Philippines and TPPA primer

April 2, 2012
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Philippines and the Trans-Pacific Partnership Free-Trade Agreement (TPPA) Primer

*information presented at ProPeopleYouth KmB meeting in Long Beach, CA

EU Ambassador Guy Ledoux

Currently, the Philippines are not eligible to join the TPPA. Washington and the EU are both willing to engage with the Philippines in joint initiatives like the recent US trade facilitation agreement that was signed at APEC 2011 in Honolulu. Trade and investment facilitation agreements create important building blocks toward potential membership in regional free-trade agreements . The Philippines have investment barriers (see below) that prevent them from participating in trade initiatives like the Trans-Pacific Partnership Agreement.

“As your government continues to consider the prospect of pursuing potential membership in the TPP, we want to be helpful,” US Trade Representative Marantis said. “We have made that clear privately and publicly.” “We are willing to provide our views on the kinds of commitments and policy reforms that are likely to be required of the Philippines to join,” he added.

The TPPA is what US president Barack Obama describes as a “landmark, 21st Century Trade Agreement” that improves upon and rectifies past problems in US trade and investment treaties. The TPPA is a free-trade agreement currently being negotiated by nine countries: the United States, Australia, New Zealand, Chile, Peru, Brunei, Vietnam, Malaysia and Singapore. Japan is in preliminary talks and Canada and Mexico are looking to join and South Korea, the Philippines and Taiwan are on the sidelines. The US is leading the negotiations and has a great deal of influence over the outcome of the agreement, which covers a vast range of subject matters, including tariffs on goods, trade in services, labor and environment, telecommunications, and intellectual property, but for Pacific Islands, the investor rights chapters may offer the greatest challenge to Pacific Island environmental resources.

Although the negotiations are being held in secret, leaked documents confirm what trade policy experts believe, that the TPPA is a “NAFTA on steroids.” Without having to adhere to normal democratic processes or contend with public scrutiny, it was recently leaked that these documents will be held in secrecy for four years after being signed or dismissed.

What are these policy reforms?

The government should be ready to implement drastic changes, possibly even including a Constitutional amendment, if it is really serious in its desire to become a signatory to the Trans-Pacific Partnership (TPP) Agreement.

John Forbes, senior advisor of the American Chamber of Commerce of the Philippines, said the country might not even be invited to join the TPP talks due to its very strict policies, particularly when it comes to the practice of certain professions of foreign nationals in the country.

The aim of the TPP is to bring all tariffs down to zero by 2015. The coverage of the deal spans trade in goods, trade in services, rules of origin, trade remedies, sanitary and phytosanitary measures, technical barriers, intellectual property, government procurement, and competition policy.

In an earlier interview, Trade Undersecretary Adrian Cristobal Jr. said the country’s accession to the TPP would pave the way for around $10 billion worth of exports for the Philippines.

On Nov. 14, 2011 at the APEC forum in Honolulu, the Philippines and US signed a customs administration and trade facilitation agreement, a building block towards Philippines participation in the Trans-Pacific Partnership (TPP) agreement.

The trade agreements that the US has with the Philippines are called Trade and Investment Framework Agreements (TIFA) signed in 1989, revised in 2006 and again in 2010.

***

Following is a list of the trade/investment barriers, some of which will have to be revised and deregulated in order for the Philippines to be considered a partner in the TPPA.

Philippines Regular Foreign Investment Negative List A (5th)

LIST A: FOREIGN OWNERSHIP IS LIMITED BY MANDATE OF THE CONSTITUTION AND SPECIFIC LAWS

 No Foreign Equity
1. Mass Media except recording (Art. XVI, Sec. 11 of the Constitution; Presidential Memorandum dated 04 May 1994)
2. Practice of professions *1
a. Engineering
i. Aeronautical
ii. Agricultural
iii. Chemical
iv. Civil
v. Electrical
vi. Electronics and Communication
vii. Geodetic
viii. Mechanical
ix. Metallurgical
x. Mining
xi. Naval Architecture and Marine
xii. Sanitary

b. Medicine and Allied Professions
i. Medicine
ii. Medical Technology
iii. Dentistry
iv. Midwifery
v. Nursing
vi. Nutrition and Dietetics
vii. Optometry
viii. Pharmacy
ix. Physical and Occupational Therapy
x. Radiologic and X-ray Technology
xi. Veterinary Medicine
c. Accountancy
d. Architecture
e. Criminology
f. Chemistry
g. Customs Brokerage
h. Environmental Planning
i. Forestry
j. Geology
k. Interior Design
l. Landscape Architecture
m. Law
n. Librarianship
o. Marine Deck Officers
p. Marine Engine Officers
q. Master Plumbing
r. Sugar Technology
s. Social Work
t. Teaching
u. Agriculture
v. Fisheries

