Background:

The JointDeclaration issued by theLeaders at the ASEAN,Australia and New ZealandCommemorative Summit inNovember 2004,announced the launch ofnegotiations for anASEAN-Australia-New-Zealand Free Trade Agreement (AANZFTA) to be realized inten years. A set of guidingprinciples for thenegotiations, which has tobe completed within twoyears, has also beenendorsed by the Leaders.[1]

The AANZFTA has the following guiding Principles:

  1. Comprehensive in scope (investment, government procurement, competition policy, trade facilitation)
  2. Deep integration (elimination of all forms of barriers to trade in goods, services and investment)
  3. Flexibilities
  4. Consistent with WTO
  5. Builds on WTO commitments
  6. Include or go beyond elements of the economic integration agreements of ASEAN and Australia-New Zealand Closer Economic Relation.

Negotiations on the ASEAN-Australia and New Zealand Free Trade Agreement (AANZFTA) are now in the final phase and the political will to achieve a substantive outcome this year exists on both sides. Progress in negotiations in Hanoiin June would be sufficient to allow conclusion of the Agreement in August 2008.[2]

The following highlights the status of the negotiations:[3]

  1. Completion of the text of the Chapters on Customs procedures and Economic Cooperation;
  2. Main issues in the negotiation of the goods modality, services and investment, specifically the flexibility on the goods modality for Normal Track and Sensitive Track, the difference in the level of ambition and the most favored nation treatment provision in services, and the ratchet mechanism in investment;
  3. ASEAN is agreeable to considering separate chapters for Intellectual Property and Competition Policy; and
  4. Australiaand New Zealandsubmitted new proposals on Government Procurement and Labor and Environment (Report on the 39th AEM).

Coverage of the Negotiation:[4]

• Trade in Goods

– Ongoing deliberations on modality providing for tariff elimination until 2013. No final agreement yet on modality.[5]

– Rules of origin

• Services

– Discussions on MFN, domestic regulation, denial of benefits, general exceptions, etc

– Submission of offers (New Zealand and Australia have already communicated their offer: see the list below)

• Investment

– Discussions on approaches to scheduling of commitments/reservations

• Economic Cooperation

– Development of work programs

• Other issues (Technical Barriers to trade, Sanitary and Phytosanitary measures, customs procedures, intellectual property, competition policy, special and differential treatment, government procurement, labor and environment

Trade in Goods

The elements of Trade in goods Modalities are the following (two-track approach): Normal and Sensitive Track (NT and ST).

  • Coverage: 90% NT and 10% ST
  • Timeline for goods liberalization:

NT: 2008 – 2015

ST: 2013 or 2015 up to 2018 (2020?)

Indicative Expression of Interest in Goods – March 2007 (Tariff Commission)

Philippines

Description of Products HS Chapter
Live Cows, sheep, goats 01
Beef, sheep and pork meat and offal 02
Full and skim milk and cream, dairy spreads, butter and cheese 04
Vegetable 07
Cereals 10
Malt and other worked grains 11
Hops 12
Hop extracts 13
Animal fats 15
Processed meat and fish 16
Chocolate 18
Cereals, flour and milk preparations 19
Canned and bottled fruit and vegetables, including juice 20
Sauces and ice-cream 21
Beer, wine and spirits 22
Alumina 28
Paint 32
Polymers 38
Plastic fittings for motor vehicles 39
Pipes, belts, gaskets and other rubber articles for motor vehicles 40
Carpets 57
Automotive – friction material for brakes and clutches 68
Mirror and glass mats 70
Iron or steel articles 73
Copper 74
Aluminum and articles 76
Zinc 79
Locks 83
Motor vehicle engines and parts 84
Electrical motors, signaling equipment, relays and switches for motor vehicles 85
Passenger motor vehicles and parts 87
Speed indicators and tachometers, Automated regulators 90
Parts for seats for motor vehicles furniture 94

Trade in Service

New Zealand’s Services Interests- The list is a focused version of New Zealand’s services request to the Philippines in the WTO Doha Round services negotiations.[6] The list is based on the assumption that the Philippines will incorporate all its existing GATS Commitments and the elements of its WTO Doha round Services offers, in the FTA. The list specifies commitments New Zealand would like the Philippines to make above and beyond its GATS commitments and GATS offers.[7]

Market Access and National Treatment (No limitations ie., schedule “None”)

– Existing Commitment covers the following categories of intra-corporate transferees: Executive and Senior Managers, Specialist and/or Senior Personnel, Specialist Personnel, Installers/Servicers, Services Sellers/Business Visitors

– Individual Services Suppliers providing services on a fee or contract basis without commercial presence, for an initial stay of 1 year or the duration of the contract.

