JPEPA

Presented by:
Shin, Kevyn Shaira
Ishida, Yuka
Sabado, Kricia

Table of Contents
I.

PROBLEM STATEMENT
Objectives of the Study
Methodology
Scope and Limitations
Significance of the study

II.

INTRODUCTION
Background of JPEPA
JPEPA Objectives
Major Elements of the JPEPA

III.

TRADE INDICATORS
Trade in Goods
Trade in Service
Investments
Movements of Natural Persons

IV.

POTENTIAL GAINS AND OPPURTUNITIES

V.

ISSUES AGAINST JPEPA

VI.

TREATIES SIGNED BY THE PHILIPPINES ON IMPORTATION OF TOXIC

WASTE

VII.

ADRESSING THE ENVIROMENTSAL ISSUE

VIII. RECENT DEVELOPMENT AND CHALLENGES

IX.

THEORITICAL FRAMEWORK

X.

CONCLUSION

Problem Statement:
Japan-Philippines Economic Partnership Agreement is the most important bilateral economic
agreement the Philippines has entered into with intentions of equal benefits for partner countries
on the other hand there are some negative implications and effects posed by the agreement.

Objectives of the study:

1. To discuss our current status of our trade relations with Japan.
2. To discuss the events that led to the formation of JPEPA.
3. To identify the objectives of the agreement.
4. To determine the economic benefits that the Philippines can get from JPEPA.
5. To determine the advantages and disadvantages of the partnership agreement.
6. To assess the impact of the agreement on the economy of Philippines.

Scope and Limitations:

This paper looks the economic gains and losses brought about by JPEPA. It also delves into
environmental projections in line with importation of hazardous wastes into the country. This
paper is an analysis of the positive and negative implications posed the Japan-Philippines
Economic Partnership Agreement (JPEPA). Firstly, it tackles on the background to the
implementation of the agreement. Secondly, it looks at JPEPA in terms of the potential economic
gains especially on labour dimension derived from the agreement and the potential losses given
its environmental implications. It cites provisions in the JPEPA that specifically tackles on
movement of labor and the environment especially with regards to the importation of wastes
under the zero-tariff policy. Moreover, it will make use of environmental projections on the
extent of the negative effects posed by the agreement.
3

Methodology

Significance of the Study

JPEPA is one of the much debated issues of Philippine Foreign Policy. JPEPA was signed on September 9,
2006 and ratified by the Philippine Senate on December 11, 2008. Since its ratification, JPEPA has been
widely criticized by various sectors of the society. Widely decried as a bad deal for the Philippines, it has
since been revealed that JPEPA contains a mass of loop holes and legal language designed to favour
Japans economy. JPEPA allows freer trade and the movement of labour which is significant to the part
of the Philippines since a portion of its GDP comes from remittances of migrant workers. However, there
are provisions of the agreement itself which are detrimental and contradictory to our own constitution
and to our national interest. Although this bilateral agreement promotes free trade and is in line with
the economic liberalization goal of the Philippines, a problem often cited is the importation of hazardous
wastes into the country under the zero-tariff JPEPA regime. Government officials in the Philippines and
in Japan have repeated claims that the inclusion of waste streams in the tariff elimination program was
merely a technicality and would not trump the national laws of the Philippines and the Basel Convention
which aims to minimize the trans boundary movement of hazardous waste and requires Parties to
become self-sufficient in wastes covered under the Convention (Basel Action Network report, 2007). In
this light, it is important to weigh in the positive and negative impacts of the agreement. This paper
specifically aims to determine whether the economic gains from JPEPA especially in terms of labor could
offset the negative environmental consequences fronted by the agreement.

INTRODUCTION

I.

BACKGROUND OF JPEPA

JPEPA is a comprehensive bilateral trade and investment agreement between Japan and the
Philippines aimed at increasing trade and investment opportunities between the two economies.
It is the first bilateral free trade agreement (FTA) for the Philippines after 50 years. Japan, on the
other hand, has signed FTAs with six economies (Singapore, Mexico, Malaysia, Indonesia, the
Philippines, Thailand, and Brunei) and is on various phases of FTA negotiations with other three
economies (South Korea, Vietnam, and India). Japan is also actively pursuing FTA with the 10member ASEAN bloc with a view of finishing it up by November 2007 during the 13th ASEAN
Summit.

JPEPA was initiated during President Gloria Macapagal-Arroyos visit to Japan in December
2002. The formal negotiations between the Philippines and Japan started in February 2004.
President Arroyo and then-Japanese Prime Minister Junichiro Koizumi agreed on major elements
of JPEPA in November 2004 that would lead to the immediate removal of tariffs on certain
fruits, vehicles, steel products, electronic appliances, and garments. The JPEPA was signed in
Helsinki, Finland on 9 September 2006.

The Philippines-Japan Economic Partnership Agreement (PJEPA) is considered a milestone in

Philippine international trade relations for several reasons. It is the first and so far, the only
bilateral economic partnership agreement (EPA) entered into by the country. Similar
international engagements of the Philippines are increasingly being negotiated multilaterally in
the context of the countrys membership in the ASEAN. Secondly, the PJEPA is a New Age
Free Trade Agreement (FTA). Going beyond the elimination of tariffs on traded goods which
characterizes an FTA, the PJEPA includes provisions for the smooth trans-border flow of people,
capital and information in areas such as investment, competition, government procurement, trade
facilitation, cooperation in science in and technology (S&T), human resource development
5

(HRD), small and medium enterprises (SMEs) and the environment (Yap, Medalla and Aldaba,
2006). The design of a comprehensive partnership highlights the capacity building and
cooperation aspects of an EPA especially in areas considered to be important in helping the
country achieve sustainable growth and address development gaps. Thirdly, the PJEPA is
significant for triggering strong opposition and lobbying by certain segments of Philippine
society. Owing perhaps to the unfamiliar nature of an EPA and apprehension about its possible
negative impact, several interest groups voiced their concerns when the signing of the PJEPA
was announced. As a result, while the Japanese Diet ratified the agreement in December 2006,
three months from the signing of the agreement, the corresponding process in the Philippines
dragged on with the PJEPA ratified by the Senate on October 8, 2008, almost two years later.
Given the limited time that has elapsed since the start of the implementation of PJEPA, it is
premature to undertake a comprehensive assessment of the impact of the agreement. It would
take time for the effects on the overall investment environment and capacity building to take
root, and thus for the fuller and wider impact of the agreement to manifest. However, initial
trends and qualitative factors can already give some indication of the effects thus far of the
PJEPA from certain key perspectives which will be discussed in this study. The study will also
surface pending issues of particular concern to the country that remain inadequately
JPEPA was built on the long-standing relationship between Japan and the Philippines. Japan
plays an important role in the economic development of the country. For several decades, Japan
has been the second largest trading partner of the Philippines, even without the benefit of a trade
or economic agreement between the two countries. Japan has also been the major source of
Official Development Assistance (ODA), Foreign Direct Investments (FDI), and remittances
from over 200,000 Filipino workers in Japan. The Philippines, on the other hand, remains an
important potential market and partner for Japan. Hence, JPEPA was seen as the next best step
towards further expanding and developing this economic partnership.
In January 2002, former Japanese Prime Minister Junichiro Koizumi proposed the Initiative for
Japan-ASEAN Comprehensive Economic Partnership. During the JapanASEAN Forum in April
of the same year, it was decided that bilateral economic partnerships under such an initiative will
be explored. Formal negotiations started in December 2003. Close to three years after this
6

announcement, JPEPA was formally signed on 9 September 2006 in Helsinki during the Summit
of the Asia-Europe Meeting. JPEPA was immediately ratified by the Japanese Diet in December
2006, but it took the Philippine Senate another two years to ratify the Agreement on 8 October
2008. JPEPA entered into force with the conclusion of the Agreement and the accompanying
Exchange of Notes on 11 December 2008. Political approval for JPEPA was adversely affected
by negative lobby and strong opposition from certain segments of the society.
Akin to other Economic Partnership Agreements (EPAs) entered into by Japan, JPEPA is
anchored on three pillars: liberalization, facilitation and cooperation. It is a comprehensive
economic partnership that includes not only the removal of tariff and nontariff barriers, but also
involves cooperation in a wide range of economic activities. JPEPA belongs to the breed of
New Age FTAs, which have been developed to address pressures arising from the growing
trend in regionalism, globalization, and technological progress. New Age FTAs include efforts
towards the smooth transborder flow of people, capital, and information along with areas like
investment, competition, government procurement, trade facilitation, cooperation in science and
technology (S&T), human resource development (HRD), small and medium enterprises (SMEs)
and the environment. (Yap, Medalla and Aldaba, 2006).
The approval of JPEPA was underpinned by the following principles:
a) Consistency with Philippine agenda and objectives of reforms. Trading arrangements are
mechanisms through which the Philippine government can advance its own reform objectives.
JPEPA is seen to contribute in the promotion of global competitiveness, sustainable growth,
efficiency allocation, and poverty allocation, which provided the Philippine government
adequate motivation to set the Agreement in place.
b) Promotion of balance between multilateralism and bilateralism. There are questions that
pertain to the consistency between multilateral and bilateral trade arrangements that are being
negotiated at the country level. There are perceptions that bilateral trade arrangements tend to
divert trading, resources (e.g., especially in form of government resources that can be utilized for
multilateral negotiations), and political efforts (that could deplete political capital in undertaking
domestic reforms).
7

