Post by seacid on Oct 17, 2007 16:57:46 GMT 8
opinion.inquirer.net/inquireropinion/columns/view_article.php?article_id=92902
By Solita Collas-Monsod
Inquirer
Last updated 03:40am (Mla time) 10/06/2007
MANILA, Philippines -- "Too much hysterics and too little sane reasoning," is how a colleague of mine described what is going on with respect to the hearings on the Japan-Philippine Economic Partnership Agreement (JPEPA). I agree. Time's a-wasting.
The way the agreement's opponents see it, the JPEPA is not only one-sided (in favor of Japan, naturally), but the Japanese government is doing this in order to ensure that it can use the Philippines as a dumping ground for all its toxic wastes. Which is why, their story goes, the negotiations were in secret, and copies of the agreement were withheld from the public.
But there is another side of that story, and it goes like this: the benefits of the JPEPA far exceeds the costs; there is no way the Philippines can be used as a dumping ground (in fact, the Philippines is exporting some of its toxic wastes to Japan); the negotiations, which took place over a two-year period, were never secret; and the draft agreement has been available on the Internet since sometime the end of 2003/beginning of 2004. And the agreement is renegotiated every five years anyway.
The history of the JPEPA starts, I am told, with Japan's entering, rather late, into the bilateral Free Trade Agreement (FTA) game. Previously, it preferred multilateral or unilateral action, but the emergence of China as a potential rival for leadership in East Asia, spurred it toward the so-called Comprehensive Economic Partnerships (CEP) or Closer Economic Relations (CER), which are more than just trade agreements. So the JPEPA idea was crystallized in time for President Gloria Macapagal-Arroyo's 2002 state visit to Japan.
Please note that the Philippines was the first country (after Singapore) with which Japan pursued the idea. But it has since entered into the same kind of economic partnership agreements with Malaysia, Thailand (which will be in force by November of this year) Indonesia and Brunei -- with no problems at all. In fact, with Singapore, the five-year period is already up. What's more, the agreement with Vietnam is pretty close to completion. And here we are, left at the starting post, with everybody moving in front of us.
What is the basis for the conclusion that JPEPA's benefits to us far exceed the costs? These issues were studied by a team of researchers from various institutions under the auspices of the Philippine Institute for Development Studies (PIDS). I understand the accusation has been made that the PIDS, having been financed by the Japanese aid agency, Japan International Cooperation Agency, was partial to Japan. That is another example of ad hominem arguments (you can't win on the issues, so attack the personalities). The PIDS is a government think tank, whose work is both nationally and internationally recognized. Moreover, anyone who doubts its independence and integrity has only to look at the policy research it has done, which pulls no punches, even during the Ferdinand Marcos dictatorship (of course, the language was couched rather diplomatically -- but the conclusions were still obvious).
In effect, what was found is that the JPEPA will cost the Philippines, in the form of direct foregone revenue (because of tariff reductions), something like P3.7-P4.2 billion a year. There are also costs to the bureaucracy, but these are minimal, because most of what the government should do would have been done with or without the JPEPA -- besides, the cooperation initiatives would entail government counterpart funding and would thus be limited to our own domestic absorptive capacity, taking on first the identified priority areas we could handle.
The benefits the country will derive from the JPEPA have been estimated to be anywhere between P6.5 billion to P110 billion based on current GDP figures, due to an improved investment climate (projected foreign direct investment from Japan amounting to P365 billion, plus more than 200,000 jobs, increasing as Japanese investors become comfortable and familiar with local partners). The studies also show an overall positive impact on poverty reduction (Metro Manila benefits most).
In the agreement, because of zero tariffs on both sides, the Philippines will now be open to a free flow of agricultural imports from Japan, and vice versa. Think of it, dear reader. What Japanese agricultural goods can we afford to buy? (Last time I was in Japan, a cherry cost the equivalent of $2.) On the other hand, what agricultural goods from the Philippines can the Japanese not afford to buy? Who do you think will benefit more?
With respect to services, the Japanese have opened their labor market for nurses and caregivers -- a landmark decision for them -- but the market will be filled, if we wait too long, by Indonesians and other ASEAN countries that already have an economic partnership agreement with Japan.
