Worsening permanent crisis amid the global crunch

In her New Year message, Mrs. Gloria Macapagal-Arroyo described 2008 as “tumultuous” due to the global recession. But fortunately, according to her, this “has not become a crisis in the Philippines”. In several occasions, Mrs. Arroyo had credited her “tough, unpopular” decisions for supposedly cushioning the impact of the world economic crisis on the country.

poverty1Malacañang assures Filipinos that the economy will not be in recession (i.e., two consecutive quarters of fall in the gross domestic product or GDP) this year. We are repeatedly told that the economy and the people are resilient. With supposedly correct policies and sound fundamentals, the country could weather the storm rocking the world’s largest industrial economies. However, the definite effects of the recession in the US and other major capitalist economies on the Philippines could not be denied. The National Economic and Development Authority (NEDA) already said that the GDP growth in 2009 will further slow down to 3.6%. The GDP has started to decelerate last year posting a third quarter growth of 4.6% from 2007’s 7.1%.

The structural defects of the domestic economy – fashioned and strengthened through centuries of colonialism and decades of neocolonialism – have tied a great majority of the Filipino people to perpetual and worsening poverty, have denied local productive forces of any real shot at genuine industrialization, and have condemned the economy to a permanent state of crisis. In the face of what some analysts describe as its worst crisis ever, US imperialism, which is primarily responsible for the country’s own permanent crisis, shall become more vicious in its exploitation, plunder, and aggression. This in turn will translate into more bankruptcies, joblessness, and poverty in the Philippines, feeding ever worsening social discontent and unrest, especially under the hugely unpopular Arroyo administration.

Emerging economic trends

1. Falling exports

The US remains the single largest market for commodities produced and shipped from the Philippines, directly absorbing 16.28% of the country’s total exports from January to September 2008. In addition, it is estimated that as much as 70% of the country’s exports are dependent on the US (and EU) market through networks of subcontractors, joint ventures, and affiliates established by its transnational corporations (TNCs) operating in China, the NIES and ASEAN countries, which directly consume a huge portion of Philippine exports of intermediate goods.

This early, the impact of a contracting export market is already being felt by the country. In October 2008, exports fell 14.9%, the worst in seven years. The drop was attributed to falling US demand for electronic products, which comprised 59% of the country’s total export receipts. Electronic exports slumped by 18.9%, as big US-based electronics retailers start to close shop due waning consumer spending.

Because the country’s supposed export-winners are import-dependent, falling imports of materials and components for their manufacture indicate the depth of the impact of the global crisis on Philippine exports in the coming months. The January to September 2008 imports of electronic products declined by 26% as electronic firms cut production due to the global economic crisis, and this will impact on electronic exports in the months ahead. While falling imports ideally could mean increasing local content of exports and thus a positive development, such contraction, in the context of the Philippines, is described by mainstream economists as a “sign of a weakening economy” and a “worrisome situation”.

2. Worsening destruction of domestic jobs and livelihood

As domestic production is in the main dictated by the whims of foreign capital and markets, primarily of the US and other centers of monopoly capitalism, the economy continues to fail to generate enough jobs and livelihood for the people. The huge army of unemployed Filipinos in fact continues to grow as imperialist globalization has further destroyed the domestic productive sectors that could provide local employment. With the worsening of the cyclic crisis of the US economy and global monopoly capitalism in general, domestic production will be further undermined and consequently, millions more of Filipinos will be added to the number of jobless.

Job scarcity is at its worst under the Arroyo administration. From 2001 to 2007, the official annual unemployment rate has consistently remained double-digits, with the yearly jobless rate pegged at almost 11.3% and almost 4 million workers unemployed every year. Due to the global crisis, the overall domestic unemployment situation is turning from bad to really, really worse. The Bureau of Labor and Employment Statistics (BLES) noted the three-year downtrend in what it calls “job opening rate”, a measure of the tightness of the labor market and an indicator of the economy’s ability to create new jobs. From 2005 to 2007, the job opening rate has been progressively declining and was pegged at 1.21%, with agriculture and manufacturing posting the lowest rates.

With the global economic crisis seen to deteriorate in the coming months, Filipino workers should indeed brace themselves for even more severe job insecurity and even more dwindling local employment opportunities. Around 1/3 of manufacturing employment can be found in the EPZs and thus will be directly hit hard by the falling US and global demand. The impact could be greater considering that EPZ locators have also built their own local subcontracting networks to further cut labor costs.