It is indeed ideal to put in place multilateral framework where trading rules and practices are
transparent, resulting in optimum welfare, competitiveness, and specialization. However, there
are constraints in capacities, especially among developing countries that undermine their active
and proactive participation in global trading negotiations. It is thus recognized that bilateral
arrangements are equally important in moving forward with the agenda of liberalization.
Pursuing bilateral arrangements has become the more practical and feasible approach that allows
member countries to:
i) create a testing ground towards gradual liberalization, thereby enabling the vulnerable sectors
to mitigate the possible adverse impacts;
ii) take the initial step towards multilateralism. Bilateral arrangements provide small countries
with bargaining tools in advancing their interests, which would not be readily available in a
multilateral set-up. Bilateral arrangements create an enabling environment for regional
integration that helps the region articulate its position in the multilateral WTO; and
iii) provide defensive mechanism, that could shield the member country from the adverse
impacts that could possibly arise from other preferential trade agreements (PTAs).
JPEPA Objectives
1. Liberalize and facilitate trade in goods and services between the Parties;
2. Facilitate the mutual recognition of the results of conformity assessment procedures for
products or processes;
3. Increase investment opportunities and strengthen protection for investments and investment
activities in the Parties;
4. Enhance protection of intellectual property and strengthen cooperation thereof to promote free
trade and investment between the Parties;
5. Promote transparency in government procurement in the Parties;
6. Promote competition by addressing anti-competitive activities and cooperate in the field of
competition;
8

Major Elements of the JPEPA

I. General Provisions
Salient Features
Review of Laws and Regulations
Each Party shall gauge the possibility of amending or repealing laws and regulations relating to
the JPEPA, if the circumstances or objectives justifying their adoption no longer exist or if such
circumstances or objectives can be addressed in less trade-restrictive means.
Public Comment Procedures
The Japanese and Philippine governments shall endeavor to provide a reasonable opportunity for
public consultations before the adoption, amendment or repeal of regulations that affect any
matter covered by the Agreement.
Measures Against Corruption
Each Party shall ensure that measures are taken to prevent and combat corruption regarding
matters covered by this Agreement, consistent with its laws and regulations.
Implementing Agreement
The governments of the Parties shall conclude a separate Implementing Agreement which shall
set forth the details and procedures for the implementation of the JPEPA.
Joint Committee
A Joint Committee composed of representatives from the governments of Japan and the
Philippines shall be established and shall have the following functions:
a) to review the implementation and operation of the JPEPA; b) to consider and recommend to
the Parties any amendments to the Agreement; c) to supervise and coordinate the work of the
Sub-Committees; d) to adopt the Operational Procedures on Trade in Goods and ROO referred to
in Article 25, and the Operational Procedures on Mutual Recognition referred to in Article 65;
9

the Rules of Procedure referred to in Article 159; and any necessary decisions; and e) to perform
other functions as the Parties may agree.
In addition, the following Sub-Committees shall be established on the date of entry into force of
the JPEPA:
a) Sub-Committee on Trade in Goods;
b) Sub-Committee on ROO;
c) Sub-Committee on Customs Procedures;
d) Sub-Committee on Mutual Recognition;
e) Sub-Committee on Trade in Services;
f) Sub-Committee on Investment;
g) Sub-Committee on Movement of Natural Persons;
h) Sub-Committee on Intellectual Property;
i) Sub-Committee on Government Procurement;
j) Sub-Committee on Improvement of the Business Environment; and
k) Sub-Committee on Cooperation.
Other Sub-Committees may be established as the Parties may agree. Also, the details regarding
the Sub-Committees may be specified in the Implementing Agreement.
Communications
Each Party shall designate a contact point for communications between the Parties on matters
regarding the JPEPA.

10

II.

TRADE INDICATORS

Impacts on specific sectors

The more significant gains from JPEPA arise not from greater market access resulting from its
FTA provisions on reduced tariffs, but from improvements in investment climate that ensue from
the enhanced features of the Agreement. The Philippines is envisaged to benefit considerably
from Japanese capital, technology and expertise that would help put the country in a better
position to meet the challenges and opportunities posed by the new age. The economic
cooperation with Japan is seen to contribute in hastening the countrys ability to develop at a
pace comparable with its East Asian neighbors.
JPEPA emphasizes cooperation on a wide range of areas, including HRD, S&T, trade and
investment promotion, SME, and the environment as previously mentioned and also covers
financial services, energy and environment, and transportation, among others. It promotes the
liberalization of tourism and travel related services, business outsourcing, banking and other
financial services, recreational, cultural and sporting services, advertising, management
consulting, audio visual services, environmental services, and value added services in
telecommunications, among others.
Microlevel studies identify gainers to include electronics and ICT (Escolar, 2004), garments
(Escolar, 2004), medical services, particularly nursing care (Tullao, 2004;Rodolfo,2004), tourism
and retirement industry (Rodolfo,2004), and agriculture (Tan and Bello,2004 ). On the other
hand, based on initial studies and assumptions, sectors that areexpected to lose are the cement
and motor vehicle parts and components. However, the negative impacts from JPEPA could be
reversed if the affected sectors enhance and link their technical capabilities with existing
Japanese manufacturing networks and the ASEAN Industrial Cooperation Scheme.
1. TRADE IN GOODS
Japan is the second largest trading partner of the Philippines next to the US. In 2006, Japan amounted to
US$7.9 billion or 17% of the countrys total exports. The leading Philippine exports to Japan consist of
electronic products, woodcraft furniture, and ignition wiring sets, fresh bananas, and iron ores. Japan is
11

our biggest export market for asparagus, bananas, papayas, nata de coco, mangoes, chicken, shrimps and
prawns, and yellow fin tuna.
Philippine imports from Japan were pegged at US$7.3 billion in 2006 or 14% of total imports. The
leading Philippine imports from Japan consist of electronic products, industrial machinery and equipment,
transport equipment, iron and steel and electrical machinery.

Top 5 Philippine Products Traded with Japan: 2004-2006 (in million US$)

Source: National Statistics Office

Considering that Japan exports industrial products, while the Philippine exports consist mainly of
agricultural products, some sectors are of the opinion that there is a trade deficit in favour of Japan.
Based on data, however, the trade deficit is in favor of the Philippines as shown below:

12

From 2006 to 2011, PJEPA trade in goods was consistently in favor of the Philippines. Some of
the Philippine exports to Japan are industrial products mostly from Japanese manufacturers in the
Philippines. Thus, it is not true that Philippine exports to Japan consist mainly of bananas and
pineapple.
JPEPA aims to improve access to market for goods traded between the two countries, through
the elimination or reduction in customs duties applied on these goods. JPEPA targets to remove
these barriers in the next 10 years for both agricultural and nonagricultural products.
JPEPA can be considered as an extension of the overall tariff reduction program of the
Philippine government, since it has initiated this reduction in the manufacturing sector which
comprises the bulk of Philippine exports. JPEPA is expected to usher in a - 8.88% change in the
overall nominal tariff rate, resulting in a -0.12% (Cororation, 2004) reduction in production cost.
This reduction in nominal tariff rate and production cost can be translated, in turn, into
improvements in the Philippine export competitiveness. JPEPA covers 5,968 tariff lines of
Philippine imports; around 66% (3,947) of these imported Japanese goods were given A
classification, implying an immediate removal of tariff. The rest would be subjected to gradual
tariff reduction. Among the goods subjected to gradual tariff reduction are automotive, iron and
steel, in line with the Philippine commitment to the ASEAN Free Trade Area (AFTA) to
eliminate tariffs by 2010 for the ASEAN-6.

13

A total of 91.6% of the goods subject to immediate tariff elimination are industrial goods, while
8.4% are agriculture goods. Among the products included for immediate tariff elimination are
machinery and equipment, clothing and textiles, organic chemicals and pharmaceutical products,
and other miscellaneous manufactured products.

Close to 95% (measured in value) of Philippine industrial and agricultural exports face zero
duties immediately from the implementation date. Prior to JPEPA, most of the Philippine
products already had free access to the Japanese market with almost 80% bearing 3% tariff or
less, comparable to the average tariff on imports from Japan of around 2.5%
JPEPA also covers 7,476 tariff lines of Philippine exports; 93% is composed of industrial goods,
while the rest are agricultural products. Around 80% (5,994 product lines) of these goods are
scheduled for immediate tariff elimination.
14

Over 90% of imported Japanese products are subject to immediate removal of tariffs; most of
which are industrial in nature. The rest of the tariff lines are either excluded from any
commitments or subject to renegotiations. Among the products excluded are: agricultural
products such as boneless meat of bovine animals, fresh Pacific salmon, frozen red and Atlantic
salmon, trout, herrings, cod, sardines, mackerel, frozen Bluefin tuna fillets, scallops, milk and
cream, whey, butter and dairy spreads, wheat and meslin, barley, rice, wheat starch, animal and
vegetable oils and pineapples weighing more than 900 grams. Meanwhile, products subjected to
renegotiations are: agricultural goods such as meat of bovine, meat of swine, bigeye tunas,
Bluefin tunas, long finned tunas, tanner crabs, certain dairy products, maize flour and starch.
Government figures showed that Japan is the biggest source of imports for the Philippines,
accounting for 12% of the total in FY2009. Recorded payments amounted to US$465.34 million,
15

compared with the US$394 million in 2009. Despite increasing imports from Japan, revenue
from the countrys exports to Japan reached US$507.58 million, generating a total trade value of
$973.01 million and US$42.34 million trade surplus for the Philippines.

