Ateneo PolSci Bloggers

Econo-Mysticism: Unravelling the Illusions of JPEPA

In Culture, Economics, Philippine Issues, Politics on June 19, 2009 at 10:19 pm

by Leiron Martija

The Japan-Philippines Economic Partership Agreement – signed and ratified as a bilateral treaty back in 2006 between the two countries with the goals of improving foreign relations, establishing jobs and an economic alliance. The treaty itself contains interweaving agreements concerning economic policies, trade fences and governmental limits of power. Amidst heavy protest from Filipinos, the JPEPA was signed, and while the lobbyists and protestors argued politically, their demagogy was met by the Arroyo administration’s economic arguments. Suddenly two disciplines, two schools of thought, not too far from each other, found themselves at odds. The problem with addressing an issue such as JPEPA proves to be rather pedagogical in this matter: a political activist will either view it as another political machination for furthering government’s preponderance, while an economist will view it as a rather plausible way of addressing national fiscal problems, with some stipulations needing correction. Nevertheless, to take a closed side in such an issue proves to be irresponsible and myopic. An issue such as JPEPA – which marries economic and political concepts – requires a perspective that is integrated, not bifurcated. The problem is a misunderstanding of the legislation, and this paper seeks to address that problem by engaging the treaty at both terms, at both perspectives.

Tackling an issue such as JPEPA requires a perspective that marries both critical political thought and economic analysis. The treaty, which sought to establish improved bilateral trade and economic relations, quickly turned controversial after allegations that the treaty was heavily in favor of Japan, and that the Philippines was being severely left out in the agreement. The pessimism in this issue is a) the stipulation regarding the dumping of toxic wastes in Philippine waters, b) the conservativist’s argument that imposing zero tariffs between the two countries will prove to be deterimental to the Philippine economy and c) the Philippine cost of JPEPA (estimated at around P3.7-4.2 billion) has been criticized as misplaced funds, which ought to go directly into public welfare projects concerning education, health care, infrastructure etc. The implications of these arguments exclaim the highly selective nature of Philippine politics. Critics of JPEPA have read the treaty in this manner, in accordance to what it will cost the Philippines. While preservation of national interest proves to be understandable (and even good in a political sense, for that matter), in this context it ignores the responsibility of being able to exercise economics politically, and on the flipside, exercising politics economically. In a rapidly globalizing world, a dynamic and flexible approach to fiscal policies and international relations is being demanded of nations. The Philippines as a nation, this paper shall argue, is lacking in such dynamism, and the JPEPA was able to highlight this through the reactions of different sectors of Philippine society.

What is needed then is a deeper and more mature understanding of our politics, and through this the development of an appreciation of economics geared towards local and international progress. This can be achieved by first, an inductive examination of our current political situation by looking at the actions/reactions of government towards an economically based treaty such as JPEPA. Afterwhich, a deductive analysis of how different sectors of society understood JPEPA and its economic stipulations, and how they reacted accordingly. Lastly, a synthesis of how these key political players translated their different standpoints in protecting the Philippine economy through their actions, and an identification of some common ground between the clashing parties. From all of this, some sort of guide towards how one ought to approach international economic-political relations; whether one is a statesman or an average Filipino citizen.