The much-hyped employment driver aggressively promoted by the US-GMA regime, the BPO service subsector, could be hit in the immediate term by slowing demand and possibly investment from the US, the country’s number one BPO client and investor. One BPO firm, Advanced Contact Solutions (ACS), has reportedly downscaled its workforce by about 900 call center agents in November due to declining business volumes from the US. But over the long-term, the BPO sector may continue to thrive precisely because of the never-ending efforts of TNCs in the imperialist countries to cut production cost and increase profits. However, this also means intensified exploitation of the country’s cheap labor as call center agents face even more depressed wages and exploitative and oppressive working conditions. Employment in the BPO firms will thus continue to grow until the next episode of the periodic crisis of the US and other monopoly capitalist countries.

3. Increasing exploitation Filipino migrant workers

The domestic job crisis is mitigated only through labor export, which under the Arroyo administration has been officially proclaimed as government policy for job creation. As of December 2007, there are 8.73 million overseas Filipinos at any given time, of which more than 2.8 million are based in the US (of which, in turn, 2.5 million are immigrants or permanent residents), according to official records.

Like the case of BPO, OFW deployment could be undermined in the immediate term by the raging global economic crisis. Domestic helpers who accounted for the largest portion of newly-hired OFWs last year at 15.6% of the total, for instance, could be immediately vulnerable as households in recession-hit countries like Hong Kong, Singapore, and Taiwan cut costs to cope with the crisis. In the US’s agriculture and service industries, more than 50,000 OFWs were already “possibly” displaced, according to a government report. Readying itself for the possible influx of jobless OFWs, the government has devised a contingency plan to redirect them to other potential foreign labor markets or to encourage those with savings to start a small business.

This betrays the lack of any comprehensive and long-term government plan to invigorate domestic sources of growth that could sustain local job creation.

But then again, since OFWs are a reliable provider of cheap labor power, American and other foreign businesses will continue to hire them, although expectedly at even more exploitative terms. The crisis in fact creates more conditions including the feared increase in number of undocumented OFWs as displaced migrant workers refuse to return home since no jobs await them, that make OFWs even more vulnerable to various forms of abuse and exploitation.

4. Intensifying economic liberalization

To address its economic crisis caused by overproduction, the US and other rich countries are also expected to become more aggressive in pushing for more trade and investment liberalization. Recent pronouncements by the imperialist powers, such as in the APEC and G20 meetings last year, indicate a renewed drive to further pry open the markets of neocolonies to accommodate their surplus commodities and create new openings for their capital to operate and squeeze more profits from the cheap labor and cheap raw materials of the Third World.

The imperialist powers find a ready and reliable ally in the Arroyo administration in its efforts to push for increased free trade. The regime has been aggressively pursuing new bilateral and regional FTAs in a misguided endeavor to increase access to export markets and invite more foreign investments for job generation. Last October, the Senate, under tremendous pressure from Malacañang and the Japanese government and businesses, railroaded the ratification of the Japan-Philippines Economic Partnership Agreement (JPEPA). Also in the pipeline is a Partnership Cooperation Agreement (PCA) with the EU as part of the process to establish an EU-ASEAN FTA. The RP-EU PCA formal negotiations will this year. And finally, the stalled negotiations for an RP-US FTA are expected to be revived soon as the US intensifies efforts to surmount its recession.

In terms of national policies, the US-GMA regime has recognized that trade and investment liberalization may have already reached its limits and thus the only way that the domestic economy can achieve more liberalization is through Charter change (Cha-cha). GMA said so herself in a roundtable with the business sector last October that the “next liberalization has to be through the Constitution… to liberalize economic provisions… mostly the 60-40 restriction (on foreign equity)”.

5. Increasing desperation for foreign capital

While tighter access to credit, aid, and investments may be felt in the immediate term, the export of capital from the monopoly capitalist economies to the neocolonies will continue and intensify. The export of capital remains one of the imperialist means to extract profits from the neocolonies and to accelerate the rate of profits. Usurious debt payments from the neocolonies, for instance, have remained a steady source of financial profits for the banks and financial institutions controlled by monopoly capitalists in the US, Europe, and Japan. From 2001 to June 2008, the cumulative debt service burden (interest and principal) already reached $56.66 billion – more than enough to wipe out the current external debt of $54.81 billion.

