The Japan Philippines Economic Partnership Agreement (JPEPA) violates provisions of the 1987 Constitution which are vital to the country’s future economic development, according to independent think-tank IBON Foundation.

The JPEPA directly undermines the intent of the Constitutional mandate to promote the “preferential use of Filipino labor, domestic materials and locally-produced goods”, IBON research head Sonny Africa said. The JPEPA’s various provisions on National Treatment in Articles 17 (goods), 73 (services), 89 (investment), 131 (government procurement) prevent the Philippines from actively supporting Filipino producers.

The JPEPA moreover severely restricts the country to pass laws setting economic policy by prohibiting performance requirements. This effectively prevents Congress from enacting laws that ensure that the country benefits from Japanese investments.

Africa pointed out that under the Agreement, the country would be prohibited from enacting local content requirements, local labor requirements and technology transfer provisions.

The JPEPA’s provisions on taxation expropriation also lay the groundwork for legal challenges to future tax measures, effectively protecting the profits of Japanese corporations at the expense of the country’s right to tax all economic activity within its jurisdiction.

The country’s past experience with free trade validates the wisdom of such economic protections guaranteed in the Constitution, Africa said. Trade as a share of gross domestic product (GDP) has doubled from in recent years. Over that same period, foreign investment quadrupled as a share of GDP, from 4% to some 15 percent. And yet joblessness has soared to historic highs with unemployment rates of 11% and some 11 million Filipinos either jobless or looking for more work. The share of domestic manufacturing to GDP has continued to fall to 23%, as has employment in the sector to 9%, while agricultural deficits have been high and rising since the mid-1990s.

According to Africa , the provisions in the Philippine Constitution are based on solid historical experience of countries that have reached any kind of industrial or agricultural development, including Japan itself. But the JPEPA enshrines a defeatist policy-making and in doing so violates the 1987 Constitution’s vital economic provisions.

As the Senate holds its final hearing on the JPEPA today, IBON urges the senators to consider the Agreement’s future impact on the country’s economic development. The free-trade pact, if ratified, would shut the door to any real industrial development and modernization.


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