The Japan-Philippines Economic Partnership Agreement

Former Vice President Teofisto Guingona, Jr. has sent At Midfield a copy of the paper he delivered to a forum in Cebu over the weekend with regards the Japan-Philippines Economic Cooperation Agreement or JPEPA which is stirring up debates over the alleged inequities in the executive agreement, including the matter of Japan reportedly being allowed to dump its industrial wastes in the Philippines. Filipino businessmen, on the other hand, have been welcoming the JPEPA in terms of the potential for Philippine exports to gain better access to the Japanese market.

We’ll try to begin closely studying this issue. For now, allow At Midfield to share with its readers the perspectives of former vice president Guingona, whose standing as a nationalist and statesman is unchallenged. Here it is:

No to JPEPA
by Tito Guingona

The Japan Philippine Economic Partnership Agreement is like a meeting between Mike Tyson and Manny Pacquiao, one big, the other small; and the terms of their meeting also appear inequitable in favor of Tyson against Pacquiao. It is a partnership favorable to Japan, disadvantageous to the Philippines.

Why? Because, among others, it unjustifiably seeks to grant national treatment to Japanese investments. Article 89 of JPEPA says that each party shall accord to investors of the other party and to their investments treatment no less favorable than that it accords, in like circumstances, to its own investors and to their investments with respect to the establishment, acquisition, expansion, management, operation,, maintenance, use, possession, liquidation, sale, or other disposition of investments.

Traditionally, an alien investor comes into the nation of another, with resources to do business. He enters like a guest, abides by the laws of that nation during his stay, and liquidates his undertakings when he decides to, in accordance with domestic regulations.

What does national treatment mean? Does it ask that we regard the Japanese investor as we do our own Filipinos? Does it connote parity, same as the parity we extended to US firms and citizens equal to Philippine firms and citizens in the wake of rehabilitation in l948? No. National treatment means more. It does not merely refer to equal — but also to treatment no less favorable than that we accord to Filipinos under like circumstances. The treatment can be equal, can be more favorable to the alien investor — but not less favorable. If for example there exists an area in Mindanao such as a preserved zone which prohibits the establishment of business therein, we can rightfully deny applications of both Philippine and Japanese to do business there. But if we grant the request of both yet give more privileges to the Japanese investor, that could be unjust but okay under JPEPA because the treatment is more favorable to the Japanese investor.

Where would national treatment apply? Not in Japan where there hardly exists any Filipino businesses, but here where Japanese investments abound. As worded in JPEPA, national treatment would cover practically all areas of investment – from establishment, to operations, to sale, to liquidation.

JPEPA is an unequal treaty because it will operate one sidedly in favor of Japan.

In the case of National Treatment, this means that Japanese investment in the Philippines become the major components of our national economy, to be treated more than parity. Under JPEPA the Philippine government becomes the guarantor of Japanese investment, against political risks like revolution. If a Japanese factory is destroyed in the wake of that revolution, the government under the terms of that treaty pays compensation. If, on the other hand, a Filipino factory is destroyed, no such warranty exists.

There is bigger folly. It appears that the Philippines did not ensure the needed flexibility. In Annex 7 we did not make more comprehensive reservations. We referred to some limitations imposed by the constitution — but we did not reserve our right to enact future legislation. On the other hand, Japan’s reservations are extensive – covering national treatment, most favored national treatment, prohibition for performance requirements – and expressly made the reservation to adopt or maintain any measure relating to those areas.

In basic agreements, especially where new rights are invoked such as national treatment, it is fundamental that reservations be made clearly because no reservations made means conformity to the new relationship, with no more recourse in the future to complain – and where congressional rights are affected – there may result a relinquishment by congress to exercise remedial powers to correct a wrong.

For example, we did not make any reservation on public utility. Would this mean that Japanese firms, if JPEPA is approved, can now enter that vital area and be accorded national treatment? Seems so, because we did not make a proper reservation.

In fisheries, our reservation states that no foreign participation is allowed for small scale utilization of marine resources in archipelagic waters, territorial sea and exclusive economic zone. In the second paragraph, it states that for deep sea fishing, corporations, associations or partnerships with a maximum 40% foreign can enter into co – production, joint venture or production sharing with the Philippine government. Compare this with the Japanese reservation which details the subsectors of fishing and states that Japan reserves the right to adopt or maintain any measure relating to investment in fisheries in the territorial sea, internal waters, exclusive economic zone and continental shelf of Japan.