However, the bigger danger for the Philippines in the long run is not so much that it will have less access to foreign loans but that commercial creditors and the bilateral and multilateral banks will impose even more usurious terms and impose even more painful restructuring as conditionalities in their desperate attempts to get out of the crisis and increase profit rates.

With more foreign exchange actually being squeezed from the country through foreign direct and portfolio investments, ODA and foreign debt, and through colonial trade as mentioned earlier, it is OF remittances that really save the day for the country in terms of foreign exchange earnings and in keeping the dollar-dependent national economy afloat. Most of the OF remittances come from the US, which accounted for 55.2% of the accumulated remittances from 2000 to September 2008 of around $82.13 billion. OF remittances is the single largest factor that sustains the Balance of Payments (BOP) position, which measures the foreign exchange transactions between the domestic economy and the rest of the world. However, the BOP surplus may not last for long as the global economic crunch intensifies and investors particularly from industrialized countries resort to “risk aversion” as an immediate reaction to protect their wealth. While most OFWs may be able to keep their jobs or are able to find other jobs illegally as discussed earlier and deployment continues, migrant workers face the reality of even cheaper wages or lower incomes. Combine this with even higher taxes and higher consumer prices and cost of living like what is happening in the US, the migrants’ remittance flows will certainly be not as brisk as before which will affect not only the BOP’s current account but household spending and domestic production as well.

6. Aggravating poverty and inequities

The years leading to the three-decade high GDP growth of more than 7% in 2007 ironically have been characterized by a dramatic increase in the official poverty figures. Between 2003 and 2006, the number of poor Filipinos grew by 3.8 million, according to the government. It was also in 2007 that the most number of Filipinos have perceived themselves as hungry, based on the regular hunger survey of the Social Weather Stations (SWS). This phenomenon highlights structural flaws in the country’s economic system which could not only produce enough wealth for its own industrialization but also whatever little wealth it creates is monopolized by TNCs and other foreign corporations and share what is left to their local agents composed of compradors and landlords.

In the face of even more dwindling wealth available in the domestic economy as the imperialist crisis worsens, local compradors and landlords will be even more aggressive to consolidate and expand their control of whatever wealth is left in the domestic economy. As such, bureaucrat capitalism in the form of cronyism has become more pronounced under the US-GMA regime. These cronies, such as Mike Defensor and Enrique Razon, have partnered with big foreign businesses to corner government contracts, investment deals, and privatization projects.

Immediate relief and long-term reforms

The immediate challenge today is to assert for urgent economic relief and policy reforms that will at the minimum address the further deterioration of the state of the domestic economy and the people. With increased uncertainties in the global economy, the key is to promote internal drivers of growth, increase domestic consumption, and in the process invigorate domestic production. This can be achieved through substantial reduction in and effective control of the prices of basic goods and services that the people consume. The 12% VAT and other onerous taxes must be scrapped and proposals for additional burdensome taxes must be vehemently opposed. Neoliberal policies that have allowed global and local cartels to abuse the people with exorbitant prices must be opposed such as the ODL, EPIRA, and ongoing, gradual privatization of the NFA and implement state regulation and increased intervention.

Complementing these efforts to bring down prices and keep them in check is the implementation of a substantial wage hike that will allow millions of poor families to at least lessen the disparity between the cost of living and their daily incomes. Filipino small and medium enterprises (SMEs) must be supported and protected by the government not only to allow them to substantially increase their workers’ wages but also to help them cope with the raging global and local crises.

Domestic resources must be freed up and public investment in social and economic services urgently needed by the marginalized sectors must be significantly increased. This entails the repeal of automatic debt servicing, the cancellation of odious debt, and a big cutback in military spending so that enough resources will be immediately made available for social services such as education, health, and housing. More taxes must be collected from big business, especially the TNCs operating in the country and reverse the trend of declining tariffs on international trade.

The domestic economy and local industries must be protected. The implementation of the JPEPA should be stopped and all means must be exhausted to abolish the treaty. Ongoing FTA negotiations must be opposed, including the concession of additional liberalization commitments in the WTO especially on agriculture and non-agricultural market access. New efforts aimed at more trade and investment liberalization such as through Cha-cha must be decisively derailed.