Now about the environmental issue -- the fear that we are going to be made a dumping ground for Japanese toxic wastes: As mentioned above, it is the Philippines that is sending toxic wastes to Japan, because we don't have the technology to manage them. Sure, the tariffs on imported wastes will be zero. But that is irrelevant -- because their importation is banned (by international as well as national fiat). And in any case, my understanding is that Japan has signed a side letter making that even clearer.
Bottom line: The JPEPA is worth it. In fact, we can't afford not to sign, because with everyone else but us on board, Japan will bring its business to them, and we may even lose what we already have. Is that what we really want?
****
LETTER TO THE EDITOR:
Response to Professor Winnie Monsod on JPEPA (October 13, 2007)
Dear Professor Monsod:
Allow a former colleague of yours from the College of Law to explain why Justice Florentino Feliciano, former Chairman of the WTO Appellate Body, deserves the kind of respect he is being paid not only by Senator Santiago, but also by a recent Philippine visitor, WTO Director General Pascal Lamy, who informed the audience at an Asian Institute of Management forum that Florentino Feliciano is an extremely famous name in Geneva and the international law community. Among many accomplishments, he is largely credited for bringing the principles of public international law into international trade law. He is also a much-sought after judge in international investment disputes in the ICSID (International Centre for the Settlement of Investment Disputes) and NAFTA (North American Free Trade Agreement).
First, you are mistaken if your impression is that the JPEPA debates are the same as the WTO debates. The JPEPA is a zoo containing several animals foreign to WTO law - regulation of investment measures other than trade-related investment measures, undertakings on competition policy, improvement of business environment, and cooperation measures. Regulation of investment measures alone (Chapter 8) is an entire field of public international law itself - international investment law - and has jurisprudence and history that blossomed independently of WTO law.
Thus, if a case were to be brought on the JPEPA's investment chapter (Chapter 8), this will be interpreted by comparing its text not with the WTO text, for the latter has no comparable provision, but with bilateral and plurilateral investment treaties, such as Japan's and the Philippines' various bilateral investment treaties, and with NAFTA's investments portion. In fact, the Philippines has familiarity only with some, but not all, the prohibitions against performance requirements. JPEPA is the first treaty where the Philippines promises never to impose nationality hiring requirements or technology transfer requirements on any foreign investment. JPEPA contains obligations larger than the WTO's and intrudes more deeply into economic policy-making than the WTO does. WTO only regulates trade; JPEPA regulates almost any kind of economic policy or administrative measure that affects trade with Japan and Japanese investments. Any discussion on the JPEPA
before the Supreme Court will not be decided on the same kind of obligations as were scrutinized in the WTO debate.
Annex 6 which you point out, does not regulate measures that are not "measures affecting trade in services" (Article 71). "Measures affecting trade in services" are "purchase, payment, use, access to, supply of, commercial presence for supply "of service." Neither does it cover regulation of investments in the non-service aspects of an enterprise. However, services have aspects of the business that do not constitute supply of service. Japan, Malaysia, Thailand and Indonesia, listed conditions affecting service sectors not only in their equivalent of Annex 6 but also in their equivalent of Annex 7 (Investments) to ensure that nothing fell "within the cracks", and to save themselves the trouble of having to define what is the service and non-service aspect of an enterprise. The UNCTAD had already warned developing countries of a serious misimpression- that trade in services rules can be easily segregated from the larger context of investment regulation
(Investment Provisions in EIAs, 2006). Senators Mar Roxas and Johnny Enrile saw this. This cautionary view is justified by the fact that the definition of "investments" under Article 88 is so exhaustive that any and all kinds of property or contract rights, real or inchoate, passive or active, are covered, including shares of stocks held by Japanese individuals or Japanese entities. Article 89 requires that those properties and rights, must be fully treated, as if, they were Filipino.
What happens then in a case where a Japanese private citizen, in his individual capacity, wishes to buy additional shares that would increase the total foreign equity in a public utility beyond 40%? Is it the chapter on services or the chapter on investments that will govern? A textual interpretation of Article 88, from the point of international investment law can very well lead to the conclusion that in this case, the Japanese can, because the Japanese is not purporting to operate the public utility, but only own a small part of the investment vehicle that is a public utility. This can also be the result if a similar situation were to take place in education, advertising, etc. The advice of Feliciano - do what the Japanese and the other ASEAN countries did - reserve comprehensively; over-reserve than under-reserve.