To further our understanding of the ramifications JPEPA implies, we must first understand what kind of a country the Philippines is to be involved in such a treaty. To do so would require a short comparative analysis (both politically and economically) between the Philippines and Japan. To throw some facts around, we can begin by taking a brief look at the economy of Japan. As the second largest economy in the world, with a nominal GDP of over US$4.5 trillion. Japan trails after China and the United States in terms of purchasing power parity (PPP). Historically, Japan suffered major devastations in economy and infrastructure during the Second World War, putting an end to the numerous zaibatsu . What followed then was what economists call the “economic miracle” of Japan: the remnants of the numerous zaibatsu then established a sort of cooperation of banks, suppliers, manufacturers and producers, which later came to be known as the keiretsu. These corporations established life-time benefits and employment to their highly unionized labor force. This business approach patterned majorly after “The Toyota Way ”, coupled with a politically stable nation and a legitimately functioning government has placed Japan in the asian economic pedestal today.
The Philippines has a similar economic history, but it seems to have acquired a different economic fate. Following World War II, the country also suffered from severe damages to infrastructure and economy. Our post-world war growth can be likened to that of Japan, marked with political stability, numerous investments, strong international ties and a burgeoning infrastructure. Up until the late 1960’s, it seemed that the Philippines would turn out to be a major player in the Asian economy. However, we’ve no “economic miracle”. The Philippine economy, much like its politics, has always been alikened to that of the “cacique ” system, a sort of patron-client relationship. This has not only inbred an economic culture of elitist-dynastical economics, but it has also catalyzed a sort of invisible economic caste system, despite clear and concise efforts of government to further liberalize the economy. This was crystallized when Ferdinand Marcos took the presidency and later on placed the entire country under Martial Law for over 20 years. The Philippine economy suffered tremendously, as the private sector was first weakened by Marcos’ planned economy, then given opportunities to buy into vast amounts of government property in the Ramos regime (NAPOCOR, Petron and Fort Bonifacio to name a few) True, the Philippines has recently boasted an economic growth of exponential proportions, but a closer look at the international economy reveals that the premature growth spurt undergone by the Philippine economy was due to the global sub-prime mortgage financial crisis, and not necessarily local development.
What we have, then, are two economies sharing similarities in the historical sense; ravaged from war, operating under an oligarchic system of business . Both were, strictly speaking, considered third-world economies when juxtaposed to the gargantuan Western economies. Japan’s post-war political evolution after “enduring the unendurable surrender ” during World War II mobilized the once imperial government to reassess itself into a multipartied form of democracy, eventually turning into a parliamentary representative democratic monarchy. And while post-war Philippines retained their Democratic American method of governance, remnants of medieval notions of politics and power proved to be detrimental to our economic development. The context of a treaty such as JPEPA then is first and foremost, an economic issue, and secondly a political one. JPEPA has elucidated that despite being a treaty textually meticulous in securing equity for both nations, the political and economic context remain gravely at odds. To argue in terms of history, both nations had similar origins after the Second World War. The developments from then to where we are now, politics and economics-wise, however seem to fork out to opposing ends; Japan has turned into an economic powerhouse, technologically advanced and politically stable. We remain to be a contingency of sari-sari stores, technologically bereft of any real or significant development, trapped in a politics that is rustic, superfluous and crude.

The relevance of taking a second glance at JPEPA, lies in shedding the treaty’s textual metaphors of equality, progress and development and seeing the political and economic implications it suggests. The problem is one that deals with the Philippines and how we as a nation exercise international policy; policies that deal with economics. The factual truth that the Philippines ought to entertain is that in a deal like JPEPA, we are not at par with Japan, and that while this assertion seems to be obvious, it does not properly translate where it matters: in the JPEPA itself. While the JPEPA remains to be egalitarian in its views to retain each respective countries’ sovereignty, the treaty itself belittles the present context. In the present context’s stead, the presupposition that each country is equipped politically and economically to fulfill the treaty and reap equal benefits from each other was postulated. While political critics say that this is a grave intrusion of our sovereignty, economists say it is beneficial to our economy. There lies the rub; in the name of progression, we stumbled upon our regression.

As mentioned above, the problem with the JPEPA is a matter of economic and political contextualization. It therefore inevitably leads to repercussions in the application of the treaty. Because the treaty meticulously protects the equality of powers for both parties, the contextualization of its application leaves both parties to play equilibrium by ear. To cite one example, Chapter 10 of the JPEPA discusses copyright laws and the protection of intellectual property between two parties. The succeeding articles stipulate that a freely open exchange of information and technology is to be promoted. However, JPEPA does not recognize that the countries are at odds when it comes to its devotion to technological development; Japan currently invests over 700,000 researchers who share over a national budget of US$130 billion, the third largest in the world . The Philippines, though showing prospective advancements in the fields of communication and agriculture , proves to be technologically lilliputian, in comparison to Japan. Pushing the argument further, article 127 of Chapter 10 discusses “the protection of new varieties of plants”. In matters of biodiversity and natural resources, the Philippines possesses a more diverse and endemic ecosystem compared to Japan. Geographically, the Philippines, being located in the tropic, boasts a plant endemism of over 45-60%. The 2000 IUCN Redlist (International Union for the Conservation of Nature) has legitimately identified at the most 193 plant species considered “Threatened, Critically Endangered and Vulnerable”. Japan however, despite 70-80% of its land mass being forested, is not as biodiverse as the Philippines is (an estimate of only around 57 species have been identified as critically endangered). These facts being presented, it is clear that the prospect for “protecting new varieties of plants” is more attributed to Japan’s application of this stipulation towards the Philippines, and not the other way around; we are protected, they protect.