However, in terms of trade share in Japan, the Philippines lagged behind other middle income
countries in ASEAN in 2009. Japans imports from the Philippines represent only 1.2% of its
total import volume. This figure tails behind Japans imports from Indonesia, Malaysia, Thailand
and Vietnam.

16

Percent share of Philippine major trading partners, 2005

17

The Philippine exports to Japan have been rising steadily since 2009, the year PJEPA was
implemented. Japan was the top destination for Philippine exports in 2011, receiving 18% of
total volume exported and dislodging the United States which received the highest value of
Philippine exports in 2009 (Table 3).

18

On the import side, the value of Japans exports to the Philippines has not risen sharply since
PJEPA. The figure rose in 2010 but fell slightly in 2011, arising mainly from the huge impact of
the Tsunami. The share registered at 11.55% of total Philippine imports during the period 2010
2011, lower than in the previous periods 2006-2008 and 2009 (Table 4).

Before PJEPA, the Philippines was a steadily declining trade partner of Japan both in terms of
trade and investments. While Japan is considered a major export destination for the Philippines,
from Japans perspective the Philippines is a minor source of its imports. Japans imports from
the Philippines as percentage of its total imports dropped from 1.4 % in 2008 to 1.11% in 2009,
increasing slightly in 2009 before falling again to 1.14% in 2010.
19

(a) Agriculture
Agriculture remains one of the most sensitive issues in trade negotiations, as they are equally
sensitive in WTO discussions. Of the tariff lines that are either excluded from any commitments
or subject to renegotiations, majority of the products belongs to the agriculture sector.
As Japan remains largely protective of its agriculture and fishery sectors, many of these products
were excluded from tariff elimination under JPEPA. More than half of Japans agricultural
products are subject to deferred tariff elimination. Tariff rate quotas (TRQs) have been applied
for a limited number of products, while many others are for renegotiation and reduction in a
period ranging from three to 15 years.
The list of products excluded from tariff elimination includes: cigarettes containing tobacco, rice,
and rice-related products (e.g. rice flour). On the other hand, Japan agreed on the tariff
elimination for products such as yellow fin tuna and skipjack on the fifth year and for products
such as small bananas only on the tenth year. Tariffs for products, such as coffee, beer,
fertilizers, fresh or dried mangoes, and fermented beverages were to be immediately eliminated.
On the part of the Philippines, it committed to the elimination of tariffs for a number of products,
such as lobsters, shrimps, crabs, cashew nuts, almonds, walnuts, hazel nuts, grapes, apples, and
pears. It also agreed to tariff reduction over the next 10 years for the rest of agricultural products.
For rice, all tariff lines have been excluded from any tariff elimination, reduction, or
renegotiation. Further, the Philippines did not make any commitments related to TRQs,
renegotiation, and tariff reduction schedule in a period less than or more than 10 years.
Notwithstanding the protectionist tendencies characteristic in the agriculture sector, the
Philippine agriculture is not going to be negatively affected and can still be considered as a
significant gainer. The high tariffs in Japan that prevail in Japan are mainly applied on
agricultural products. Reduction in tariffs is therefore expected to contribute in improving the
Philippines market access and market share. Prior to JPEPA, Philippine products such as
pineapples and bananas dominated the Japanese market, despite the high tariffs that prevailed at
the time. In contrast, lowering tariffs applied onJapanese products is not expected to pose a
20

serious threat to domestic producers because of the relatively expensive costs of Japanese
agricultural products.
Other gainers for Philippine agriculture include shrimps, crabs, prawns, mangoes, cane molasses,
chicken and tuna where the Philippines has established an advantage as a major exporter. Japan
also agreed to grant a favorable treatment to Philippine sugar, chicken, pineapples, fishery
products, and bananas.
To take advantage of the opportunities under JPEPA, it is necessary that Filipino exporters put
serious attention on food quality and safety, which are sensitive considerations for the Japanese
market. Attention should be devoted to the production of hormone free, even-sized, properly
packed, and hygienic products. JPEPA promotes mutual recognition and conformity assessment
procedures for products and processes component (including sanitary and pytho-sanitary
measures or SPS), which aim to help Philippines exporters meet Japans standards and
requirements. Technical cooperation and investment cooperation could be explored to address
the weaknesses in the agriculture sector. Improving capacities on SPS measures and exchange of
information and training could be actively negotiated.
Philippine agricultural exports, which are subject to immediate tariff removal under JPEPA,
include marine products such as frozen lobsters, frozen shrimps and prawns; and fruits and
vegetables such as coconuts, cashew nuts, mangoes, papayas, durians, potatoes, cabbages,
lettuce, carrots, cucumbers, globe artichokes, asparagus, celery, mushrooms, truffles, and spinach
(Annex 3).

21

(b) Industrial products

Prior to JPEPA, most of the industrial products coming from the Philippines already had low
tariffs that ranged from 0 to 3%. The Philippines committed to immediate tariff elimination for a
number of industrial products. However, gradual tariff reduction will be applied to sensitive
sectors, such as the automotive industry, enabling them to put in place adjustment measures to
face the inevitability of competition. Tariff reduction is expected to take place on the tenth year.
Moreover, the Philippines introduced TRQs for iron and steel products.

Japan, on the other hand, committed to the immediate tariff elimination on essentially all
industrial goods and non-imposition of TRQs. Products like tanned or dressed furskins, articles
of furskin, and certain types of footwear have been exempted from tariff elimination, reduction,
or renegotiation. Only plywood, veneered panels, and similar laminated woods will be subject to
re-negotiation. Tariff reduction for the remaining products will be eliminated mostly on the tenth
year of JPEPA implementation.

22

The economies of Japan and the Philippines are characterized by a high degree of intra-industry
linkage. Thus based on comparative advantage, it is expected that Japan would gain in capital
and technology intensive products, while the Philippines would benefit from labor intensive
sectors. (Siazon,2007).
Industries, like electrical and electronic appliances and their parts, auto parts, and textiles and
apparel which are characterized by global production networks and vertical specialization, are
positively affected by JPEPA. Production processes in these industries are fragmented into many
stages distributed in various developing countries, resulting in huge vertical intra-industry trade
in parts and components. The international production and distribution networks in East Asia can
be considered as among the most advanced in the world. JPEPA enables the Philippine industries
to benefit from Japans globalizing corporate activities and participate in their international
production networks. SMEs, which supply inputs to large industries, can primarily benefit from
technology transfer through subcontracting arrangements in this kind of segmented production
process.
Special tariff treatment and gradual tariff elimination will be pursued for sensitive sectors such as
the automotive industry (Table 6).

23

Almost 10% of the tariff lines, mostly agricultural products, are subject to gradual tariff
reductions. Very minimal tariff lines (0.5%) offered by Japan are subject to specific
commitments:
Creation of tariff rate quota (TRQ) for pineapples smaller than 900g under a zero in-quota rate,
instead of the applied 17% most-favored nation (MFN) rate. Creation of TRQ for chicken meat
with 8.5% in quota rate, instead of the applied 11.9% MFN rate. Tariffs on sausages and similar
products will be reduced on the second year from 19.2% to 17% in 5 equal annual installments.

Around 10% of the tariff lines are either excluded from any commitments or subject to
renegotiations in a future date. Those excluded are: Agricultural goods such as boneless meat of
bovine animals, fresh Pacific salmon, frozen red & Atlantic salmon, trout, herrings, cod,
sardines, mackerel, frozen bluefin tuna fillets, scallops, milk and cream, whey, butter and dairy
spreads, wheat and meslin, barley, rice, wheat starch, animal and vegetable oils, and pineapples
weighing more than 900g.

ADVANTAGES
JPEPA is also expected to increase our exports to Japan, Philippines second largest export
market, due to a broader range of agricultural and industrial products that will be allowed under
the treaty. The Philippines exports to Japan are currently averaging at 10% annual growth for
the past six years (Table 11). The annual growth of our exports for 2007 is projected at 8.7%
without JPEPA. With JPEPA, however, our exports are estimated to grow faster at 9.1% at the
very least