Finally, the latest flare-up in the periodic crisis of monopoly capitalism and its consequent impact on the weak and pre-industrial domestic economy have made it more imperative to create the material conditions that will allow the economy to break free from its permanent crisis of backwardness and poverty. This necessitates the implementation of a genuine agrarian reform program to encourage the productivity of Filipino farmers and farm workers, who comprise a great majority of the direct producers of wealth in the economy. This will allow agriculture to create the needed economic surplus for industrial development and widen industrial production as it boosts domestic consumption in the countryside where an overwhelming majority of poor and exploited Filipinos live. (END)

Senate railroaded JPEPA, who’s surprised?

Voting 16-4, the Senate has railroaded Wednesday night the ratification of the JPEPA. The wicked scheme of Malacanang, Miriam Santiago and Mar Roxas was swift and was over in a matter of less than three hours. At 8:30pm, I received a text message from a Senate staff: “Nagbibilangan na dito. Gusto nila ipasa JPEPA tonight”. And at around 10:58pm, another text message came: “JPEPA has been approved on third reading. Pimentel, Aguino, Escudero and Madrigal voted no”.

The events that transpired at the Senate on Wednesday night, however, is not really surprising anymore. From the start, JPEPA has been shrouded in secrecy – it was negotiated by Malacanang away from public eye.  It was signed by GMA on the sidelines of a major international event in Finland. Civil society groups had to petition the Supreme Court just to force Malacanang to make public important documents about the JPEPA (which unfortunately the SC turned down, setting the precedent for more undemocratic and non-transparent negotiations on economic treaties in the future – at our expense, of course) That it was ratified by the Senate while the rest of the country is asleep is only a fitting conclusion to an agreement that has been kept away from public scrutiny.

This is not the first time that Congress, with apparent pressure from Malacanang and powerful lobby groups, has rushed the approval of an unpopular measure or initiative in the dead of the night. From impeachment complaints against GMA, to EPIRA and VAT, and now the JPEPA, legislators and Malacanang have the propensity to cloak their wicked plans against the Filipino people in the darkness of the night.

The press releases from Malacanang and JPEPA’s main proponents today are loaded with the expected sound bites. GMA was quoted as saying that the JPEPA will protect the country from the onslaught of the global economic recession – I guess GMA must hire new speech and PR writers to come up with more interesting and fresh sound bites, this is exactly what she has been saying to justify the VAT. Miriam, for her part, is denying that they railroaded the JPEPA. Inisahan na tayo, ginagawa pa tayong tanga.

But the fight is not yet over. One option is to file a petition before the Supreme Court to question the constitutionality of the JPEPA. Legal luminaries like former SC justice Feliciano, Prof. Dean Magallona and Prof. Harry Roque, among others have pointed out the constitutional defects of the treaty such as its provisions on foreign ownership and investment. We can pursue this option to stop JPEPA’s implementation. But like all government institutions, we can only expect a favorable ruling from the Supreme Court if we have a strong mass movement that will exert political pressure to defend the country’s patrimony and sovereignty.

Constitutional issues to determine alignments in Senate vote on the JPEPA

First published in Bulatlat.com, Vol. VIII No. 33, Sep 21-27, 2008

It has been more than two years now since President Gloria Arroyo and Japanese premier Junichiro Koizumi signed the Japan-Philippines Economic Partnership Agreement (JPEPA) in September 2006. But the controversial treaty remains pending in the Senate and despite many delays continues to face rough sailing at the upper chamber.

While the treaty’s sponsors, Senators Miriam Santiago and Mar Roxas, still have a lot to explain to their colleagues about the economic implications of the JPEPA, not to mention the still unresolved issues of toxic waste dumping and dubious gains for Filipino nurses and health workers, it seems that the issue of constitutionality will be the most contentious debate among the senators. Constitutionality has been emerging as a key factor that could determine alignments in the Senate once the JPEPA is put on vote.

Conditional concurrence and side agreement

Since the joint committees on foreign relations and trade and commerce, chaired respectively by Santiago and Roxas, closed public hearings in December 2007, the JPEPA has been hounded by questions on its constitutionality. Santiago, who has emphatically recognized the unconstitutionality of the JPEPA, has since insisted for a side agreement that will correct the constitutional flaws of the treaty. These legal infirmities pertain to the treaty’s investment provisions on national treatment, most favored nation (MFN) and prohibition of performance requirements.