This is the kind of line-by-line scrutiny that the JPEPA will be subjected to in case Japan were to sue us under Chapter 15's provisions on State-to-State disputes. The dispute settlement tribunal will not determine the Philippines' rights according to the negotiators' impression that a small device they inserted in Article 87 paragraph 4 was enough to ensure compliance with the Constitution. The tribunal will look at the text, and if the text requires us to grant national treatment to a Japanese national in the passive ownership of shares in a public utility, as Article 89 requires, even if it were contrary to the Constitution, there is a treaty breach if we refuse to allow the purchase of stock by the Japanese investor. The tribunal will look, not at GATT or WTO jurisprudence, but at ICSID and NAFTA jurisprudence for guidance. What Justice Feliciano therefore suggests, to prevent such a situation, is to fully cite pertinent constitutional provisions in
Annex 7. If only the kind of care were given to Annex 7 that Annex 6 got (thanks to DDG Songco), we would not be in this terrible mess. Unfortunately, her fine work cannot extend to investment measures that are not "investments in services," that are not measures affecting "trade in services," or that do not concern access to the Philippine market by Japanese service suppliers.
I suggest we also listen to Justice Feliciano's advice on rectifying the most egregious constitutional failure of the JPEPA - the failure to make any reservation for future measures. The Philippines essentially abdicated its legislative power to enact preferential, protective or even developmental measures over Japanese investments. The enormity of this failure is dramatized by the contrasting comprehensive reservations made by Malaysia, Thailand and Indonesia in their EPAs with Japan, and by Japan itself in its reservations in JPEPA. These countries assured themselves full flexibility to impose or adjust future preferential measures over large sectors of the economy, and to impose performance requirements, such as transfer of technology, hiring policies, etc. For nothing, we assured Japan that never shall we employ those kinds of policies, even if absolutely needed by Filipinos, against Japanese investors. This is contrary to specific constitutional
provisions that require the State to intervene when necessary.
No, Winnie, the emperor has clothes, and he was, as usual, wearing his finest and wisest judicial robes.
MA. LOURDES "MEILOU" SERENO
Former Professor, UP College of Law
Former Counsellor, WTO Appellate Body
October 13, 2007
By Solita Collas-Monsod
Inquirer
Last updated 03:40am (Mla time) 10/06/2007
MANILA, Philippines -- "Too much hysterics and too little sane reasoning," is how a colleague of mine described what is going on with respect to the hearings on the Japan-Philippine Economic Partnership Agreement (JPEPA). I agree. Time's a-wasting.
The way the agreement's opponents see it, the JPEPA is not only one-sided (in favor of Japan, naturally), but the Japanese government is doing this in order to ensure that it can use the Philippines as a dumping ground for all its toxic wastes. Which is why, their story goes, the negotiations were in secret, and copies of the agreement were withheld from the public.
But there is another side of that story, and it goes like this: the benefits of the JPEPA far exceeds the costs; there is no way the Philippines can be used as a dumping ground (in fact, the Philippines is exporting some of its toxic wastes to Japan); the negotiations, which took place over a two-year period, were never secret; and the draft agreement has been available on the Internet since sometime the end of 2003/beginning of 2004. And the agreement is renegotiated every five years anyway.
The history of the JPEPA starts, I am told, with Japan's entering, rather late, into the bilateral Free Trade Agreement (FTA) game. Previously, it preferred multilateral or unilateral action, but the emergence of China as a potential rival for leadership in East Asia, spurred it toward the so-called Comprehensive Economic Partnerships (CEP) or Closer Economic Relations (CER), which are more than just trade agreements. So the JPEPA idea was crystallized in time for President Gloria Macapagal-Arroyo's 2002 state visit to Japan.
Please note that the Philippines was the first country (after Singapore) with which Japan pursued the idea. But it has since entered into the same kind of economic partnership agreements with Malaysia, Thailand (which will be in force by November of this year) Indonesia and Brunei -- with no problems at all. In fact, with Singapore, the five-year period is already up. What's more, the agreement with Vietnam is pretty close to completion. And here we are, left at the starting post, with everybody moving in front of us.