24

Of the principal fruit items that Japan imports, the Philippines supplies 58% of Japans total
imports on banana, 7% on pineapples, 1% on avocados and on papayas. Meanwhile, only 1% of
Japans vegetable imports are supplied by the country, which leaves more room for expansion.
Our two major fresh vegetable exportsto Japan are okra and asparagus. In 2005, fish,
crustaceans, and mollusks (e.g. shrimps and prawns) account for US$ 81.2 million of Philippine
exports to Japan.
Under JPEPA, Japan will immediately remove tariffs on certain agricultural products such as
shrimps and prawns, asparagus, leguminous vegetables, dried bananas, mangoes, mangosteens,
and fresh papayas, as well as manufactured goods like knitted and crocheted fabrics (Annex 3).
Thus, these sectors are expected to benefit directly from the treaty.
Also, the country can increase its market penetration by supplying goods which it has a
comparative advantage fish, fruits, charcoal, iron ore concentrates, non-ferrous metal silver
platinum ores, crude vegetable materials, wood manufactures, office machine, travel
goods/handbags, clothes (excluding fur), watches and clocks, and other manufactured goods.
Moreover, JPEPA provides the mechanism where the country can regain its declining share on
Japan imports on mostly agricultural products (e.g. fresh and dried fruits, fresh and chilled
25

vegetables, sugar confectionery, fermented beverages, frozen fish fillets, prepared crustaceans
and mollusks, sauce, seasoning and condiments, frozen fruits and nuts, unpicked vegetables, and
sausages of meat) and consumer manufactures (e.g. festive articles, clothing accessories, plastic
articles, suits/jackets/trousers, pulp/paper/board articles, plastic floor and wall covering, plastic
and rubber apparel, childrens toys, metal furniture, glass articles, skirts, textile articles,
nightwear and underwear, household linens, mattresses, knitted hosiery, and hand paintings and
drawings).
To maximize the benefits from these opportunities, Filipino exporters must take into account the
strict requirements of the Japanese on food quality and safety. Filipino exporters need to supply
hormone-free, even-sized, properly-packed, and hygienic products. The JPEPA has provisions on
mutual recognition and conformity assessment procedures for products and processes which
would help Filipino exporters meet Japans standards and requirements like sanitary and
phytosanitary measures
DISADVATNAGES
Displacement of affected local industries. The domestic industries would experience stiff
competition from the onslaught of cheaper imports. Those hardest hit would be the sensitive
sectors and industries (i.e. automotive industry) unless safeguards are put in place or they are
excluded from FTA negotiations. The auto industry is characterized by low value-added
activities (i.e. assembly operations). The auto industry estimates that there would be 77,000
workers who would be displaced if JPEPA takes into effect. Foregone government revenues.
Another important issue with any FTA is the foregone revenues due to the removal of tariffs.
The Tariff Commission estimates Php3.69 billion to Php4.15 billion foregone revenues for the
first year of implementation of the JPEPA

26

Other estimates range from P3 billion to P9 billion6,or roughly 2.5% to 7.4% of total customs
duties collection in 2004.
Trade deficit. The countrys trade balance with Japan posted a US$648 million surplus in 2006
from a deficit of US$865 million in 2005 (Table 14). This reflects the faster growth of Philippine
exports to than imports from Japan. However, with JPEPA the trade balance with Japan may
likely worsen. This may arise because some of the countrys top exports to Japan will only get
gradual tariff elimination such as: Yellowfin tunas tariff will be eliminated/ reduced to zero
within six years from date of entry into force.
Fresh banana tariff will be eliminated/ reduced to zero within 11 years from date of entry into
force. Dried pineapples tariff will be eliminated/ reduced to zero within 11 years from date of
entry into force. Cathodes and sections of cathodes of refined copper tariff will be eliminated/
reduced to zero within six years from date of entry into force.

2. TRADE IN SERVICE
Chapters 8 and 9 of JPEPA contain provisions related to the movement of natural persons from
both countries. JPEPA removed the possible quantitative restrictions on the number of natural
persons to be granted entry and temporary stay, except otherwise provided by immigration laws

27

and natural regulations. The implementation of movement of natural persons will be reviewed
every five years, after JPEPA has been put into force.
The period of time allowed for mobility under JPEPA varies on the classification of these
individuals: Professionals and specialized/skilled workers are allowed an extendable period after
one to three years; nurses for an extendable period after the first year; and caregivers up to an
extendable period after three years.
Inclusion of services in JPEPA facilitates the liberalization of services related to the medical
profession, tourism and travel, outsourcing, banking and other financial services, recreational,
cultural and sporting services, advertising, management consulting, audio visual services,
environmental services, and value added services on telecommunications (e.g., wired or wireless
technology, voice telephone services, and satellite services, among others).
As a result, JPEPA has opened up various opportunities for the Filipino labor to tap into the
Japanese market. The liberalization of Japanese health care industry and for the Filipino
caregiver and the creation of a new visa category for the Filipino caregivers are among the
benefits derived from JPEPA. These workers are permitted to work for a limited time, while
working on the acquisition of Japanese qualifications, which includes a level of proficiency in
the Japanese language. Prior to JPEPA, Filipino nurses who acquired relevant Japanese
qualifications were allowed to work for a maximum of seven yearstay in training but were not
officially permitted to work.
Recognizing that language proficiency and Japanese licensure exams are difficult to meet,
JPEPA included a package for language proficiency training that extends modest stipend, board,
and lodging to qualified applicants for a period of six months. After six months, the candidates,
whether or not they passed the examinations will be offered an employment contract under the
supervision of a Japanese nurse and will receive a salary. In addition, Japan agreed to fund a
Japanese language institute in the Philippines so that training can be undertaken within the
country. In 2009, close to 400 Filipino nurses and caregivers were deployed to Japan under the
JPEPA scheme. The figure was smaller than the original target as a result of the global financial
crisis that affected demand in Japan. For 2010, the Philippine Overseas Employment
28

Administration has opened the recruitment for the second batch of 500 nurses and caregivers in
line with JPEPA.
Apart from remittances that could be generated, employment in Japan makes technological
transfer and exchange possible that could further improve the competitiveness of the Filipino
human resource. Additional protection for the Filipino workers in Japan was also made possible
under the Agreement.
3. INVESTMENTS
Japan is the Philippines largest source of foreign direct investments (FDI) in 2005, but slipped
to third place behind the United States and Korea in 2006. FDI from Japan was pegged at P27.5
billion in 2005, 3.5% higher than in 2004. In 2006, however, approved FDIs from Japan declined
to P20 billion (Table 2). FDI from Japan from 2000 to 2006 was estimated at P143.5 billion

JPEPA grants both investors from Japan and the Philippines national treatment and mostfavored-nation (MFN) status. National treatment (Article 89) enjoins the two countries to accord
same treatment to domestic and foreign investors and their investments from the partner
countries. MFN treatment (Article 90), on the other hand, means that each partner country shall
accord the investors and their investments coming from the other partner country same treatment
it accords to investors of a Third Party. The Investment provisions in JPEPA further aim to
protect investors from conflicts and provide for conditions that relate to expropriation,
compensation, strife, and safeguard and prudential measures, among others. It also contains
Performance

29

Requirement Prohibitions which enumerates the exceptions or prohibitions to investment

conditions which may arise from the mandate of the Philippine constitution or existing domestic
laws as listed in the Foreign Investment Negative List (FINL). Annex I of JPEPA identifies these
limitations or prohibitions. JPEPA likewise prohibits both parties to impose or enforce as a
condition for investment activities requirements such as research and development requirement,
technology transfer and hiring and appointment of nationals as executives, managers or board
member.
Japan has been one of the major sources of FDI in the Philippines. The year 2007 posted the
highest investment growth for the past 10 years. Investment figure dipped in 2008 as a result of
the global economic slump, to pick up again in 2009 as more Japanese investments poured in
following the signing of JPEPA.

One of the major areas where the intervening global financial crisis has made it difficult to assess
progress achieved under PJEPA is foreign direct investments in the Philippines. Nonetheless, it
is good to ask what the new investments have been so far and what are the prospects for
investments from Japan in the near future? Japan is the leading source of foreign investment in
the Philippines, in terms of BOI approvals, from 2009-2011. It registered a high of around P 71
billion immediately after PJEPA implementation, but fell in 2010 to P 58 billion (A big factor is
the tsunami heavily affecting Japan). However, FDI has rebounded again in 2011 to more than
30

Philippine pesos 77 billion, likely to be even higher in the coming years, with the Philippines
included in the VIP (Vietnam, Indonesia and the Philippines) as among the favored FDI
destination for Japanese investors

In terms of sectors, Japan has consistently invested most heavily in the manufacturing sector of
the Philippines, followed by some investment in the financial and real estate markets
Foreign direct investments from Japan to the Philippine may be increasing but the country still
lags behind its ASEAN neighbors in receiving FDI from Japan, an indication perhaps of the still
limited role of the Philippines in regional production networks. Table 15 shows Japanese FDI to
the Philippines were at $ 4.5 billion in 2006-2010, 80% higher than in the previous five-year
period 2001-2005. Although this is a significant increase, the total amount is just a quarter of the
value of Japanese FDI to Thailand in the same period at $17.6 billion. In terms of growth rate,
Malaysia and Vietnam have seen higher growth rates of FDI from Japan in 2006-2010 compared

31

to the Philippines, registering increases of 596% and 510% from 2001-2005, respectively.

