a kind used for the extraction of arsenic or those metals or for the manufacture of their chemical compounds 3% Ash and residues from the incineration of municipal waste 3% ( , ) Waste pharmaceuticals (and its subheadings) Residual products of the chemical or allied industries, not elsewhere specified or included; municipal waste; sewage sludge; other wastes specified in Note 6 to this Chapter Municipal waste Sewage sludge Clinical waste adhesive dressings and other articles having adhesive layer; wadding gauze bandages, surgical gloves Other clinical waste , Waste organic solvents halogenated, and other , Other wastes from other chemical or allied industries containing organic constituents, other Wastes of metal pickling liquors, hydraulic fluids, brake fluids and anti freeze fluids Worn clothing and other worn articles Prohibited under RA Used or new rags, scrap twine, cordage, rope and cables and worn out articles of twine, cordage, rope or cables, of textile materials

10 Labor Export: Entry and temporary stay (1 3 years) of Filipino nurses and caregivers provided: 3) They are qualified nurses and caregivers under Philippine laws; 4) Graduate of an appropriate 4 year degree program 5) proficient in both written and spoken Japanese language; and, 6) Training under kangoshi (Japanese nurse) or Kaigofukushishi (Japanese caregiver) in Japanese facilities with a personal contract Characteristics of the JPEPA Largest Japanese exports to the Philippines Vehicles Machineries (farm and construction) Appliances (Domestic and Industrial) Automobile parts Automobile engines (including knocked down engines) But what is the Philippines quid pro quo in this imbalanced trade agreement?

11 Philippine Trade Deficit Time Series BOP and BOT ( ) amount in US$ million 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, (500) (1,000) (1,500) (2,000) (2,500) (3,000) (3,500) (2,338) (3,686) 243 (353) (547) (1,671)(2,118) , , (93) ,103 1, (166) 1, ,107 (1,165)(2,286)(3,281) (5,431) (3,363) 852 1, ,247 3,586 1,384 (513) (192) (7,180)(7,663) 115 (280) ,500 2,000 1,500 1, (500) (1,000) (1,500) (2,000) (2,500) (3,000) (3,500) (4,000) (4,500) (5,000) (5,500) (6,000) (6,500) (7,000) (7,500) (8,000) year Row 5 Row 9

12 Constitutional issues The JPEPA contains national treatment clauses under articles 17, 73 and 89 to wit: each Party shall accord to services and service suppliers of the other Party, in respect of all measures affecting Hence, the supply the of national Services [investments, trade in goods], treatment no less favorable than that it accords to its treatment own like services clause and service is [investments. Trade in goods] suppliers. rendered inoperative. Another reason for charter change! (these are exactly the same as the wordings in Article III of GATT 1994) The Philippine Constitution states: The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive. (Article 12, Section 12, 1987 Constitution)

13 Constitutional issues The Philippines also failed to register its reservations on the non applicability of the national treatment clause in the ownership, franchising and operation of public utilities (as provided in Annex 8 of JPEPA).

14 Implications to future economic agreements Under the principle of Most Favored Nation (MFN) of the GATT 1994: any advantage, favour, privilege or immunity granted Despite by WTO s any [Member] recognition to any product of bilateral originating and regional in or destined free trade for agreements, any other country shall other be countries accorded immediately may now demand and the unconditionally same liberalization to the like measures product originating given to in or Japan. destined for the territories of all other [Members] (Article I.1 GATT 1994) 1.) Does the measure at issue confer an advantage upon the products originating in or destined for the territories of all other Members? 2.) Are the products concerned alike? 3.) Was the advantage at issue granted immediately and unconditionally to all like products concerned?

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