By April 2008, the Department of Trade and Industry (DTI) and the Department of Foreign Affairs (DFA) have yet to convince their Japanese counterparts on a detailed side agreement that will amend the country’s unconstitutional obligations in the JPEPA. At that time, Santiago had started to push for what she called “conditional concurrence” wherein the Senate will ratify the JPEPA based on the condition that a side agreement revising the treaty will follow.

Conditional concurrence, however, was criticized by some of her colleagues, notably Senator Francis Escudero who pointed out that both the Constitution and the Vienna Convention on the Law of Treaties do not allow the Senate to issue a conditional concurrence on the JPEPA. More importantly, Malacañang knew that pushing for a conditional concurrence will put the Philippines in a position that could cause the Arroyo administration diplomatic embarrassment because Japan has remained adamant in its stance not to revise the JPEPA. For Japan, striking out the questioned investment provisions from the JPEPA will cancel the most important concessions that they got under the treaty.

Thus, DFA secretary Alberto Romulo had to ask Santiago to defer her scheduled April 28 sponsorship speech, when she was supposed to officially endorse conditional concurrence, and wait until the side agreement between the two governments has already been clinched. Negotiations for a side agreement continued but has not been produced until Congress took a break from its first regular session in June. JPEPA’s next opportunity to get Senate approval was further delayed to August when Congress resumes session.

During the congressional break, DTI secretary Peter Favila continued pursuing the detailed side agreement with Japan. Even Roxas flew to Tokyo in July and met with top Japanese trade and foreign affairs officials to help convince them on the need for a side deal so that the JPEPA could get pass the Senate. But Japan would not budge from its “no revision” position. By end-July, Santiago was forced to admit that the best they could get from Japan was a mere “general statement” of assurance that the JPEPA will not violate the Constitution instead of a detailed side agreement that effectively revises the country’s unconstitutional obligations in the treaty.

Exchange of notes

With the doors for a possible revision of the JPEPA effectively shut, Santiago is left with no option but to endorse concurrence on the treaty as it stands. Santiago, of course, is obliged to do this as a political payback to Arroyo’s nomination of her to the International Court of Justice (ICJ). But Santiago and the JPEPA proponents still need to package the sponsorship for concurrence as if the earlier conditions have been met to counter the anticipated opposition from the public and some senators.

It is in this context that Santiago, in her August 6 sponsorship speech on the JPEPA, said that she is now endorsing (unconditional) concurrence on the treaty because the Japanese have already agreed to an “exchange of notes” that will supposedly correct the constitutional defects of the JPEPA. The exchange of notes actually has not been produced and made public until September 1, which further delayed interpellations in the Senate as some lawmakers including Roxas wanted to see its contents before proceeding with the interpellations.

Only five pages, the actual document is composed of: (1) the diplomatic letter of Romulo to Japanese foreign minister Masahiko Koumura, dated August 22, identifying four major points of “shared understanding” between the Philippines and Japan and (2) Masahiko’s reply to Romulo, dated August 28, citing verbatim the points he raised and a statement confirming the shared understanding.

The first two points of the shared understanding refer to general statements pertaining to the parties’ commitment to respect each others’ national laws, including their constitutions; and to implement the JPEPA in accordance with each other’s respective charters.

Point number three, meanwhile, enumerates the provisions of the 1987 Constitution that the Philippines clarified shall not be amended by the JPEPA. These include provisions in Article II (Section 15), Article XII (Sections 1, 2, 3, 7, 8, 10-12 and 14), Article XIV (Sections 4 and 12), and Article XVI (Section 11). The provisions cover, among others, the protection of Filipino enterprises from unfair foreign competition; restrictions on foreign ownership of public lands and in the exploration and exploitation of natural resources; limitation to Filipinos of certain investment areas; preferential rights, privileges and concessions granted to Filipinos covering the national economy and patrimony; regulation of foreign investments; regulation of technology transfer and promotion; and the promotion of preferential use of Filipino labor, domestic materials, and locally produced goods.

A useless document

A closer look at the contents of the exchange of notes reveals that the document is useless in so far as ensuring that the JPEPA will not undermine the Constitution. It could have been a stronger and more binding document if it explicitly amended the questionable provisions of the JPEPA, as originally proposed by retired SC justice Florentino Feliciano who first raised the constitutional issues during one of last year’s Senate hearings.