(Art. XII, Sec. 14 of the Constitution; Sec. 1 of R.A. 5181)

3. Retail trade enterprises with paid-up capital of not less than US$ 2,500,000.00 (Sec. 5 of R.A. 8762) *2
4. Cooperatives (Ch. III, Art. 26 of R.A. 6938)
5. Private Security Agencies (Sec. 4 of R.A. 5487)
6. Small-scale Mining (Sec. 3 of R.A. 7076)
7. Utilization of Marine Resources in archipelagic waters, territorial sea, and exclusive economic zone (Art. XII, Sec. 2 of the Constitution)
8. Ownership, operation and management of cockpits (Sec. 5 of P.D. 449)
9. Manufacture, repair, stockpiling and/or distribution of nuclear weapons (Art. II Sec. 8 of the Constitution) *3
10. Manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and anti-personal mines (Various treaties to which the Philippines is a signatory and conventions supported by the Philippines) *3
11. Manufacture of firecrackers and other pyrotechnic devices (Sec. 5 of R.A. 7183)

Up to Twenty Percent (20%) Foreign Equity
12. Private radio communication network (R.A. 3846)

Up to Twenty-Five Percent (25%) Foreign Equity
13. Private recruitment, whether for local or overseas employment (Art. 27 of P.D. 442)
14. Contracts for the construction and repair of locally-funded public works (Sec. 1 of CA 541, LOI 630) except:
a. infrastructure/development projects covered in R.A. 7718; and
b. projects which are foreign funded or assisted and required to undergo international competitive bidding(Sec. 2(a) of R.A. 7718)
15. Contracts for construction of defense-related structure (Sec. 1 of CA 541)

Up to Thirty Percent (30%) Foreign Equity
16. Advertising (Art. XVI, Sec. 11 of the Constitution)

Up to Forty Percent (40%) Foreign Equity
17. Exploration, development and utilization of natural resources (Art. XII, Sec. 2 of the Constitution) *4
18. Ownership of Private Lands (Art. XII, Sec. 7 of the Constitution; Ch. 5, Sec. 22 of CA 141)
19. Operation and management of public utilities (Art. XII, Sec. 11 of the Constitution; Sec. 16 of CA 146)
20. Ownership/establishment and administration of educational institutions (Art. XIV, Sec. 4 of the Constitution)
21. Culture, production, milling, processing, trading excepting retailing, of rice and corn and acquiring, by barter, purchase or otherwise, rice and corn and the by-products thereof (Sec. 5 of PD 194; Sec. 15 of R.A. 5762) *5
22. Contracts for the supply of materials, goods and commodities to government-owned or controlled corporation, company, agency or municipal corporation (Sec. 1 of R.A. 5183)
23. Project Proponent and facility Operator of a BOT project requiring a public utilities franchise (Art. XII, Sec. 11 of the Constitution; Sec. 2a of R.A. 7718)
24. Operation of deep sea commercial fishing vessels (Sec. 27 of R.A. 8550)
25. Adjustment Companies (Sec. 323 of P.D. 612 as amended by P.D. 1814)
26. Ownership of condominium units where the common areas in the condominium projects are co-owned by the owners of the separate units or owned by a corporation (Sec. 5 pf R.A. 4726)

Up to Sixty Percent (60%) Foreign Equity
27. Financing companies regulated by the Securities and Exchange Commission (Sec. 6 of R.A. 5980 as amended by R.A. 8556) 6
28. Investment housed regulated by the SEC (Sec. 5 of P.D. 129 as amended by R.A. 8366) *6