What is the basis for the conclusion that JPEPA's benefits to us far exceed the costs? These issues were studied by a team of researchers from various institutions under the auspices of the Philippine Institute for Development Studies (PIDS). I understand the accusation has been made that the PIDS, having been financed by the Japanese aid agency, Japan International Cooperation Agency, was partial to Japan. That is another example of ad hominem arguments (you can't win on the issues, so attack the personalities). The PIDS is a government think tank, whose work is both nationally and internationally recognized. Moreover, anyone who doubts its independence and integrity has only to look at the policy research it has done, which pulls no punches, even during the Ferdinand Marcos dictatorship (of course, the language was couched rather diplomatically -- but the conclusions were still obvious).
In effect, what was found is that the JPEPA will cost the Philippines, in the form of direct foregone revenue (because of tariff reductions), something like P3.7-P4.2 billion a year. There are also costs to the bureaucracy, but these are minimal, because most of what the government should do would have been done with or without the JPEPA -- besides, the cooperation initiatives would entail government counterpart funding and would thus be limited to our own domestic absorptive capacity, taking on first the identified priority areas we could handle.
The benefits the country will derive from the JPEPA have been estimated to be anywhere between P6.5 billion to P110 billion based on current GDP figures, due to an improved investment climate (projected foreign direct investment from Japan amounting to P365 billion, plus more than 200,000 jobs, increasing as Japanese investors become comfortable and familiar with local partners). The studies also show an overall positive impact on poverty reduction (Metro Manila benefits most).
In the agreement, because of zero tariffs on both sides, the Philippines will now be open to a free flow of agricultural imports from Japan, and vice versa. Think of it, dear reader. What Japanese agricultural goods can we afford to buy? (Last time I was in Japan, a cherry cost the equivalent of $2.) On the other hand, what agricultural goods from the Philippines can the Japanese not afford to buy? Who do you think will benefit more?
With respect to services, the Japanese have opened their labor market for nurses and caregivers -- a landmark decision for them -- but the market will be filled, if we wait too long, by Indonesians and other ASEAN countries that already have an economic partnership agreement with Japan.
Now about the environmental issue -- the fear that we are going to be made a dumping ground for Japanese toxic wastes: As mentioned above, it is the Philippines that is sending toxic wastes to Japan, because we don't have the technology to manage them. Sure, the tariffs on imported wastes will be zero. But that is irrelevant -- because their importation is banned (by international as well as national fiat). And in any case, my understanding is that Japan has signed a side letter making that even clearer.
Bottom line: The JPEPA is worth it. In fact, we can't afford not to sign, because with everyone else but us on board, Japan will bring its business to them, and we may even lose what we already have. Is that what we really want?
****
LETTER TO THE EDITOR:
Response to Professor Winnie Monsod on JPEPA (October 13, 2007)
Dear Professor Monsod:
Allow a former colleague of yours from the College of Law to explain why Justice Florentino Feliciano, former Chairman of the WTO Appellate Body, deserves the kind of respect he is being paid not only by Senator Santiago, but also by a recent Philippine visitor, WTO Director General Pascal Lamy, who informed the audience at an Asian Institute of Management forum that Florentino Feliciano is an extremely famous name in Geneva and the international law community. Among many accomplishments, he is largely credited for bringing the principles of public international law into international trade law. He is also a much-sought after judge in international investment disputes in the ICSID (International Centre for the Settlement of Investment Disputes) and NAFTA (North American Free Trade Agreement).
First, you are mistaken if your impression is that the JPEPA debates are the same as the WTO debates. The JPEPA is a zoo containing several animals foreign to WTO law - regulation of investment measures other than trade-related investment measures, undertakings on competition policy, improvement of business environment, and cooperation measures. Regulation of investment measures alone (Chapter 8) is an entire field of public international law itself - international investment law - and has jurisprudence and history that blossomed independently of WTO law.
Thus, if a case were to be brought on the JPEPA's investment chapter (Chapter 8), this will be interpreted by comparing its text not with the WTO text, for the latter has no comparable provision, but with bilateral and plurilateral investment treaties, such as Japan's and the Philippines' various bilateral investment treaties, and with NAFTA's investments portion. In fact, the Philippines has familiarity only with some, but not all, the prohibitions against performance requirements. JPEPA is the first treaty where the Philippines promises never to impose nationality hiring requirements or technology transfer requirements on any foreign investment. JPEPA contains obligations larger than the WTO's and intrudes more deeply into economic policy-making than the WTO does. WTO only regulates trade; JPEPA regulates almost any kind of economic policy or administrative measure that affects trade with Japan and Japanese investments. Any discussion on the JPEPA
before the Supreme Court will not be decided on the same kind of obligations as were scrutinized in the WTO debate.
