IDEALS, Inc. {Philippines}, a non-stock and non-profit legal resource organization is currently monitoring the on-going negotiations for the EU-ASEAN Free Trade Agreement. In cooperation with several NGOs and people’s organisations from the Philippines, we hereby express our concern and raise certain issues as regards the process being pursued for this FTA and the possible contents thereof. We note, state, and/or question the following:

Transparency, Right to Information and Participation

Based on official documents, the European Union and the ASEAN are currently talking with each other in these “Exchange of Views” sessions. However, very little is known as regards the possibility of any government already making specific commitments for the the FTA; the depth and nature of the commitments are not at all discussed with the citizens of the Philippines and other ASEAN countries.

While the Ford report and various versions of the EU’s negotiation mandate have been made available online, the ASEAN has not, at all, released any document outlining the clear negotiation mandate for the region vis-a-vis the EU.

Consultations with the basic sectors are non-existent.

Concern against possible bilateral negotiations

The Ford Report states the possibility of bilateral agreements “if certain countries in the ASEAN prove to be reticent about signing an FTA.” The European Union has also expressed concern in relation to the Myanmar issue and has indicated that no FTA will be signed if Myanmar signs with the ASEAN.

It is hereby stated that the possibility of a bilateral route [e.g. EU-Philippines, EU-Thailand, etc], is a heavy burden to carry for developing countries like the Philippines, which may have very little bargaining leverage as compared to a scenario where it negotiates together with a wider and bigger regional bloc such as the ASEAN.

It is therefore asked: what is the possibility of the EU-ASEAN FTA taking the bilateral route instead?

Concerns against trade sanctions as “penalty” for human rights violations

The Ford Report speaks of the possibility of “allowing for the suspension of preferential tariffs” in case there is a “consistent breach of human rights clauses;” a clause clearly found in the Partnership and Cooperation Agreement which is said to be a pre-requisite for the signing of the FTA.

IDEALS, Inc. joins the expression of serious concern on this extremely vague proposal. The suspension of tariff preferences as a “penalty” for HR violations is problematic on several points:

  • Without a clear indication as regards which sector will have to suffer from the withdrawal of tariff benefits, a situation may arise such that an innocent sector may be penalized for HR violations being committed in another sector or even parties not even recognized by the government.
  • There is yet no indication as to who will determine and how it will be determined that indeed HR violations have reached serious and acute levels sufficient to allow the suspension of tariff concessions.

Monitoring Specific Negotiation Issues

Land ownership by EU citizens and corporations

Inasmuch as agricultural production is unavoidably tied to the issue of land access, FTA negotiations must be monitored to ensure that in the investment and services chapter, unconstitutional commitments in relation to land access will not be made. The Philippines limits private land ownership to Filipino citizens and corporations with a maximum of 40 percent foreign equity. This limitation applies to all services sectors and to all types of investments, without exception. This rule must thus be stated and recognized as an exception to the commitment to extend national treatment to EU and to all other nation-members of the ASEAN.

Access to Philippine fishing grounds

Negotiations in fisheries cannot include access to fishing grounds, whether or not these are in the territorial sea or in the exclusive economic zone. For the Philippines, the enjoyment and utilization of marine wealth is limited exclusively to Filipino citizens. Foreign participation is not allowed; thus, foreign fishing vessels are prohibited from engaging in related activities.

TBTs and SPS

EU SPS and TBTs remain to be extremely stringent. FTA monitoring will address the following:

  1. Will the FTA contemplate harmonisation of standards? If the EU standards are higher, what would be the expected cost on ASEAN countries for the latter to meet these standards to ensure market access? The issue of using Aid for Trade and/or Official Development Assistance will be sensitive for the Philippines because the country devotes a large portion of its annual budget to debt servicing; a policy that is widely criticized inasmuch as funding for basic services have suffered through the years.
  1. Will cooperation on SPS and TBT take the form of harmonisation of standards or will it use a mechanism similar to Japan’s where both countries commit to mutually recognize the certifications of each country’s assessment bodies, subject to a procedure of review in certain cases?

Note: EU-Chile Agreement contains a combination of approaches: harmonisation of standards and mutual recognition of conformity assessment bodies.

Trade-distorting export subsidies

Trade-distorting subsidies in agriculture and fisheries must be a priority issue. The EU, among others, seeks greater market access for its agricultural products. The latest draft mandates have yet to discuss extensively the commitments to be expected on the issue of subsidies.

Government Procurement

Within the framework of the WTO Agreement on Government Procurement, the Philippines has not made commitments to the effect that it would guarantee market access to foreign bidders/suppliers.

In the last report of the WTO Working Group on Transparency in Government Procurement,[1] it was reported that:

“The representative of the Philippines stated that his delegation did not deny that there were valuable benefits associated with a system of transparency in government procurement, even in the area of corruption, although, as many delegations had said, this was beyond the WTO’s competence and mandate.” (emphasis supplied)

Government procurement, if opened indiscriminately to foreign contractors, will have negative impact on the local industries, especially construction. Thus, employment impact must be closely looked into. The following data could be considered:

  • The construction industry of the Philippines started to suffer against foreign competition when Republic Act 8182 [Official Development Assistance Act] was amended in 1998 to give the President the right to waive any preference for local goods and local services if the project is funded by ODA.
  • The economic pressure might prove to be insurmountable for local companies inasmuch as they would have to compete with EU-based companies: the EU is home to the top 3 largest construction companies in the world.

On Mining:

The Philippines now allows foreign corporations to participate in mining activities via technical or financial assistance. Based on the latest mandates, there is serious concern that the European Union might ask for the complete removal of restrictions in this sector [i.e. prohibition against moratoriums and regulation of the number of operating companies]. This request might be legally defensible under the standard expropriation provisions of current FTAs/EPAs. While the host-country may impose bans or moratoria, the host country may be liable for compensation.

On Labor Clauses and FTAs

The social impact of FTAs have always be discussed in line with the presence of labor and environmental clauses in the text of the agreements. However, actual labor and employment effects of the FTA must be analyzed further by considering the following:

  • US FTAs have included commitments to exert best efforts in most ILO Core Labor Rights, except for the commitment against non-discrimination.
  • In the JPEPA, despite the Philippines’ being a signatory of the convention against discrimination, the text of its agreement with Japan noticeably lacks the same commitment precisely because until today, Japan refuses to sign the said convention.
  • Labor clauses, even when included in FTAs, are nothing but empty provisions that actually do not have clear guidelines as regards enforcement, and remedies in case of breach. Most FTAs depend on the ILO to enforce labor clauses; without providing for a direct remedy within the bilateral/regional framework itself.

– end –

[1] WT/WGTGP/M/18 dated 07 July 2003.

EU-ASEAN Free Trade Agreement: Some Issues and Concerns

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