  1. Legal Services
  2. Accounting Services
  3. Engineering Services
  4. Integrated Engineering Services
  5. Urban Planning and Landscape Architectural Services
  6. Veterinary Services
  7. Consultancy Services Related to the installation of Computer Hardware
  8. Software Implementation services
  9. Data processing services
  10. Data base services
  11. Maintenance and repair services of office machinery and equipment including computers
  12. Data preparation and other computer services
  13. Advertising Services
  14. Consulting services including management consultancy services
  15. Technical testing and analysis services
  16. Services incidental to agriculture and forestry
  17. Services Incidental to fishing
  18. Related scientific and technical consulting services
  19. Motion picture projection services
  20. Construction and integrated construction services
  21. Education services (Primary Education, Secondary Education, Higher Education, Adult Education, other Education services)
  22. Environmental Services
  23. Non-life insurance services
  24. Tourism and related services (Accommodation facilities, specialty restaurants, professional Congress organizers, travel agencies)
  25. Recreational, Cultural and Sporting Services
  26. Air Transport Services (Leasing/rental of aircraft without crew, maintenance and repair of aircraft, general sales and cargo sales agency)
  27. Services auxiliary to all modes of transport (Cargo handling, Freight Transport agency services

Australia’s Services Interests- Australia seeks greater certainty and transparency in relation to key elements of the Philippines’ foreign investment notification and approval regime. Australia seeks right to establish commercial presence by ownership and control, including joint ventures, of up to 100% of an existing Philippine business, and establishment of a new, wholly Australian-owned and controlled business in the Philippines.

Australia seeks treatment no less favourable than domestic suppliers, and to be entitled to supply like services, without discriminatory restrictions.

  1. Legal
  2. Accounting
  3. Engineering (All sub-sectors)
  4. Architectural (including landscape architecture)
  5. Urban planning
  6. Management consulting and related services
  7. Mining related services
  8. Scientific and technical consulting services
  9. Construction
  10. Private education
  11. Environmental services
  12. Banking
  13. Insurance
  14. Telecommunications
  15. Travel and tourism services
  16. Freight logistics
  17. Financial Services

Issues:

  1. AANZFTA will result to an unfair agreement as it threatens to eliminate the remaining powerful tools the Philippines still have in order to protect and develop its own domestic industries.

The negotiation is expected to include provisions on investment, government procurement, trade facilitation and competition policy which were already rejected in Singapore by the developing countries.

In investment, under ANZCERTA, which elements will be included in the AANZFTA, Australia and New Zealand have modified their investment regimes with respect to investments from the other country so that a large majority of investment proposals do not require approval from the investment authority.[8] If this provision will be adopted, it will limit the Philippines’ right to regulate and exercise authority over foreign direct investments within its national jurisdiction.[9]

In case of government procurement, under ANZCERTA, the Member States shall actively and on a reciprocal basis work towards the elimination of preferences for domestic suppliers over suppliers from the other Member State in government purchasing.[10] This will have the effect of violating Philippines’ policy of promoting domestic materials and locally produced goods.[11]

In competition policy, ANZCERTA provides for the elimination of all export subsidies and export incentives on goods traded.[12] Both countries have further restrained their ability to adopt industry assistance measures with adverse effects on competition in the area. No safeguards measures or anti-dumping actions apply.[13] This provision will directly affect the Philippines policy of protecting Filipino enterprises against unfair foreign competition.[14]

2. AANZFTA will accord less protection to Philippine Local Industries since New Zealand and Australia want full liberalization without exceptions or flexibilities in trade in goods.

The negotiation calls for the elimination of all forms of barriers to trade in goods. This means that provisions on sensitive products and special safeguard measures might be subjected to elimination. Removal of these measures would have the effect of exposing our local industries to unfair competition due to import surges. If no exceptions or flexibilities can be agreed upon, the FTA would not be compliant to the WTO and would accord less protection to our local industries.

3. AANZFTA will be detrimental to Philippines’ Agrarian Reform program, food security and sectoral development.

The negotiation calls for elimination of all forms of trade barriers in investment. This means that limitations in the use of marine resources, ownership and lease of agricultural lands, preferences given to Filipinos in the grant of rights, privileges, and concessions covering the national economy and patrimony, and the preferential use of Filipino labor might be subjected to elimination.