In fact, the exchange of notes could be a Trojan Horse just awaiting the opportune time to attack. A closer look at point number four of the shared understanding reveals the hidden intentions of the document:

“4. The present exchange serves only to confirm the interpretation of and does not modify the rights and obligations of the Parties under the provisions of the JPEPA.” (emphasis added)

In other words, the unconstitutional provisions of the agreement remain and will still bind the Philippines once the JPEPA gets ratified. The exchange of notes did not resolve the constitutional issues but in effect just deferred the question to be tested by actual legal conflicts over the treaty’s implementation that may arise in the future. This places the Constitution under unnecessary duress because under the Vienna Convention on the Law of Treaties, the Philippines could not raise unconstitutionality for failure to comply with its JPEPA obligations.

Legal luminaries share the same observation. In a paper, former UP College of Law dean Professor Merlin Magallona described the exchange of notes as a derogation of the Constitution. Magallona wrote: “The essence of a treaty in international law is that it creates legal relations between the state parties, and the core of such relations consists of rights and obligations embodied in the meaning of the text of the treaty in question. For this reason, instead, the Exchange of Notes appears as reaffirmation of the legal relations between Japan and the Philippines in JPEPA and has the effect of reinforcing the intent to adhere to the rights and obligations as provided in JPEPA”.

Magallona also argued that if the Senate ratifies the JPEPA, there is a danger that the treaty will supersede the Constitution in application and settlement of disputes over JPEPA’s interpretation. “In case of incompatibility between JPEPA and the Constitution as an issue to be decided by an arbitral tribunal that may be created by the parties pursuant to JPEPA, that tribunal will apply JPEPA over and above the Constitution pursuant to the fundamental principle of the pacta sunt servanda and in accordance with the basic norm of international law that a party to a treaty cannot invoke its internal law, including its Constitution, as a justification for failure to perform its obligation under the treaty”, Magallona wrote.

Professor Harry Roque, also of the UP Law, meanwhile, belittled the exchange of notes as a scheme to appease domestic opposition to the JPEPA. “The reality is that in a treaty, neither of the parties can invoke a violation of its domestic law as a ground for its non-compliance therewith. In short, even if the JPEPA were to violate the Philippine Constitution, it will not affect its binding nature. Hence, the exchange of note is a superfluity”, Roque pointed out.

Both Magallona and Roque said that the remedy to the unconstitutionality of the JPEPA is not the exchange of notes but non-concurrence on the part of the Senate.

Emerging alignments

While Santiago claims that with the exchange of notes, the JPEPA could now breeze through the Senate and perhaps be finally ratified by October, the reality is that more and more senators are being convinced that the treaty is legally indefensible. Since the exchange of notes was made public, a bloc of senators has emerged pushing for a renegotiation of the JPEPA.

Among them is Senate majority floor leader Francis Pangilinan who said that despite the exchange of notes, JPEPA’s ratification is not assured because he thinks that it failed to cure the major defects of the treaty. He pushed for renegotiation as a “way out” of the debate over the pact. While Pangilinan is careful not to call the move a rejection of the treaty, a renegotiation will, in effect, mean Senate non-concurrence on the current JPEPA. As Santiago noted, “a call for renegotiation will effectively kill the treaty” and asked her colleagues to simply “love it or leave it”.

Senator Benigno Aquino III has already confirmed that he belongs to the renegotiation bloc while Senator Panfilo Lacson has also made public his proposal to renegotiate the treaty. Lacson shares the views that the exchange of notes “may be rejected by the Japanese Diet or could be questioned before an international court”. Unconfirmed reports also list Senators Jamby Madrigal and Antonio Trillanes IV as among those included in the renegotiation bloc although Madrigal has been consistent from the start on her opposition to the JPEPA.

While not reported listed in the renegotiation bloc, Senator Pia Cayetano has also been vocal since the onset about her serious misgivings on the JPEPA specifically on its environmental impact. In addition, reliable sources also disclosed that Escudero and minority floor leader Aquilino Pimentel Jr. will likely vote against the treaty or support the call for a renegotiation. Santiago, interestingly, has also named Senator Gringo Honasan as among those who want the JPEPA renegotiated although he has yet to make any public statement on this.

