Published on October 9, 2007
The Japan-Philippines Economic Partnership Agreement (JPEPA)(Highlights of Issues): The Japan-Philippines Economic Partnership Agreement (JPEPA) (Highlights of Issues) Presented to the Senate Committees on: Trade and Industry Economic Affairs Thomas G. Aquino Senior Undersecretary Department of Trade and Industry November 27, 2006 Negotiating Objectives: Negotiating Objectives Obtain under a bilateral agreement economic benefits timelier than could be obtained under other rules-based trade arrangements. Strengthen and pursue focused relationship on economic cooperation. Obtain a broader understanding of advanced economic development experiences. * Basically drawn from E.O. 213, “Creation of a Philippine Coordinating Committee to Study the Feasibility of the Japan-Philippines Economic Partnership Agreement.” Trade Negotiations Process: Trade Negotiations Process Scope of Negotiations*: Scope of Negotiations* Trade in Goods Tariff, Rules of Origin, Customs Procedures, Paperless Trading, Trade Remedies, Non-Tariff Measures Trade in Services (including Movement of Natural Persons) Investment Mutual Recognition and Standards and Conformance Competition Policy Intellectual Property Government Procurement Cooperation Information and Communication Technology, Science and Technology, Energy, Human Resource Development, Tourism, Broadcasting, Small and Medium Enterprises, Trade and Investment Promotion and Financial Services Cooperation. Improvement of the Business Environment General Provisions, Final Provisions, Dispute Avoidance and Settlement *Based on “Framework of the Negotiations for the Japan-Philippines Economic Partnership Agreement”, February 4, 2004. Consistency of Negotiating Stance with National Interest: Consistency of Negotiating Stance with National Interest Global and regional realities, and domestic development objectives RP Domestic and Global Economic Policy, as defined in the: Medium Term Philippine Development Plan (MTPDP) and Philippine Export Development Plan (PEDP) Priority areas of RP negotiating interests Note: In accordance with the Constitution and other statutes Priority areas of RP negotiating interest: Priority areas of RP negotiating interest Market access for agricultural goods (Trade in Goods) Significant increase in Foreign Direct Investment (Investments, Business Environment) Market Access for nurses and caregivers, IT professionals among others (Movement of Natural Persons) Enhanced bilateral economic cooperation through technical assistance (Cooperation) Efficiency of negotiation processEPAs with Japan: Efficiency of negotiation process EPAs with Japan Source: METI’s and MOFA’s websites Transparency of the process: Transparency of the process Process undertaken by mandated NGAs. Structured, step-by-step negotiation process consisting of both formal and informal meetings. Extensive consultations and public hearings were conducted by corresponding NGAs, including attendance in House of Representative hearings. Press releases and interviews took place from 2002 to 2006. Tradeline website contained framework and areas of negotiation (http://tradelinephil.dti.gov.ph) A dedicated website (www.business.gov.ph) was on-line for dissemination of information to the public, including JPEPA Agreement itself. Senate hearings. Consultation of vital sectors: Consultation of vital sectors Under a separate submission, the listing of communications made will pinpoint consultations undertaken by concerned agencies with different sectors, vital or otherwise. Proposed improvements in current negotiating set-up The views and comments of the DTI on the possible improvements in the current negotiating set-up are consistent with the submissions made in the November 7, 2006 joint hearings of the Committee on Trade and Commerce and the Committee on Economic Affairs. Projected increase in RP Exports to Japan: Projected increase in RP Exports to Japan Comparative before EPA after EPA average growth Mexico to Japan: 2001-’04: -1.3 2005-’06: 10.3 of exports (%): Singapore to Japan: 1998-’01: 5.8 2002-’06: 7.3 Main RP Exports to Japan: Main RP Exports to Japan Electrical & electronic equipment are main RP exports RP dominates fruits market, despite barriers Significant barriers to exports of fish & marine products Scope for further RP export penetration (1): Scope for further RP export penetration (1) Mainly electronics, automotive and other industrial manufactures (e.g., circuits, resistors, capacitors, switches, radio receivers, I-O units, etc.) agricultural products (fresh and dried bananas, dried and salted fish, etc.) consumer manufactures (curtains and other furnishings, babies' garments and clothes, knitted garments, wood furniture, trousers, t-shirts, vests, etc.) Growing Japan imports, where RP role as supplier is expanding: Scope for further RP export penetration (2): Scope for further RP export penetration (2) fish