The first part of our reservation implies that the prohibition fishing in our waters apply only to small scale fishing, without clear restraint on other activities. Under this loose and incomprehensive reservation, a Japanese fishing boat factory can conceivably establish fishing operations in our waters, with or without JPEPA. The second part of our reservation is likewise inadequate. It deals only with agreements with government. What of the continental shelf? What of economic development in the exclusive economic Zone?

For lapses in making proper reservations, we may forego rights, relinquish power to enact future legislation on investments. Therefore we should not approve JPEPA. Why deprive congress of this fundamental right of legislation embodied in Art.Vl Sec. l of the constitution.

A treaty is intended to enhance the nation, not derogate its power to govern. Ironically, Art.4 of JPEPA calls on the parties to consider amending or repealing laws that affect the implementation and operation of said agreement. – For us to further relinquish legislation? To further ensure protection of their investments? But if there arises abuse detrimental to national interest, should we not assert to correct a wrong and use legislative power? We cannot and should not give up this inherent right to fight for the Filipino. Even the power of local governments are affected. Instead of more autonomy, one year after approval of JPEPA, they will be restrained from enacting ordinances concerning Japanese investments. JPEPA will operate as a usurpation of legislative and executive powers of the Philippine government. It creates a hierarchy of rules in our legal system in which JPEPA will hold a position of supremacy over the acts of Congress. JPEPA is at war with the principle which our own Supreme Court upholds: that a statute and a treaty one of equal understanding in our legal system..

2. Under JPEPA, all products are targeted over time for tariff reduction or elimination, all – except those exempted. Japan listed 238 tariff lines involving various agricultural and industrial products such as sardines and slippers for exclusion while the Philippines limited exemptions to only 6 tariff items, 5 for rice and l for salt. This means that once JPEPA is approved, the targeted reduction or elimination of tariffs of all products outside the exempted ones will begin. The Philippines agreed to reduce or eliminate tariffs in ten years, Japan within 3 to l5 years, with some goods like sugar still quantified under a Tariff Rate Quota..

In accordance with articles l2 and l3 of said agreement, the implementation of JPEPA will be done by a Joint Committee and sub coommittees composed of representatives of the Government of the parties, But the power over tariffs in the Philippines is vested in Congress, not to any joint committee. The President who signed the proposed agreement possesses only delegated powers – and the same cannot further be delegated.

The moment JPEPA is concurred in by the Senate it becomes valid out effective as law and the Supreme Court has categorized a treaty concurred in by Senate as domestic law. In this light, the operation of JPEPA through the Joint Committee and several sub-committees becomes a situation where Japanese government appointees will be engaged in the implementation of a domestic law in Philippine territory ─ a bizarre anomaly in our constitutional and legal system.

Where is accountability? Responsibility? Transparency? The negotiations that led to JPEPA were done in relative obscurity, without the needed information and publicity mandated by the right to know. It is a truism that in bilateral negotiations, the poor who possesses less bargaining power must be ten times more vigilant, otherwise concessions can be easily taken in the guise of aid like Official Development Assistance. We do not depreciate the Assistance given to the Philippines by ODA. But such assistance are loans that Philippines pays for. In addition there exist flow back benefits that Japan gets back because the entity in charge of ODA, Japan Bank and International Cooperation, mandates that the majority of the projects funded by said Assistance must be undertaken by Japanese entities. If Japan waved the flag of ODA before, they can do it again during implementation once JPEPA is approved. The Joint Committee to implement presumes equal partners out to pursue equitable interests. But reality tells us that in such situations the perceived welfare of both do not run parallel but often collide. So this kind of implementation may only retard, not smoothen relations. Furthermore, under JPEPA, the most favored treatment clause is extended to other countries. If we extend national treatment to their investments, the same can be invoked by other nations in separate agreements. We may have multiple joint committees overseeing similar JPEPAS for as many countries – a financial and administrative nightmare!

In the meantime, Japan under the proposed treaty denies us tariff reduction for agricultural goods to enter her country such as sugar, bananas, mangos, tuna and other marine products even as we give duty free imports to her industrial inventories like electronics – for double whammy advantages because many of these products or their parts are manufactured in the Philippines by Japanese firms themselves, like transmissions for automobiles. They ship them from here to Japan duty free, and when they export an entire automobile, transmission included, they will come in one day duty free. Japan exports to us high value finished goods, usually accorded low tariffs. The Philippines on the other hand trades low value added rural products like banana – yet we must pay tariff of ten to twenty percent. An imbalance we can ill afford. As of 2005 our trade deficit with Japan already stood at $2,034 billion US dollars. JPEPA will predictably see more imports from Japan, shifting our focus from manufacturing to importing and losing jobs to workers.