Thus, there is a fighting chance that the needed eight votes to block JPEPA’s ratification may be mustered as senators forge a consensus around the unconstitutionality of the JPEPA despite the exchange of notes. But nothing is certain at this point considering that the Japanese, according to Senate insiders, have been really aggressive in their lobbying efforts to get the JPEPA approved and unrevised. Also, the propensity of Malacañang to use all the (dirty) tricks in the book to push for its agenda must not be overlooked.

The challenge for anti-JPEPA advocates is to ensure that those who have already come out publicly against the JPEPA, whether for outright rejection or for renegotiation, will firm up their position. The exchange of notes must be further exposed to help convince the other senators who have not yet made up their mind on the treaty. Public pressure, through the combination of one-on-one dialogues and briefing with targeted senators and direct mass actions to pressure the Senate as an institution to vote against the JPEPA must be intensified. (END)

Jpepa faces tough constitutional issues as Senate vote nears

Part 1 of a two-part series

The Japan-Philippines Economic Partnership Agreement (Jpepa) is on top of the agenda of the Philippine Senate when it resumes from its Holy Week break on April 28. Senator Miriam Santiago, chair of the Senate committee on foreign relations, said she will release a full report endorsing “conditional concurrence” with the treaty.

Originally, the upper chamber was supposed to ratify the Jpepa before the Lenten break. But the Senate schedule on the treaty has been derailed by the alleged $329-million broadband corruption scandal. Since February, senators have been preoccupied with the inquiry on the anomalous broadband contract that caused renewed calls for Pres. Gloria Arroyo’s resignation or ouster.

Nonetheless, Filipino trade officials have been quietly but aggressively promoting the Jpepa through the media. The Japanese embassy has also become more insistent in its lobbying efforts for Jpepa’s ratification. But as the Senate vote on the treaty draws near, many fundamental issues remain unresolved. In fact, the proposed conditional concurrence of Santiago underscores the failure of the Jpepa to pass crucial constitutional issues.

If ratified, the Jpepa sets a dangerous precedent wherein treaties could be approved in spite of clear constitutional flaws. Worse, Jpepa ratification ignores the legitimate concerns brought up by fishers, workers, nurses, environmentalists, nationalists, and other cause-oriented groups. Beyond the constitutionality of the Jpepa, the bigger issues involve the treaty’s lasting impact on the livelihood of marginalized groups and the country’s economic sovereignty.

National treatment

Retired Supreme Court (SC) justice Florentino Feliciano raised several constitutional questions in one of the Senate’s hearings on the Jpepa last year. He pointed out that the Jpepa’s provisions granting national treatment to Japanese investors and prohibiting performance requirements violate the 1987 Constitution.

National treatment, which is contained in Article 89, means that Japanese investors and their investments will be treated like their Filipino counterparts. But this provision contradicts the ownership limits set by the Constitution. “It is common knowledge that entry into certain sectors of economic activity in our country is constitutionally restricted to Filipinos or to juridical persons at least 60% owned by Filipinos”, Feliciano said.

Government negotiators actually had the chance to hurdle such legal challenge. Article 94 of the treaty gives the Philippines an option to list all constitutional and legal provisions that do not conform to Article 89. But while the negotiators did exercise this option, they failed to provide a full account of such provisions. “The most dramatic example of omission”, observed Feliciano “is relating to the operation of public utilities”.

Article XII Section 11 of the Constitution requires a minimum of 60% Filipino ownership in public utilities. “If the Jpepa comes into effect, Japanese investors would be entitled to own more than 40% of a public utility. This would be a direct contravention of our Constitution”, Feliciano maintained.

There are other similar constitutional restrictions that were not listed by the negotiators in Article 94. They include limits relating to the practice of certain professions; ownership and administration of educational institutions; mass media; and advertising.

Performance requirements and future measures

Article 93, meanwhile, limits the authority of government to impose certain requirements on Japanese investments in the country. Government could not oblige Japanese investors to transfer technology, use a particular amount of local inputs in their production, and to hire Filipinos in certain positions, among others.

Feliciano cited Article XII Section 13 of the Constitution as inconsistent with Jpepa’s Article 93. This provision mandates the State to “promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures to make them competitive”.

A “more serious” constitutional law aspect of the Jpepa that the negotiators ignored, according to Feliciano, relates to the so-called “future non-conforming measures”. Article 94 of the treaty also gives the Philippines an option to list economic activities that the country may want to exclude from Article 89 in the future. However, what the negotiators listed are not reservations for future measures but existing non-conforming measures.