Annex 6 which you point out, does not regulate measures that are not "measures affecting trade in services" (Article 71). "Measures affecting trade in services" are "purchase, payment, use, access to, supply of, commercial presence for supply "of service." Neither does it cover regulation of investments in the non-service aspects of an enterprise. However, services have aspects of the business that do not constitute supply of service. Japan, Malaysia, Thailand and Indonesia, listed conditions affecting service sectors not only in their equivalent of Annex 6 but also in their equivalent of Annex 7 (Investments) to ensure that nothing fell "within the cracks", and to save themselves the trouble of having to define what is the service and non-service aspect of an enterprise. The UNCTAD had already warned developing countries of a serious misimpression- that trade in services rules can be easily segregated from the larger context of investment regulation
(Investment Provisions in EIAs, 2006). Senators Mar Roxas and Johnny Enrile saw this. This cautionary view is justified by the fact that the definition of "investments" under Article 88 is so exhaustive that any and all kinds of property or contract rights, real or inchoate, passive or active, are covered, including shares of stocks held by Japanese individuals or Japanese entities. Article 89 requires that those properties and rights, must be fully treated, as if, they were Filipino.
What happens then in a case where a Japanese private citizen, in his individual capacity, wishes to buy additional shares that would increase the total foreign equity in a public utility beyond 40%? Is it the chapter on services or the chapter on investments that will govern? A textual interpretation of Article 88, from the point of international investment law can very well lead to the conclusion that in this case, the Japanese can, because the Japanese is not purporting to operate the public utility, but only own a small part of the investment vehicle that is a public utility. This can also be the result if a similar situation were to take place in education, advertising, etc. The advice of Feliciano - do what the Japanese and the other ASEAN countries did - reserve comprehensively; over-reserve than under-reserve.
This is the kind of line-by-line scrutiny that the JPEPA will be subjected to in case Japan were to sue us under Chapter 15's provisions on State-to-State disputes. The dispute settlement tribunal will not determine the Philippines' rights according to the negotiators' impression that a small device they inserted in Article 87 paragraph 4 was enough to ensure compliance with the Constitution. The tribunal will look at the text, and if the text requires us to grant national treatment to a Japanese national in the passive ownership of shares in a public utility, as Article 89 requires, even if it were contrary to the Constitution, there is a treaty breach if we refuse to allow the purchase of stock by the Japanese investor. The tribunal will look, not at GATT or WTO jurisprudence, but at ICSID and NAFTA jurisprudence for guidance. What Justice Feliciano therefore suggests, to prevent such a situation, is to fully cite pertinent constitutional provisions in
Annex 7. If only the kind of care were given to Annex 7 that Annex 6 got (thanks to DDG Songco), we would not be in this terrible mess. Unfortunately, her fine work cannot extend to investment measures that are not "investments in services," that are not measures affecting "trade in services," or that do not concern access to the Philippine market by Japanese service suppliers.
I suggest we also listen to Justice Feliciano's advice on rectifying the most egregious constitutional failure of the JPEPA - the failure to make any reservation for future measures. The Philippines essentially abdicated its legislative power to enact preferential, protective or even developmental measures over Japanese investments. The enormity of this failure is dramatized by the contrasting comprehensive reservations made by Malaysia, Thailand and Indonesia in their EPAs with Japan, and by Japan itself in its reservations in JPEPA. These countries assured themselves full flexibility to impose or adjust future preferential measures over large sectors of the economy, and to impose performance requirements, such as transfer of technology, hiring policies, etc. For nothing, we assured Japan that never shall we employ those kinds of policies, even if absolutely needed by Filipinos, against Japanese investors. This is contrary to specific constitutional
provisions that require the State to intervene when necessary.
No, Winnie, the emperor has clothes, and he was, as usual, wearing his finest and wisest judicial robes.
MA. LOURDES "MEILOU" SERENO
Former Professor, UP College of Law
Former Counsellor, WTO Appellate Body
October 13, 2007