*1 This is limited to Filipino citizens save in cases prescribed by law
*2 Full foreign participation is allowed for retail trade enterprises: (a) with paid-up capital of US$2,500,000 or more provided that investments for establishing a store is not less than US$830,000; or (b) specializing in high end or luxury products, provided that the paid-up capital per store is not less than US$250,000 (Sec. 5 of R.A. 9762)
*3 Domestic investments are also prohibited (Art II, Sec. 8 of the Constitution; Conventions/Treaties to which the Philippines is a signatory)
*4 Full foreign participation is allowed through financial or technical assistance agreement with the President Art. XII, Sec. 2 of the Constitution)
*5 Full foreign participation is allowed provided that within the 30-year period from start of operation, the foreign investor shall divest a minimum of 60 percent of their equity to Filipino citizens (Sec. 5 of P.D. 194; NFA Council Resolution No. 193 s. 1998)
*6 No foreign national may be allowed to own stock in financing companies or investment houses unless the country of which he is a national accords the same reciprocal rights to Filipinos (Sec. 6 of R.A. 5980 as amended by R.A. 8556; P.D. 129 as amended by R.A. 8366)

 

Philippines Foreign Investment Negative List B (8th)

LIST B: FOREIGN OWNERSHIP IS LIMITED FOR REASONS OF SECURITY, DEFENSE, RISK TO HEALTH AND MORALS AND PROTECTION OF SMALL- AND MEDIUM SCALE ENTERPRISES

Up to Forty Percent (40 %) Foreign Equity
1. Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine National Police (PNP) clearance:
a) Firearms (handguns to shotguns), parts of firearms and ammunition there of, instruments or implements used or intended to be used in the manufacture of firearms
b) Gunpowder
c) Dynamite
d) Blasting supplies
e) Ingredients used in making explosives:
i. Chlorates of potassium and sodium
ii. Nitrates of ammonium, potassium, sodium, barium, copper (11), lead (11), calcium and cuprite
iii. Nitric acid
iv. Nitrocellulose
v. Perchlorates of ammonium, potassium and sodium
vi. Dinitrocellulose
vii. Glycerol
viii. Amorphous phosphorus
ix. Hydrogen peroxide
x. Strontium nitrate powder
xi. Toluene

f) Telescopic sights, sniper scope and other similar devices.
However, the manufacture or repair of these items may be authorized by the Chief of the PNP to non-Philippine nationals; Provided that a substantial percentage of output, as determined by the said agency, is exported. Provided further that the extent of foreign equity ownership allowed shall be specified in the said authority/clearance (RA 7042 as amended by RA 8179)

2. Manufacture, repair, storage and/or distribution of products requiring Department of National Defense (DND) clearance:

a) Guns and ammunition for warfare
b) Military ordnance and parts thereof (e.g., torpedoes, depth charges, bombs, grenades, missiles)c) Gunnery, bombing and fire control systems and components
d) Guided missiles/missile systems and components
e) Tactical aircraft (fixed and rotary winged), parts and components thereof
f) Space vehicles and component systems
g) Combat vessels (air, land and naval) and auxiliaries
h) Weapons repair and maintenance equipment
i) Military communications equipment
j) Night vision equipment
k) Stimulated coherent radiation devices, components and accessories
l) Armament training devices
m) Other as may be determined by the Secretary of the DND
However, the manufacture or repair of these items may be authorized by the Secretary of the DND to non-Philippine nationals; Provided that a substantial percentage of output, as determined by the said agency, is exported. Provided further that the extent of foreign equity ownership allowed shall be specified in the said authority/clearance (RA 7042 as amended by RA 8179)
3. Manufacture and distribution of dangerous drugs (RA 7042 as amended by RA 8719)
4. Sauna and steam bathhouses, massage clinics and other like activities regulated by law because of risks posed to public health and morals (RA 7042 as amended by RA 8179)
5. All forms of gambling (RA 7042 as amended by RA 8179), except those covered by investment agreements with PAGCOR (RA 9487) operating within special economic zones administered by the Philippine Economic Zone Authority (RA 7916)
6. Domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000 (RA 7042 as amended by RA 8179)
7. Domestic market enterprises which involve advanced technology or employ at least fifty (50) direct employees with paid-in equity capital of less than the equivalent of US$100,000 (RA 7042 as amended by RA 8179)

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One Response to Philippines and TPPA primer

  1. admin on May 1, 2012 at 10:43 am

    http://www.state.gov/r/pa/prs/ps/2012/04/188977.htm
    Joint Statement of the United States-Philippines Ministerial Dialogue

    The U.S.-Philippines Alliance: Charting a Course Forward

    Following is the text of a joint statement by the United States of America and the Republic of the Philippines issued on April 30, 2012, in Washington, D.C.