. 3. What is even of greater concern is the dumping of Japanese materials such as hospital waste, municipal sewage, clinical toxics, and other materials embedded in products which will come in duty free. In l999 Japan exported to the Philippines in a single try, l22 40 ft container vans — reportedly carrying waste paper for recycling. However, when the container vans were opened, what the government authorities found was not recycled paper as stated in the customs declaration – but hazardous, infectious, and toxic trash: intravenous injections, used diapers and napkins, syringes for blood, dextrose, worn bandages. We protested because it was the right thing to do, and after some ado, the perilous products were sent back.

Japan is highly industrialized. She generates many products that contain chemicals and toxic waste. For her own ends, she has adopted a policy of the three Rs: Reduce, Reuse, Recycle. This means they are encouraged to use products like a ferry boat for commercial purposes, and after some time recycle by converting it, perhaps into a tugboat, then when no longer viable, dump them somewhere. Including the effluents and enamels embodied therein.

Waste disposal comprises a big challenge, and the principle enunciated by the International Basel Convention, an assembly where both the Philippines and Japan are members — is that each nation maintains within its own borders the responsibility of resolving the waste problem. There grew a glaring loophole when some developed nations claimed they were not exporting waste but recycled products.

The international community via the Basil Ban Amendment plugged that loophole preventing the transborder movement of toxic and hazardous waste even for recycling. Unfortunately neither Japan nor the Philippines has ratified the Basel Amendment. But the Philippines should, because we have laws which control the use of Toxic Substances and Hazardous Wastes, Republic Acts 6969 and 4653. If however we approve JPEPA, we set aside our own laws – and open our doors to garbage disposal. Does not our nation deserve the right to health against hazardous waste? Are we not concerned first and foremost with national interest? Do we not have enough of a problem in the disposal of our own waste?

The advocates of JPEPA claim that Japan has entered into similar agreements with countries like Malaysia and Singapore which are beneficial. But Malaysia has ratified the Basel Agreement, while Singapore is a noted center of transshipment for commercial trade.

In our case, our negotiators have agreed to adjusted tariff rates, setting the stage for Japan – to dump their recycled garbage here, no matter the consequences. The tariff for waste pharmaceuticals has been lowered from 20% to 0; municipal waste from 30% to 0; clinical waste such as adhesive dressings, wadding gauze, surgical gloves from 30% to 0. Waste comprising organic solvents, halogenated substance, from 30% to 0. The reduced tariff to zero – glares like an ugly invitation for Japan to dump.

JPEPA refers to the products of trade as goods but the ‘bad ones’ are left hanging. If a forty foot container van export arrives comprising 60% used newpapaers but 40% recycled worn out products containing perilous effluents, will our customs officials reject the waste and admit only the old newsprints, considering that implementation of JPEPA is under a joint committee under the demanding rules of GATT adopted by JAPEPA?

We are told that our Foreign Affairs Secretary has written a letter to his counterpart, the Foreign Minister there, who responded that Japan would not export hazardous waste to our country. But such letters were not included in the negotiations, not made integral parts of the agreement, not definitive of what constitutes forbidden waste – because for Japan a recycled product is a product that can be exported. If they genuinely desire not to export waste to the Philippines then we should amend the treaty.

4.Those for JPEPA proclaim that for some concessions in trade, the door for Philippine nurses and caregivers will now open. They say it is an opportunity for a better life. If so, then why do the members of the Philippine Nursing Association themselves stand opposed to JPEPA?

The entry of nurses and caregivers there are totally governed under the Immigration laws and regulations of Japan. We do not know how many are entitled to go, when, for how long. Philippine Nurses and caregivers have been acclaimed the world over. Not only do they ably discharge their duties in a dedicated way, they do so with a personal touch, regardless of overtime and overdue pressures. To make them learn to speak and write in Nipongo seems reasonable – but they object to the requirement that they take another qualifying examination again – in Nipongo. To learn and communicate in an alien tongue is alright, but what looks unfair is to have them undertake a rigorous examination in Nipongo, whose nuances they do not fully grasp, where even amongst Japanese applicants the success rating is not relatively high. At present professional Japanese coming here in aid of their firms doing business in the Philippines are accorded fair treatment. Would they not object if the host government impose as an additional requirement for their stay – that they also take a qualifying examination in Filipino?

What happens when a Filipino applicant for nursing does not qualify? How long can she stay, what kind of treatment to expect? Can the rules change? The questions are relevant because JPEPA is an agreement not only in trade and investments but also to treatment of natural persons, governed by Japan’s laws and regulations in immigration.