Foreign direct investments from Japan to the Philippine may be increasing but the country still
lags behind its ASEAN neighbors in receiving FDI from Japan, an indication perhaps of the still
limited role of the Philippines in regional production networks. Table 15 shows Japanese FDI to
the Philippines were at $ 4.5 billion in 2006-2010, 80% higher than in the previous five-year
period 2001-2005. Although this is a significant increase, the total amount is just a quarter of the
value of Japanese FDI to Thailand in the same period at $17.6 billion. In terms of growth rate,
Malaysia and Vietnam have seen higher growth rates of FDI from Japan in 2006-2010 compared
to the Philippines, registering increases of 596% and 510% from 2001-2005, respectively.
Improving the investment climate is crucial for the Philippines to unlock greater potential
investments from Japan. Japanese investors comment that the countrys natural advantages considerable natural resources, proximity to Japan as well as China and South Korea, and the
English-speaking proficiency of Filipinos - are best complemented by better infrastructure and
lower electricity costs. Insufficient road and infrastructure networks hamper the free movement
of goods and people and raise production and distribution costs. Electricity rates in the
Philippines continue to surpass those of neighboring ASEAN countries, effectively discouraging
prospective investors.
Recent news about investments from Japan appears promising. President Noynoy Aquino
secured P1.4 billion in investment pledges during his visit to Japan in September 2011. These
investments are targeted for the energy, manufacturing and service sectors. In January 2012, 18
32

Japanese gaming giant Universal Entertainment Corporation broke ground on a $2 billion

investment focused on casino resort development along Manila Bay. The development is
expected to generate many jobs with two planned luxury casino hotels having a combined total
1,100 rooms.
ADVANTAGES
JPEPA is expected to increase investment in the Philippines since it provides greater certainty
and confidence for Japanese investors. BOI estimates that the expected FDI from Japan would
amount to Php559 billion between 2007 and 2016 and is expected to generate 35,477 more jobs
to Filipinos

DISADVATNAGES
In theory, investment agreements such as JPEPA are expected to increase investment since it
provides greater certainty and confidence for foreign investors. But the record has been so far
spotty. Annual Japanese FDI to Singapore during 1999-2002 averaged US$477 million, three
times higher compared to US$153 million during 2003-2006. Japan and Singapore signed a free
trade agreement in November 2002. It clearly shows that where the FDI goes depends on more
fundamental factors such as low cost of production, large market size and access to natural
resources.
The downside of JPEPA is the explicit prohibition on performance requirements. Under JPEPA,
there is a provision on the performance requirement (Article93). Simply put, it means that neither
party can impose or enforce as a condition for investment activities requirements such as
33

research and development (R&D) requirement, technology transfer and hiring and appointment
of nationals as executives, managers, or board member. This provision effectively ties the hand
of and reduces the policy space available for succeeding policymakers without getting any
substantial benefit in return. Thus, this provision may prove to be disadvantageous to a
developing country like the Philippines because the country might be stuck in low value-added
manufacturing activities and hence, fail to move to higher value-added activities. At present the
comparative advantage of the Philippine electronics industry lies mainly in low value-added
activities (e.g. assembly operations) and less on production of electronic products.
Furthermore, the Philippines publish regularly a Foreign Investment Negative List (FINL), a list
of economic activities which limits foreign ownership and participation due to mandates of the
Constitution and domestic laws. However, there are items in the FINL which are not specifically
included as exceptions for Japanese investments. Some economic sectors not listed in the 6th
FINL are listed in JPEPA. For instance, no foreign vessels are allowed to transport passengers or
cargo between ports or places within the Philippine territorial waters (Table 12). Also, a SubCommittee on Government Procurement would be formed to look into opening up the Philippine
government procurement contracts to Japanese nationals, implying that the Japanese will be
allowed to enter into government procurement contracts. Since it is not categorically stated in the
treaty, it is not clear whether Japan can invest in these areas included in the FINL.

34

4. MOVEMENTS OF NATURAL PERSONS

One contentious area in the implementation of the PJEPA is the Movement of Natural Persons.
The PJEPA includes a provision that would allow Filipino nurses and certified care workers to
work in Japan contingent on passing several requirements.
Professional and civil society groups continue to voice concern about the stringent Japanese
standards and difficult Japanese language proficiency and national exams. Media reports state
that as of May 2011 only two Filipina nurses had passed the licensure exam and 229 caregivers
allowed to work in Japan. However, these reports appear to contradict data recently obtained
from other sources *(Japanese embassy) which highlight the following:
310 Filipino candidates for nurses and certified care workers (93 nurses,190 care workers, and
27 care students) were accepted in FY2009.128 Filipino candidates for nurses and certified care
workers (46 nurses, 72 care workers, 10 care students) were accepted in FY2010.131 Filipino
candidates for nurses and certified care workers (70 nurses and 61 care workers) were accepted
in FY2011.
It is difficult to verify information related to the Movement of Natural Persons not just in terms
of statistics but also on the procedures and programs related to the hiring of qualified Filipino
health care workers. There is a clear need for better information dissemination about work
opportunities in Japan and the education of the public about workers rights and labor protection.
More important than the impact on the Movement of Natural Persons, however, is the impact on
employment. The paper benefits from the current study by Lanzona on the impact of free trade
agreements on domestic labor markets.5 The study aims to provide an empirical analysis of the
effects of FTA provisions on employment using previous FTAs that the Philippines has engaged
in recently, namely, the AFTA and the PJEPA. The study uses panel data of workers and a
framework of a worker employment model. Preliminary results of the study indicate that the
PJEPA has had a positive impact on labor, meaning the PJEPA increases the probability of being
employed, controlling for the effects of increased imports from partner countries. Given that the
average value of Philippine imports from Japan in the period 2009-2011 are lower than in the
35

period 2006-2008 and that the percentage of imports from Japan to total Philippine imports has
been declining since 2006, we can make an initial conclusion that Philippine employment has not
had a negative impact from the PJEPA.
Under JPEPA, Filipino nationals would be allowed to practice their profession in Japan subject
to certain conditions. The list of professions included are: legal services, accounting and taxation
services, architectural and engineering services, computer related services, advertising and
management consulting services, translation and interpretation services, services incidental to
agriculture, audiovisual services, higher education services, tourism and travel services,
entertainment services (theatre, live bands), and maritime transport services.
According to the Department of Trade and Industry (DTI), Japan has historically maintained
very restrictive entry requirements for foreign professionals. Between 2001 and 2006, the only
occupational categories Filipinos were able to substantially fill were choreographers (139,521
deployed), and composers, musicians and singers (177,457). Not a single nurse was deployed to
Japan during the said 6-year period; in contrast, 5,244 were deployed to the United States and
32,380 to Saudi Arabia.
Under PJEPA, Japan initially agreed to allow alimited number of nurses (100 in the first year) to
stay beyond the current four-year limit if they acquire a Japanese license. As negotiated, the
quota was raised to 400 to 500 per year. The Philippines agreed to a demand-driven, vis-a-vis the
quota-driven approach in order to accommodate more nurses and caregivers wanting to work in
Japan.
In spite of PJEPAs good intentions, several issues arose in its implementation phase. According
to the organization of Filipino nurses (Ang Nars), both the nurses and caregivers working in
Japan are in a miserable situation as they are subjected to unfair labor practices, extreme pressure
to pass licensing examinations administered in Japanese within three (3) years, cramped living
conditions and poor salaries.

36

ADVATNAGES
Under JPEPA, Filipino nationals would be allowed to practice their profession in Japan subject
to certain conditions. In the immediate future, at least two groups of Filipino professionals are
expected to benefit from JPEPA: Filipino health professionals (nurses and care workers) and
seafarers. For Filipino health professionals, JPEPA establishes a formal arrangement for the
acceptance of 1,000 Filipino health professionals to work in Japan for the first two years JPEPA
will be in force. With Japans ageing population, the demand for careworkers in Japan is
increasing and the country can take advantage of this opportunity.
Filipino seafarers, likewise, are expected to benefit from JPEPA through Japans continued
assistance in education and skills enhancement. In fact Japan made investments in the
Philippines efforts to streamline and build up the skills, professionalism, and continued process
improvement through appropriate training centers and facilities. It donated a computerized
system to the Maritime Training Council (MTC) to maintain the integrity of the assessment and
certification process for the Filipino seafarers.
The Japanese assistance becomes more imperative as Japanese shipping firms want to draw an
additional 8,000 to 10,000 experienced Filipino seafarers to man up to 600 new ships to be built
until the year 2010. Japan is the largest employer of seafarers, employing 72% of the 240,000
Filipino seafarers deployed worldwide.
This provision of movement of natural persons under JPEPA is expected to boost remittances of
Filipino overseas contract workers (OCWs). Also, this market access in services provides a
mechanism for technology transfer and cooperation which could facilitate improvements in the
competitiveness of Filipino workers. JPEPA ensures this by setting up HRD cooperation
programs covering language proficiency trainings, technical assistance in skills upgrading,
mutual personnel exchange and fellowship programs, and research and development in Science
and Technology.

37

DISADVANTAGES
Whether Japan would be an attractive market for Filipino nurses and caregivers remains unclear
given stringent Japanese requirements (e.g. language proficiency) and the existence of other
more lucrative markets for nurses such as US and UK. In 2006, the average monthly salary for
Japanese nurses is estimated at US$1,643 (Y193,924) which may not be high enough to entice
Filipino nurses considering Japans high cost of living. Nurses working in US get a monthly
salary of US$3,359; in UK, US$2,052; Saudi Arabia (US$506); and other Middle Eastern
countries (US$959)
III.