These trade barriers to investment cannot be done under the Constitution. As regards the use of marine resources, the same is reserved exclusively to Filipino people.[15] As regards the lease or ownership of agricultural lands, private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area.[16]Removal of these barriers would have the effect of endangering the agrarian reform program of the government, would endanger Philippine food security, and would endanger the promotion of social justice in all sectors specifically the farmer’s, fisher’s, urban and labor sector.

  1. AANZFTA would allow a 100% foreign corporation to engage in mining services which is against the Constitution.

The national treatment provision would place foreign corporations in equal footing with Filipinos as regards the exploration, development and utilization of our natural resources.

A 100% foreign corporation is not allowed to engage in mining activities in the Philippines. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens.[17]

  1. New Zealand and Australia demand full market access and national treatment in trade in services which is against the pertinent provisions of Philippine laws.

New Zealand and Australia are demanding no limitation on the schedule of trade in services. The services offers of New Zealand and Australia seek 100% ownership and control of foreign investment opportunities in the Philippines which is against the pertinent provisions of Philippine laws. No 100 % ownership and control is allowed in advertising services, public utilities, practice of engineering, architecture and mining, the practice of law, accountancy, and environmental planning, agriculture, fisheries, forestry, and education.

As regards advertising, only Filipino citizens or corporations or associations at least seventy per centum of the capital of which is owned by such citizens shall be allowed to engage in the advertising industry.[18]

As regards public utilities such as telecommunications and transportation, no franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens.[19]

As regards the practice of engineering, architecture and mining, the practice of law, accountancy, and environmental planning, agriculture, fisheries and forestry, no foreign equity is allowed.[20]

As regards education, educational institutions, other than those established by religious groups and mission boards, shall be owned solely by citizens of the Philippines or corporations or associations at least sixty per centum of the capital of which is owned by such citizens.[21]

Conclusion:

The negotiation of the ASEAN-Australia-New Zealand FTA would result to an unfair agreement that would include provisions on government procurement, investment, competition policy and trade facilitation; would result to violation of WTO commitments since no flexibilities will be allowed, would have the effect of endangering the agrarian reform program of the government, would endanger Philippine food security, and would endanger the promotion of social justice in all sectors specifically the farmer’s, fisher’s, urban and labor sector; would result to violation of the Constitution as the utilization of our natural resources particularly in mining; and would violate Constitutional limitations as regards foreign equity since the agreement will allow 100% foreign ownership and control of services.

What are the offers and concessions made by our negotiators?

What are the negotiating positions and mandates carried by our negotiators?

Are people and their organizations consulted?

What kind of FTA will bind the Philippines?

Let us demand for the disclosure of the negotiation of the

ASEAN-Australia-New Zealand FTA!

Expose the illegitimacy of the ASEAN-Australia-New Zealand FTA!


[1] ASEANONE April 2005

[2] 22nd ASEAN-Australia Forum,Canberra, 22 May 2008

[3] Philippine Exporters Confederation Inc., ASEAN for Philippine Business, Q&A Primer, 2007

[4] Philippine Exporters Confederation, Inc. (PHILEXPORT), RP Free Trade Areas: RP Free Trade Areas: Status and Implications, 11 January 2008

[5] Tariff Commission, http://www.tariffcommission.gov.ph/FTAs.ppt#280,5,Slide 5

[6] DavidPine,New Zealand Ambassador inManila

[7] WELLINGTON-1208749-v1-AANZFTA ServicesPhilippines Request V2 March 07

[8] Fact sheet about ANZCERTA, submitted by Australia/New Zealand to APEC.

[9] Section 10, Article 12, 1987 Constitution

[10] Article 11 (1), ANZCERTA

[11] Section 12, Article 12, 1987 Constitution

[12] Article 9 (1), ANZCERTA

[13] Fact sheet about ANZCERTA, submitted by Australia/New Zealand to APEC.

[14] Section 1, Article 12, 1987 Constitution

[15] Section 2, Article XII, 1987 Constitution

[16] Section 3, Article XII, 1987 Constitution

[17] Section 2, Article XII, 1987 Constitution.

[18] Section 11 (2), Article 16, 1987 Philippine Constitution

[19] Section 11, Article 12, 1987 Constitution.

[20] E.O. 584, Seventh Regular Foreign investment Negative List,

[21] Section 4(2), Article 14, 1987 Philippine Constitution

Primer on the Asean-Australia-New Zealand FTA Negotiation

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