5. GATT, the General Agreement on Tariff and Trade, and its successor, the WTO, World Trade Organization, were the entities that sponsored globalization. Their vision got derailed because of the resounding cries of protest raised mainly by developing nations. The noted economist Joseph Stiglitz once said that the challenges faced by globalization sprang from the fact that the rules for globalization were made by rich developed countries mainly for the benefit of the rich developed nations.

JPEPA is worse. It goes beyond WTO because WTO for example prescribed reduced tariffs for nations to follow – but it did not seek total elimination of the same. Under WTO, nations still had a leeway to legislate; under JPEPA we would have no such adjustmemt. WTO did not impose performance requirements for investments. Under JPEPA, we cannot require that the investor hire local labor, promote technology transfer, or use local material for their businesses. WTO did not impose insurance for investments. Under JPEPA we are mandated to guarantee investments against certain risks such as revolution.

When WTO got derailed, some thought that the world would at last listen more closely to the reasons of international protest from developing nations. Now it seems that bilateral agreements embody the new strategies to pursue the advantages of rich developed nations.

The advocates for JPEPA claim that once we approve, trade will increase by 20 % , investments by 350 % . But they do not show a detailed study. They do not explain how or why. On the contrary, a study undertaken by PIDS, Philippine Institute of Development Studies shows that positive growth of the economy arising from JPEPA will be minimal, barely 0.09%. Relatively small. Why? According to an economic analyst because trade is more favorable to Japan and will mainly benefit her, not our farmers and fisherfolks. And Japan’s investments will generally follow the trends of investment — where transports and infrastructures already exist, not to areas in dire need of investments.

Small benefits – at what price? At the price of the Filipino farmer becoming poorer because he has no real access to the Japanese market, at the price of losing hope for our fishermen, not only because they are being edged out of municipal waters by commercial fishing – but because we open up our exclusive economic zone to Japanese marine enterprises who have the resources to exploit that stretch of sea for themselves.

Above all, the price we must pay if we approve JPEPA is that we relinquish sovereignty to a supposed foreign partner. We cede the right to legislate, we surrender the capacity to protect our own people. We give up the right to govern – and to undertake sustained development. We will be a satellite of Japan.

6. What seems even more abrasive is the proposal in JPEPA, Article 2. It says “With respect to the Philippines, the national territory as defined in Article I of its constitution, the term ‘national terrritory’ also includes the exclusive economic zone and the continental shelf to which the Philippines exercises sovereign rights or jurisdiction in accordance with its laws and regulations and international law;”

The second paragraph in the same Article copies the same provision for Japan’s exclusive economic zone and continental shelf, but as in the case of investments – the same one way traffic route prevails – because there hardly exists any Philippine investments in Japan proper, more so in the exclusive economic zone.

The Philippine was granted sovereign rights over Exclusive Economic Zone by the Law of the Sea Conference of the United Nations in the l980s, covering two hundred miles of sea and continental shelf from shoreline to sea. In such areas live fish and aquatic animals, where potential resources like oil and gas and maritime wealth may be found. In the wake of poverties, I have talked to a number of fishermen who live from day to day with their meager catch. They have not even heard of the Exclusive Economic Zone and their potentials, and thought for a while that we were talking of the depletion of municipal waters. But I believe that the nation’s leaders owe it to them to make the areas a living reality for them and their children.

Japan without JPEPA has invested substantially here. Now she wants investments under national treatment, with protection guaranties, plus access to our exclusive economic zone. Will they go fishing there for our benefit? Will they tap the marine resources for our welfare? With due respect I say – Japan has her own exclusive economic zone. Attend to that area. Leave us be.

Section 2 of Article XII of our constitution provides: The State shall protect the nation’s maritime wealth in its archipelagic waters, territorial sea, and EXCLUSIVE ECONOMIC ZONE and RESERVE ITS USE AND ENJOYMENT EXCLUSIVELY TO FILIPINO CITIZENS.” (Capital letters ours) But if we approve JPEPA we accord National Treatment to Japanese Firms to exploit the Two Hundred Mile Area of the exclusive economic zone.

The Petroleum Act, R.A. 387 provides that “all natural deposits or occurrences of petroleum or natural gas ON THE CONTINENTAL SHELF…seaward from the shores of the Philippines…BELONG TO THE REPUBLIC OF THE PHILIPPINES INALIENABLY AND IMPRECRIPTIVELY.” (Capital letters ours)

For all this, it seems only just that we say No to JPEPA. No because we cannot give away what is entrusted. No because the terms embodied therein are basically disadvantageous and unfair to the Philippines and the Filipino. No because we have a mandate to strive for a better legacy to our children. Let us respectfully but firmly say NO to JPEPA!