fruits charcoal iron ore concentrates non-ferrous metal silver platinum ores crude vegetable materials, nes wood manufactures, nes office machine travel goods/ handbags clothes, excluding fur watches and clocks other manufactured goods zoo animals / pets (non-threatened & non-endangered) Major Japan Imports, where RP has comparative advantage* and role as supplier can be expanded: * Based on Revealed Comparative Advantage calculations Source: PIDS Studies on the JPEPA Scope for further RP export penetration (3): Scope for further RP export penetration (3) Mostly agricultural and food products fresh and dried fruits, fresh, and chilled vegetables, sugar confectionery, fermented beverages, frozen fish fillets, prepared crustaceans and mollusks, sauces / seasoning / condiments, frozen fruits and nuts, unpickled vegetables, sausages of meat Consumer manufactures festive articles, suits and ensembles, clothing accessories, plastic articles, suits/jackets/trousers pulp/paper/board articles, plastic floor and wall covering, plastic and rubber apparel, children's toys metal furniture, glass articles skirts, textile articles, nightwear and underwear, household linens, mattresses, knitted hosiery hand paintings and drawings Growing Japan Imports, where RP role as supplier has been declining: Japan as a major source of FDIs into RP: Japan as a major source of FDIs into RP Japan is #8 investment source of the world. Source: IMD World Competitiveness Yearbook 2005 Japan is #1 source of RP foreign investments. Source:Board of Investments Projected increase in Japan Foreign Direct Investments (FDI) to RP : Projected increase in Japan Foreign Direct Investments (FDI) to RP Period 1995 to 2005 Project Cost : Php137 B Employment : 35,731 Revenue : Php4.75B Notes: Latest estimate from BOI enabling estimation of direct employment and revenue (w/holding, other taxes and licenses) for the projected period. An EPA should necessarily stimulate FDI outflows from Japan as a capital-surplus economy. Unlike other agreements, the JPEPA contains a specific chapter on improving the business environment to strongly facilitate inflow of FDIs. Period 2007 to 2016 Project Cost : Php559 B Employment : 35,477 Revenue :Php4.72B Deployment of Overseas Workers: Deployment of Overseas Workers Easier entry of qualified Filipino nurses and certified careworkers through language training, clear guidelines on exercise of profession/occupation and streamlined processing of application Possible application in other professions Deployment of Overseas Workers: Deployment of Overseas Workers Japan has a mature population while RP has a relatively young population… Demand for careworkers in Japan is increasing. Source: Ministry of Economy, Trade and Industry (2006) Source: ADB (2001) Source: National Institute of Population and Social Security Research (2006) Estimated foregone Tariff Revenues: Estimated foregone Tariff Revenues Latest Tariff Commission estimate: Php4.15B* Based on 2005 8-digit level HS data on RP imports from Japan; RP offer schedule at 8-digit level, taking into account 2007 MFN tariffs; PIDS (2003): between Php3B to Php5B IBON: Php9B (Based on aggregated data) * Based on Php55 to US$1 foreign exchange rate. Needs to be modified further to reflect Php52 to US$1. Estimated foregone Tariff Revenues: Estimated foregone Tariff Revenues Foregone tariff revenues partly get retained in the country as business savings for expanding working capital and/or additional investible funds to generate more economic activities. Foregone tariff revenues will also partly boost consumer spending and trigger increased demand for goods and services. Increased economic activity, through the multiplier process, will generate more jobs, incomes, and a bigger revenue base in the coming years. Possible Detrimental Impact on Industries: Possible Detrimental Impact on Industries More than 50% of total value of RP imports from Japan already enter duty-free, even prior to the JPEPA; another 35% are subject to tariffs of 5% and below. Adverse effects are only limited to certain product groups. Certain product groups possess possibilities for export expansions. Or if solely domestic market-oriented, resort to trade remedies may be pursued if import surge will be caused by Japanese products. Some garment products, footwear and furniture; Tiles, certain steel products, some machinery and electrical and electronic appliances, auto and auto parts Legal Issues: Legal Issues The Preamble of the JPEPA states that it recognizes the importance of the implementation of measures by the Governments of the Parties in accordance with their respective laws and regulations. Toxic Waste: Toxic Waste The views and comments of the DTI on the toxic waste issue, as expressed in the November 7, 2006 joint hearings of the Committee on Trade and Commerce and the Committee on Economic Affairs, are contained in a briefer issued by the DTI.