POTENTIAL GAINS AND OPPORTUNITIES

Japan and the Philippines share strong economic ties. Japan is the countrys second largest
trading partner. In 2000, Japan accounted for 14.73% of our total exports and 19.1% of total
imports. The Philippines remains an important potential market and a potential export base for
Japanese companies planning to operate in the Asian market. In 2000, the Philippines accounted
for 2.14% of Japans total exports and 1.9% of its total imports. Our top exports to Japan consist
of agricultural products such as fresh bananas, pineapples, and asparagus and industrial goods
like semiconductor and electronic products.
Japan is currently the largest source of foreign direct investment in the Philippines. In 2003, its
cumulative flows amounted to US$22.13 billion. Japan is also the countrys largest source of
official development assistance receiving 41.76 billion yen in 2002.
Building on these current trade and investment ties, JPEPA will further bolster the existing close
links and deepen the cooperation between the two countries. The JPEPA rests on three key
pillars: (i) liberalization, (ii) facilitation, and (iii) cooperation.
Market Openings in Goods
Japan will immediately remove tariffs on shrimps & prawns, asparagus, leguminous vegetables,
dried bananas, guavas, mangoes, mangosteens, fresh papayas, coconut (copra) refined or
unrefined, dried durians, jackfruit, rambutan as well as in manufactured goods like knitted and
38

crocheted fabrics. Gradual tariff elimination towards zero tariff will be implemented in products
like frozen yellowfin tunas, prepared or preserved tunas, fresh bananas, dried pineapples, fruits
containing added sugar, and articles of apparel & clothing accessories. The agriculture and
fishery sector remains a sensitive issue for Japan with certain products such as rice, wheat, milk,
herrings, sardines, mackerel and other fish being excluded from the JPEPA.
Japan is in the process of adjusting its own domestic policy in these sectors. To take advantage of
these opportunities, Filipino exporters must always take into account the emphasis that the
Japanese put on food quality and safety. To gain access to Japanese markets, we need to supply
hormone free, even-sized, properly packed, and hygienic products. The JPEPA has provisions for
mutual recognition and conformity assessment procedures which aim to help our exporters meet
Japans standards and requirements like sanitary and phytosanitary measures.
As part of the Philippines concessions, immediate tariff elimination will be implemented on
products like fresh apples, pears & quinces. Note that most of our industrial products have low
tariffs already with rates ranging from zero to 3%.
However, for sensitive sectors such as the automotive industry, gradual tariff reduction will be
pursued and for certain products that are manufactured in the country, no tariff reductions will be
implemented and will be subject to negotiations in 2009. For vehicles of cyclinder capacity
exceeding 3,000 cc, the tariff rate remains at 30%. For second hand vehicles, the Philippines is
allowed to impose import duties.
For buses with gross vehicle weight of 6 to 18 tonnes, tariffs will be reduced gradually from 14%
to free in 2010. For vehicles of cyclinder capacity not exceeding 3000 cc, tariffs will be
eliminated from 29% to 20% in 2009, subject to negotiations.
For components, parts &/or accessories under the motor vehicle development program, the most
favored nation (MFN) rate will apply and tariff elimination will be subject to negotiations in
2009. It is important to note that the Philippines is committed under the ASEAN Free Trade Area
(AFTA) to eliminate all tariffs on the automotive sector by 2010. This is consistent with the

39

global nature of the industry characterized by international production networks and vertical
specialization.
For washing machines with current rate of 10%, tariffs will be eliminated in 11 equal annual
instalments from base rate to free. For flat-rolled products of iron or non-alloy steel with current
rate of 7%, tariff will be eliminated in 6 equal annual instalments from base rate to free. For
portland cement, the MFN rate will apply and will only be eliminated on the sixth year of the
Agreement. For machinery for crushing or kneading earth whose current rates range from 1 to
5%, there will be immediate tariff elimination.
Market access in Services
In terms of movement of natural persons, Japan will allow Filipino nurses and careworkers to
work in Japan on the condition that they pass Japans examination requirements along with IT
workers and other professionals. This is important not only because of the expected increase in
remittances of OCWs but also because it provides a venue for technology transfer and
cooperation which could facilitate improvements in the competitiveness of our workers. To
realize these, the JPEPA has set HRD cooperation programs covering language proficiency
trainings, technical assistance in skills upgrading, mutual personnel exchange and fellowship
programs, and research and development in S&T.
Facilitation Measures
Economic facilitation measures are important to ensure the efficient movement of goods,
services, people, and capital. These cut across a wide range of areas such as government
regulations and controls, business efficiency, transportation, ICT and the financial sector. These
involve simplification and harmonization of customs procedures, use of ICT and paperless
trading along with measures to improve the business environment and competition policy
framework to address anticompetitive business practices. Cooperation Areas
Through economic liberalization, facilitation, and cooperation; JPEPA represents great
potentials. It can create new market opportunities and larger economies of scale that can bring
40

significant benefits to both countries. But beyond market access, JPEPA emphasizes cooperation
initiatives on HRD, financial services, ICT (next generation internet, broadband & ubiquitous
networks), energy and environment (management of hazardous and solid wastes), S&T, trade
and investment promotion, SMEs, tourism, transportation, and road development. Given our
current level of development, we can benefit significantly from Japans capital, technology and
expertise to strengthen our capacity to meet the challenges posed by the new age.
IV.

ISSUES AGAINST JPEPA

Both the technical and political process for reviewing and deciding on the merits of JPEPA was
severely prolonged by strong lobby and criticisms from various segments of the society. JPEPA
is criticized to have hastily pushed the Philippines to commit to the contested Singapore issues
(i.e., investment, competition, government procurement), that could place the country in a
disadvantageous position vis--vis Japan. It is likewise criticized for effectively legalizing the
importation of toxic and hazardous wastes from Japan
(a) Inclusion of Singapore Issues
The economic framework adopted for JPEPA followed suit from that of Japan Singapore EPA
(JSEPA), which was signed at the same time that JPEPA was planned.Japan utilized regional and
bilateral EPAs to revitalize its relationship with the ASEAN and its economic partners, including
the Philippines. When JPEPA was put in place, Japan promoted the expansion of the JPEPA
coverage from mere trade liberalization and facilitation to other measures of enhancing economic
partnership. The Singapore issues, which include investment, competition, government
procurement and trade facilitation, were first raised during the 1996 WTO negotiations.
They were subsequently taken off the track during the 2003 Cancun Conference due to protests
from developing countries. Inclusion of these issues was opposed by G77, a coalition of
developing countries including the Philippines because of the potential negative implications on
developing countries. In JPEPA, these Singapore issues are included in Chapter 8 (Investments),
Chapter 11 (Government Procurement), Competition (Chapter 12), and Trade Cooperation and
Facilitation (Chapter XX).
41

There were initial fears that inclusion of these provisions would eventually undermine the
negotiating position of the Philippines in the realm of multilateral and regional trade agreements.
However, the Philippines permitted the inclusion of the Singapore issues since they are linked
with the overall necessity for improving the governance framework 18 19 crucial in
strengthening the domestic market and in supporting legal structures. These reforms are equally
necessary in developing the countrys business environment.
(b) Environmental concerns
One of the reasons that resulted in the delay of JPEPA ratification was the allegation from the
public on possible environmental violation entailed by JPEPA. Critics feared that JPEPA would
lead to the free-flow entry of toxic and hazardous waste products to the Philippine shores, with
the adoption of a zero-rating scheme for waste products. Fears have been allayed by the fact that
both Japan and the Philippines are signatories to the Basel Convention4 on the Transboundary
Movement of Hazardous Wastes. The convention requires signatory countries to make prior
notice and consent before any act of exportation or importation of hazardous wastes. Existing
environmental policies in the Philippines reinforce the prohibition of hazardous wastes and
products in the country. For example, the Toxic Substances and Hazardous and Nuclear Wastes
Control (Republic Act No. 6969) prohibits the entry, transit, storage, and disposal of hazardous
and nuclear wastes into the country. Prevailing import controls and regulations that are more
binding protection than tariffs also help deter transboundary environmental irregularities.

42

To further protect the environment, JPEPA has built-in measures and safeguards to prevent
illegal activities that may arise out of the zero-rating of tariffs on waste products.
These measures include:
a) Issuance of a joint statement by the governments of Japan and the Philippines that
expresses their shared commitment to protect the environment.
b) Article 102 (Environmental Measures) and Chapter 8 (Investment) provide that these two
countries agreed not to mutually relax environmental measures just to encourage investments
by the other party.
c) Article 34, Chapter 8, (Cooperation in the field of energy and environment of the
Implementing Agreement pursuant to Article 12 of the JPEPA) binds the two countries to
adhere to efficient utilization of energy, proper management of environment and sustainable
development.
To effectively implement the provisions of JPEPA regarding the environment, capacity
building for building for enforcing, monitoring, and environmental regulations was suggested
during the JPEPA deliberations. Cooperation could be forged along the areas of: (a)
designing technology transfer programs to manage toxic and hazardous wastes; (b)
improving capacity of our regulators to implement environmental laws, e.g., in monitoring;
(c) forging closer coordination among the customs and environment agencies in the two
countries in order to effectively regulate and prevent illegal wastes trade; and (d) acquiring
necessary equipment and the necessary skills to regulate and/or prevent entry of hazardous
wastes. Technical and regulatory agencies, such as the Department of Environment and
Natural Resources and the Bureau of Customs, need to be capacitated to perform their
responsibilities under JPEPA.
V.