This could undermine Article XII Section 10 of the Constitution. The said provision mandates Congress to reserve to firms at least 60% owned by Filipinos certain areas of investments. Such investment may not be restricted today but “when the national interest dictates” could be restricted in the future.

On trade liberalization, Feliciano raised his concern on possible conflicts between the executive and legislative branches of government. Article 18 of the Jpepa requires the Philippines to eliminate tariffs on imported Japanese goods. “The power to set and modify tariff rates is fundamentally legislative in nature”, Feliciano said. “Although the Constitution (Article VI Section 28) allows Congress to delegate such authority to the President, it is still subject to limitations and restrictions”, maintained Feliciano.

Conditional concurrence

Other legal stalwarts who were not invited in the Senate hearings echo the observations of Feliciano. But while Feliciano proposes to amend the Jpepa to correct its constitutional flaws, they believe that such an option is not possible. Former SC chief justice Artemio Panganiban said that the treaty can no longer be renegotiated because the Japanese Diet already ratified it in December 2006.

“The best option is ‘conditional’ or ‘qualified’ ratification wherein the Senate ratifies the treaty but expresses reservation that the Constitution is superior over the Jpepa”, Panganiban said.

Santiago apparently took her cue from Feliciano’s analysis of the constitutional aspect of the Jpepa and Panganiban’s opinion on how the treaty can survive constitutional challenge. “It (Jpepa) will be declared unconstitutional by the Supreme Court. That is my humble opinion as a scholar of constitutional law”, Santiago admitted.

Note, however, that before pitching for conditional concurrence, Santiago first floated the idea of “exchange of diplomatic notes”. She called it a “side agreement” between Japan and the Philippines which will state that the Constitution shall prevail over the unconstitutional provisions of the treaty. Santiago initiated informal talks about the side deal with the Japanese embassy in Manila last December.

But three months later, Santiago has yet to produce the supposed side deal. Normally, a copy of such agreement is distributed to senators as in the case of the toxic waste issue. In May last year, the foreign affairs departments of Japan and the Philippines had an exchange of diplomatic notes wherein Japan promised not to export toxic wastes in the country under the Jpepa.

Did Santiago fail to convince the Japanese government to sign a side deal that states it will respect the Philippine Constitution in relation to the Jpepa? In her latest statement on the Jpepa, Santiago did not mention the side agreement.

“The Jpepa committee report will comprise at least four documents: the standard format with the signatures of nearly 23 senators who are members of the two committees; the draft Senate resolution setting out the conditions for concurrence; the report on constitutional and legal issues; and the report on trade and industry issues”, Santiago said when she announced the April 28 schedule on the Jpepa.

Will Japan accept it?

Because there is no bilateral side deal where Japan commits to abide by the Philippine Constitution, Santiago is now pushing for a unilateral conditional concurrence. But will Japan accept it? Santiago herself is uncertain. “I hope Japan will accept the conditions, without resubmitting the Jpepa to the Japanese Diet”, said Santiago.

The constitutional issues cited by Feliciano against the Jpepa’s provisions on national treatment and prohibition of performance requirements are non-negotiable for Japan. It defeats Japan’s primary purpose of using the treaty to further maximize its exploitation of the Philippines’ resources and markets. Considering that the country already has a highly liberalized trade sector, the true value of the Jpepa for the Japanese is the commitment of the Philippines to liberalize more investment areas.

But what is more dangerous is the gambit that Santiago is trying to play. Ratifying the Jpepa at its present unconstitutional form creates the risk that the Philippines will be subjected to legal disputes in international courts and face liability for damages. Under the Vienna Convention on the Law of Treaties, for instance, the Philippines could not invoke unconstitutionality as legal defense for non-performance of its Jpepa obligations.

Why not avoid these future complications and say “no deal!” now because the Jpepa patently violates the Constitution?

Most importantly, these restrictions were imposed by the framers of the Constitution because they protect the national patrimony and sovereignty. Thus, the debate should go beyond constitutionality but on how the Jpepa may undermine the country’s efforts in achieving industrialization and in strengthening its self-determination.

(To be concluded)

Part 2 of the series discusses the deeper issues of Philippine patrimony and sovereignty in relation to the Jpepa.