To delve into the argumentation, opening our ecosystem to Japan eases the legalization of free trade in terms of both goods and technologies. Chapter 2 of the JPEPA analyses the implications on trade goods, discussing non-tariff measures, free trade stipulations etc. Article 18 of this chapter discusses the “elimination of customs duties”, where both parties are inherently exempted from normative red-tape involving import and export. This becomes further discussed in chapter 4, on procedures on customs. To contribute to the argument, article 55 stands out as it discusses “cooperation and exchange of information”. Chapter 9 concerns itself with the movements of natural people. And in the spirit of elucidating these contextual problems that lie in JPEPA, Article 110 speaks of Specific Commitments . These articles again deal with an understanding of the two countries at leveled economic and political contexts: A problem which proves to shed an unflattering light towards Philippine politics, and how its imperfections translate into our economic system.
It is imperative then to point out one of the political flaws brought about by the drafting of the agreement; the activities of the numerous anti-JPEPA groups that have organized themselves into a singular coalitive movement, the Magkaisa Junk JPEPA Group (MJJC). After the initial months of drafting JPEPA, numerous organizations such as the Alliance for Progressive Labor (APL), the Initiatives for Dialogue and Empowerment through Alternative Legal Services Inc. and the Mother Earth Foundation are but a few of the groups forefronting the fight against JPEPA. A common thread among these organizations is their understanding of the Philippines’ natural resources being pushed into imminent threat from Japanese toxic wastes and the exploitation of the Overseas Filipino Worker in Japan. However, political opposition in the Philippines with regards to JPEPA were ignored as the agreement was signed and ratified in 2006. Since then, the opposition has sadly, moved on to more recent issues that riddle our political system: The ZTE-NBN deal, the Fertilizer scam etc. Politically speaking, the JPEPA was downplayed for its implications to how the Philippines relates itself to the economic international community. Aptly put, Japan’s mistake was assuming we had equal contexts; the Philippines’ mistake was that it knew its own too well.
The “liberalization” of both Parties’ bilateral trade may seem economically and politically enticing, but again, contextualization of each countries’ situation raises a serious political question: is “economic liberalization”, in the bilateral free-trade sense, truly for mutual development, or does it project a simulated economic equality between the two countries, entailing a sort of fiscal and technological power-play between two nations?
Policy Recommendations
As stated in the first part of this paper, there is an inherent need to integrate – not bifurcate – perspectives employed when tackling an issue such as JPEPA. While the political paradigm proves to highlight the problematic factors of the treaty, viewing it in the paradigm of economics will prove to elucidate the prominent solutions the treaty promises. To employ the basic tools of economics’ guiding principle, Rational Choice Theory, we see that an agreement such as JPEPA supplies the Philippines with advantages that could address immediate economic needs, as economists such as Solita Collas Monsod argues. In her article “The other side of JPEPA”, Monsod stresses the inherent need for the Philippines to enter into this treaty with Japan. She cites the misguided nature anti-JPEPA groups seemed to have lost themselves into with regards to the toxic waste dumping, saying that the Philippines will in fact be the country that delivers its toxic wastes to Japan for proper disposal and recycling. She also discusses in the article several anti-JPEPA groups who express their vehemence towards stipulations regarding zero tariffs as shortsighting the entire treaty. Zero tariffs, as Monsod argues, provides the Philippines an easier purchasing power of technological advancements, both hardware and software, which could allow us to develop at the very least plausible technological solutions to address our agricultural problems. Japan, she further argues, appropriates raw materials and natural resources from the Philippines, which we possess in abundance. As a final note, Monsod writes about economics working on the principles of balancing out, of giving that which is in excess to gain something which a party is in shortage of; ideally, it works towards mutual exchange and benefit. What matters is the Parties both make the Rational Choice.

What then proves to be the poignant errors that Philippine representatives made in the drafting of the JPEPA? Was it merely selfish preponderance, a miscalculation of economic manifolds, or was it a lack in our part to properly assess our context, thereby limiting our economic advantage over the treaty to temporary overseas jobs and access to technologies? Perhaps Philippine economists who participated in the Consultative Commission in drafting the JPEPA truly were making rational choices for our country , despite its shortcomings. However, what the Consultative Commision ought to have foreseen, as I would recommend in this part of the paper, was an anticipation of the political instability that a treaty such as JPEPA would incite. If the Consultative Commission were to truly act in the interest of the Philippine nation, stipulations such as Chapter 9 or Article 18 would not be problematic. The perennial suggestion then, for future bilateral treaties the Philippines ought to enter, is a recognition of the painful contextual realities: that we are a third-world economy, technologically and agriculturally dependent on the international market, participating not as a key player in the world economy, rather as a market open to international exploitation. The suggestion seems a tad too romantic, even for a professional paper. But again we are reminded of post-WWII Japan: ravaged by nuclear warfare, with its infrastructure and its economy in pieces, a nation thought to have been doomed to a Third-World death. But today, they stand as the second largest economy in the world, boasting a political stability, technological independence and respectable business principles. Did they do it by pretending they were at equal levels with the greater economic giants in Europe? Did they do it by opening their natural resources and labor market for exploitation? Was the “economic miracle” really a miracle, or something that happened out of the Japanese will to economically and politically become independent and sustainable? The answer is no. They did it by seeing the truth in the atomic bombs, in the fiscal problems presented by the zaibatsu, in the need to evolve politically and economically.

We, as a nation, need to see the truth in the JPEPA, at our economic contexts, at our political systems. We need to see it for what it is, instead of seeing it as some mystical phenomenon, smoke and mirrors that illusion a nation where all is well.

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