TREATIES SIGNED BY THE PHILIPPINES ON IMPORTATION OF TOXIC

WASTE

Aside from Philippine laws on toxic wastes, the Philippines also signed the following treaties:
43

1. The Basel Convention - The Philippines became a party to the Basel Convention on the
Transboundary Movements of Hazardous Wastes and their Disposal on March 10, 1993. The
Convention seeks to minimize the generation and exports of hazardous wastes, and the
promotion of national self-sufficiency by placing responsibility on toxic waste generators to
dispose of the wastes as close to area of generation as possible. In its efforts at minimizing waste
exports, the Basel Convention restricts traffic in toxic wastes by applying the Prior Informed
Consent procedure.
The amendment of the Convention was primarily driven by developing countries and this group
called for the prohibition, for any reason, whatsoever, disposal or recycling, in the export of toxic
wastes from Annex VII, i.e. European Union, member countries of the organization for
Economic Cooperation and Development and Leichtenstein to any non-Annex VII countries
(developing countries). The obligation to prevent toxic waste exports falls upon developed
countries that are part of the Annex VII group, and not on developing countries
2. The Stockholm Convention - The Philippines became a party to the Stockholm Convention
on Persistent Organic Pollutants (POPs) on February 27, 2004. The Convention is an
international treaty designed to end the production and use of some of the worlds most
poisonous chemicals, namely POPs. The Stockholm Convention severely restricts export and
import of POPs and POP wastes
3. The Montreal Protocol - The Montreal Protocol on Substances That Deplete the Ozone
Layer was ratified on July 17, 1991. The Protocol requires each country-Party to ratchet down
its respective production and consumption of Ozone Depleting Substances (ODS) following the
time frame stated in the Protocol, with the ultimate goal of global elimination of ODS. The
Protocol also requires all Parties to ban exports and imports of controlled substances11 and to
non-Parties.

44

VI.

ADDRESING THE ENVIRONEMNTAL ISSUE

JPEPA is based on sustainable development & environmental cooperation

The JPEPA binds the two countries to the general principles of efficient utilization of energy,
proper management of environment and sustainable development and the need to cooperate in
the field of energy and environment (Article 34, Chapter 8 Implementing Agreement). The Joint
Statement signed by the two Heads of States explicitly indicated cooperation in the management
of hazardous and solid wastes in the list of possible areas for cooperation. Under Article 102, the
two countries mutually agree not to relax environmental measures to encourage investments by
the other party.
JPEPA provides special exceptions for environmental protection
Trade liberalization under JPEPA allows special exceptions for environmental protection. These
exceptions are provided for under trade in goods (Article 23), mutual recognition (Article 66),
trade in services (Article 83), investment (Chapter 8), and movement of natural persons (Article
114). These articles state that: Nothing in this Chapter shall be construed to limit the authority
of a Party to take measures it considers appropriate, for protecting health, safety or the
environment or prevention of deceptive practices. Articles XX and XXI of the GATT 1994 also
applies in the JPEPA. GATT Article XX contains provisions designed to allow WTO Members
to determine their own policies on state interests including the environment (and its relationship
with trade), their environmental objectives and the environmental legislation they enact and
implement.
Thus, the JPEPA has sufficient provisions to protect the environment and prevent any illegal
trade that may arise from the zero tariffs imposed on hazardous and toxic wastes. Trade
liberalization under the JPEPA does not mean, or imply, that the ability of any of the two
countries to take measures to control trade in hazardous and toxic wastes or, more generally, to
protect the environment, is at issue. It is important to note that in the economic partnership
agreements signed by Japan with Singapore and Malaysia, tariffs on ash, residues, waste

45

pharmaceuticals, municipal waste, sewage sludge, clinical wastes and other waste products have
also been eliminated.
JPEPA did not create new tariff classifications and tariff lines on wastes & scraps
The tariff lines on wastes and scraps under contention are not new. They have been in the tariff
and customs codes from the start. These were created mainly for customs classification. Though
the tariff rates on these goods were eliminated, this does not imply free trade since countries
have trade regulations or non-tariff measures that are applied to restrict trade in these goods.
Need for cooperation to improve technical and regulatory capacity
The Philippines and Japan are both signatories to the Basel Convention on the Transboundary
Movement of Hazardous Wastes. In the Philippines, hazardous wastes are regulated by the
Department of Environment and Natural Resources under Republic Act 6969 or Toxic
Substances and Hazardous and Nuclear Wastes Control Act. Since there are already existing
import controls and regulations on trade in hazardous wastes, tariffs are already redundant. As
such, one can reduce them without expanding market access or increasing imports because the
more binding protection measures are import controls.
With or without the redundant tariffs, the more important issue is how to strengthen our technical
and regulatory capacity to manage hazardous wastes and effectively implement import controls.
Due to the absence of reliable recyclers in the country, Japanese firms export hazardous wastes
like copper sludge and printed circuit boards for recycling in Japan. Through JPEPAs
environment cooperation initiatives, we can respond to these issues by designing technology
transfer programs to manage hazardous wastes along with capability-building programs to
improve the capacity of our regulators to implement environmental laws. With JPEPA, closer
coordination among the customs and environment people between the two countries in order to
effectively regulate and prevent illegal wastes trade could also be pursued.

46

VII.

RECENT DEVELOPMENT AND CHALLENGES TO MOVING FORWARD

It is rather early to assess the impact of JPEPA since it was only ratified in 2008. Clearly, JPEPA
offers a lot of opportunities for the Philippines. However, to take full advantage of these
opportunities, it is necessary to address the identified weaknesses both on the institutional and
physical fronts. These actions are well within the mandate and authority of domestic policy
makers and implementers.
JPEPA stipulates the creation of a Joint Committee to be composed of representatives from the
governments of Japan and the Philippines. The Joint Committee is mandated t(i) review the
implementation and operation of JPEPA; (ii) consider and recommend to both governments any
possible amendment to the Agreement; (iii) oversee and coordinate the work of the ensuing
subcommittees; and (iv) adopt the Operational Procedures on Trade in Goods and Rules of
Origin (ROO) under Article 25, the Operational Procedures on Mutual Recognition under Article
65, and the Rules of Procedure under Article 159; and e) perform other functions as the two
governments may agree.
To support the work of the Joint Committee, subcommittees will also be created with the task of
monitoring actions and issues related to specific themes of JPEPA implementation. There are at
least 11 subcommittees that are supposed to be created once JPEPA is set in place, on themes
namely: Trade in Goods, Trade in Services, ROO, Customs Procedures, Mutual Recognition,
Investment, Movement of Natural Persons, Intellectual Property, Government Procurement,
Improvement of the Business Environment, and Cooperation.
They are mandated to assess the status of JPEPA implementation and determine the need to
amend or repeal laws and regulations related to JPEPA. Other subcommittees may be created if
agreed between the two parties. As of 2009, 5 of the 12 subcommittees had been convened and 9
working groups under JPEPAs Chapter on Cooperation were submitted for consideration,
including Movement of Natural Persons. The government is taking further steps to implement
other pending commitments.

47

On August 13, 2010, the Department of Trade and Industry convened government agencies and
stakeholders to take stock of what JPEPA has accomplished and to make an early assessment on
JPEPAs impact. Special attention was given on sectors that were fearful of potential negative
impact.
The good news is that two years after implementation, JPEPA showed no significant adjustment
costs for the government. No sector also showed signs of displacement and dislocation. Even the
auto industry, which feared JPEPAs adverse impact, posted positive growth despite the global
crisis. Comparing Direction of Trade data on 1st quarter of 2009 and 2010, Philippine trade with
Japan increased, with Philippine export showing huge potential for bigger gains in 2010.

Nonetheless, many of the more substantial actions have yet to be implemented. In fact, many
Japanese investors have echoed these concerns through various venues in the hope of getting
government attention to these commitments. Japanese investors in the country, along with other
foreign investors complain about inadequate infrastructure that impedes the efficient flow of
goods from the production to the market place. Poorly maintained road networks and incomplete
infrastructure networks, compounded by heavy traffic congestion, severely limit the movement
of goods undermining the productivity of industries, particularly those that are located inside
economic zones. Electricity tariffs in the Philippines are much higher than those of its neighbors
in the ASEAN. The looming energy crisis in the Philippines sends jitters to the investors who

48

fear the sustainability of their operations in the country and dampens the interest of prospective
investors who are considering the Philippines in their investment decisions.
Fiscal constraints faced by the Philippines further undermine the ability of the government to
beef up investments in these sectors. With infrastructure and capital spending in the Philippines
that is considered rather low at a rate of 3.3% of GDP, compared to the average of 5% in the
region, it is alarming for many investors that the poor physical environment in the country will
take time to be substantially addressed. To illustrate, vehicle operating costs and intercity
freights in the country are estimated to be 50% higher than those in Indonesia and Thailand.
Power tariffs are also high at 20-80% more than in other ASEAN countries, according to ADB.
Investors also complain of the high transaction cost of doing business in the Philippines. This
observation is reinforced by a World Bank assessment that placed the Philippines in a survey of
184 countries: 144 in ease of doing business; 162 in starting a business; 111 in dealing with
construction permits; 132 in protecting investors; and 118 in enforcing contracts.
Inadequate infrastructure and weak institutional framework undermine the overall
competitiveness of the Philippines, including its ability to maximize gains from JPEPA. In 2009,
the Philippines ranked 43rd in the World Competitiveness Survey, which covered a sample of 57
countries. This is rather low, compared to other Asian countries included in the survey:
Hongkong (2); Singapore (3); Malaysia (18); China (20); Taiwan (23); Thailand (27); only
Indonesia was close at 42.
Breaking down this ranking into sub-factors, the Philippines ranked very low in categories
related to capital investments, such as (overall) infrastructure (56); basic infrastructure (57);
education (54); health (48); and scientific infrastructure (56). The policy and governance
environment in the country also deterred international investors, as indicated by the low rankings
in institutional framework (42); government efficiency (42); business legislation (50); and public
finance (54).
Japanese contractors also complain of the onerous contracts that govern the public sector
programs and projects in which they are engaged. The experience in taxation and claim
49

settlements in these domestic projects are not encouraging for Japanese contractors. This
negative experience has affected the provision of Japanese ODA to the Philippines.
Immediate and satisfactory resolution of the manner by which Japanese ODA is utilized is
necessary. Japan remains to be largest provider of ODA to the Philippines, with contributions
amounting to over US$24.5 billion over the last four decades. This makes the Philippines, among
the top 10 recipients of Japanese ODA, in form of technical assistance, concessional loans, and
contributions to programs and project of MOFA website multilateral institutions. While the
Philippines have long been a major recipient of Japanese ODA, there is much to improve on the
impact of Japanese ODA to the long term development of the Philippines.
For this reason, the governments of Japan and the Philippines have agreed to prepare a program
of support that will support actions related to JPEPA implementation, including the weaknesses
identified by the Japanese affiliate parties, such as the Japanese Chamber of Commerce and
Industry of the Philippines. The package of assistance seeks to contribute to the overall goal of
improving the investment climate for the private sector, through reforms related to tax
administration, simplification of customs services and procedures, pending commitments under
the Revised Kyoto Protocol, and publicprivate sector partnerships. The Japanese Government
has also pledged to provide an economic revitalization package to its key partners, including the
Philippines, making it third to Vietnam and Indonesia to receive such support. Many sectors are
thus pinning their hopes on the possible outcomes of these cooperative efforts in the hope of
catching up on committed actions.
VIII. THEORETICAL FRAMEWORK
Complex Interdependence is a theory of International Relations that is a direct critique to the
Political Neo-realist school. It contends that state interdependence is not as simple as a contest
for relative gains using the tool of militarism as primary measurement and bargaining option.
Instead, it presents that the modern interstate relations is characterized by a military force that is
decreasing, while structures that encourage more complex inter-state dependence and
cooperation on the state and civic society level are increasing. From this, we can gather that there
is a rise in alternate, multiple channels of action and cooperation between states in transnational,
50

transgovernmental, and interstate relations and there is an absence of a hierarchy of issues where
military concerns used to be a top priority, creating an environment where other state agendas
come into the front that must be addressed in other means other than military coercion.
Further, it holds that the state is still the primary actor in the anarchic global arena, and retains
the prerogative to create and strengthen existing institutions. In the context of this study,
Complex Interdependence will be used as the lens with which the researchers will review the
existing JPEPA legislation, and how a suitable recommendation can be formed.
According to the theory of complex interdependence there is an increase interstate dependence
primarily in the economic sector. That said, it is still the state prerogative to pursue and/or
strengthen existing institutions or channels of cooperation. What this means is that, while there
are mode moderate channels for economic bargains, it is still the Philippine State that should take
the lead in securing better gains for the country.
While neighbouring countries are investing heavily on their human resources and our global
environment is solely based on global competitiveness and heavily pushing sustainable
development, engaging in agreements between other states is the best way for the Philippines to
achieve its set goals.
From this, we can only look towards other channels where effective compromise can be
gathered. In the Japan-Philippine Economic agreement, given that Japans benefits from the
JPEPA deal grant them a significant economic advantage, while the Philippine state suffers, it
can be said that the JPEPA overall is inimical to the national interests of the Philippines. Other
avenues of the JPEPA such as future healthcare outsourcing and the like have yet unproven
economic projections. Comparatively, the projections in 2002 by the Philippine legislators in
support for the JPEPA Agreement have not been met, and there is little evidence that it will be
met in the years to come.
The discussion above entails that the Philippines has gained substantial economic benefits from
JPEPA which fits the economic liberalization vision of the country. However, in terms of trade,
the institution of JPEPA has not produced a significant impact since its implementation because
51

it has not changed the negative trade balance. Nevertheless, since JPEPA is still on its third year
of implementing its policies and pursuing its goal, we can still expect that JPEPA would yield
more economic gains in the long run as predicted by various studies.
The claims of various studies that JPEPA will lead to a substantial environmental damage in the
case of the Philippines are not baseless since they are based on the data of the negative effects of
Japans agreements with other countries. There is still no concrete evidence of how much
hazardous wastes are imported to the country (if there are any), so we cannot really say that
JPEPA is a total failure.
Right now, there is no sufficient evidence to say that the economic gains from the agreement can
offset the possible long term environmental damages since there are no concrete facts yet
regarding the matter. Nevertheless, data would show that whatever economic gains we have in
the present is slow especially in comparison to other bilateral agreements made with other
countries.
It actually can especially if we focus on labor because the only comparative advantage we have
is in our labor export. Given Japans ageing population and the recent environmental catastrophe
it suffered, it will be in need of a lot of healthcare professionals especially in rebuilding their
deficits. Thus, we can make a logical argument that the Philippines can use JPEPA as an
opportunity to bargain our way to more equitable terms of economic partnership.
IX.

CONCLUSION

The Philippines could not afford to delay JPEPA implementation as our neighbors in the ASEAN
are investing heavily on their human resources and built environments in the name of global
competitiveness and sustainable development. ODA is one of the many instruments to advance
this goal. The slow action to set place complementary policies and institutions consistent with
trade liberalization resulted in the prolonged adjustment and restructuring among domestic
industries. These policies undermined efficiency considerations. Trade policies and economic
priorities have become inconsistent and incompatible with global parameters and with the
52

countrys own development agenda. The East Asian region has been touted as one of the most
dynamic economic regions in the world. It has become a preferred destination for many
international investors and has witnessed exponential increases in trade volume. However, the
gains are uneven in the region, with China as one of the economic champions, while the
Philippines has yet to gain from this economic vibrancy. The new age FTAs like JPEPA
underscores the urgency to implementing reforms. In many cases, where governance takes time
to even be considered, openness makes up for the absence of credible governance practices.
Market appetite and behavior provide immediate feedback to government decision-makers on the
inadequacy of the actions being undertaken.
Being the first FTA to be signed by the Philippines, the experience and performance under
JPEPA will be subject to close scrutiny that could consequently influence the future EPAs to be
entered into by the Philippines. It also signals the seriousness and readiness of the Philippines to
take a more active part in promoting free trade based on cooperation. The opposite signals
otherwise. Without solid reforms and actions, the gains from JPEPA in particular, and from
globalization and integration in general will not be maximized. JPEPA is the embodiment of a
development objective, but not a substitute to a development strategy. JPEPA opens up
opportunities to access a bigger market and explore other development prospects, but these will
remain promises if actions are not taken. In this regard, the role of a decisive leadership and proactive policies to take full advantage of the benefits of JPEPA cannot be overemphasized.
It is equally challenging to ensure that the benefits of JPEPA spread through as many sectors and
segments of the society as possible. For example, SMEs need to be placed in a position to
capture gains in a globalizing world. It is necessary to demonstrate that JPEPA has positive
impacts on ordinary lives in form of improved incomes and productivity and increase
employment opportunities and market access, among others. It is also necessary that the public
and private sectors in the Philippines better gear up to ensure that the agreed reforms are
implemented. Key agencies, such as the Departments of Trade and Industry, Foreign Affairs,
Finance, and Labor and Employment, should ideally possess capacities to pursue country level
actions related to JPEPA.

53

Given the economic asymmetries, most particularly market size, the challenge for developing
countries in North-South agreements is to ensure that any negotiated outcome is supportive of
the interest of both countries. Most often than not, the main motivation for developing countries
engaging in trade agreements is poverty reduction and to help sustain and achieve its
development goals. Henceforth, the priority needs are not merely trade policy-related but revolve
around bolstering trade capacity and improving the investment climate through the cooperation
agreements embodied in the trade agreements. (Balboa, 2008) The challenge for the new
administration is how to take a more aggressive stance in making JPEPA work and arrest the
continuing decline of the countrys competitiveness in the global economy.

54

REFERENCES:
Medalla, Erlinda M. ( 2010 September ) Japan - Philippines Economic Partnership Agreement
(JPEPA): Toward a Framework for Regional Economic Integration Retrieved from
http://dirp4.pids.gov.ph/ris/dps/pidsdps1019.pdf
Aldaba, Rafaelita M. , Medalla, Erlinda M. & Yap, Joseph T. Assesing the Japan Philippines
Economic Partnership Agreement Retrieved from
http://dirp4.pids.gov.ph/ris/pn/JPEPA_Inquirer.pdf
Senate Economic Planning Office (2007 September) Japan - Philippines Economic Partnership
Agreement (JPEPA): An Assessment Retrieved from
https://www.senate.gov.ph/publications/PB%202007-01%20-%20JapanPhilippines%20Economic%20Partnership%20Agreement%20(JPEPA),%20An%20assesment.p
df
Atty. Alonzo, Emmanuael M. (2012 May-June) Reviewing the Philippines - Japan Economic
Partnership Agreement Retrieved from
http://www.senate.gov.ph/publications/taxbits%2013%20vol3%20May-Jun%202012.pdf

55