    I. Preamble

    The U.S.-Philippines alliance is stronger than ever, reflecting the deep and abiding ties linking our two nations and forged through a history of shared sacrifice and common purpose. Seventy years ago this month, thousands of U.S. and Filipino troops served together in defense of our last strongholds at Corregidor and Bataan. Later, when we signed our Mutual Defense Treaty in 1951, we united against the spread of communism. Today, Americans and Filipinos are inextricably bound by common values and shared aspirations, including a commitment to democracy and the rule of law, building a robust economic partnership, and deepening people-to-people ties.

    Our alliance remains an anchor for peace, stability, and prosperity in the Asia-Pacific region. With this in mind, our Ministers meet today in Washington to reaffirm the Manila Declaration signed by our governments on November 16, 2011 and to ensure that our alliance remains robust, agile, and responsive in order to meet changing global and regional dynamics. Our consultations seek to address common strategic and security objectives, promote economic cooperation, advance people-to-people ties, and enshrine principles of good governance and the rule of law.

    The Ministers reaffirm our shared obligations under the Mutual Defense Treaty and our mutual commitment to the peace and security of the region.

    II. Common Strategic Objectives

    The United States and the Republic of the Philippines articulate the following shared objectives characterizing our collective and individual engagements in the Asia-Pacific region:

    Enhance peace, security, and prosperity in the Asia-Pacific.

    Support efforts to increase cooperation in the Association of Southeast Asian Nations (ASEAN), the ASEAN Regional Forum (ARF), the ASEAN Defense Ministers’ Meeting-Plus (ADMM+), the Asia Pacific Economic Cooperation (APEC), and the East Asia Summit (EAS).

    · Reaffirm our common interest in maintaining freedom of navigation, unimpeded lawful commerce, and transit of people across the seas and subscribe to a rules-based approach in resolving competing claims in maritime areas through peaceful, collaborative, multilateral, and diplomatic processes within the framework of international law, including as reflected in the UN Convention on the Law of the Sea.

    Recognizing the outstanding contributions of the Philippines as the ASEAN country coordinator for the United States since 2009, ensure a smooth transition as Burma assumes this role in July.

    Strengthen bilateral and regional cooperation on humanitarian and disaster relief preparedness activities and enhancing combined capabilities in responding to natural disasters.

    Support expanded regional counterterrorism cooperation through intelligence sharing and coordination of surveillance and interdiction efforts.

    Encourage the efforts at the regional and international levels including the East Asia Summit to promote nuclear disarmament, nuclear non-proliferation, and peaceful uses of nuclear energy. We agreed that we should continue to work together to ensure compliance and implementation of relevant United Nations non-proliferation commitments and to pursue cooperation through multilateral mechanisms.

    Reduce all types of environmental degradation including illegal fishing, deforestation, poaching of endangered species, climate change, and destruction of coral reefs.

    Cooperate in the prevention and eradication of piracy.

    III. Security Partnership

    The United States and the Republic of the Philippines reaffirm our shared obligations under the Mutual Defense Treaty, which remains the foundation of the U.S.-Philippines security relationship. In seeking to enhance our security cooperation, we intend to do the following:

    Continue to hold discussions through the Bilateral Strategic Dialogue Defense Working Group and the Mutual Defense Board-Security Engagement Board on further enhancing the defense and security aspects of our alliance on the basis of reciprocity and mutual benefit, in accordance with both countries’ domestic laws and constitutional processes, and the Mutual Defense Treaty, the Agreement Relating to Military Assistance, the Mutual Logistics Support Agreement and the Agreement Regarding the Treatment of United States Armed Forces Visiting the Philippines (Visiting Forces Agreement).

    Jointly explore modalities for strengthening the defense capabilities of the Philippines in order to establish a minimum credible defense posture through robust cooperative security assistance programs.

    Affirm that our respective military forces should be prepared to respond in a timely and effective way to the range of contingencies that may arise in our region, including humanitarian assistance and disaster relief, and should be able to work with the armed forces of regional partners.

    Ensure that our collective defense capabilities and communications infrastructure are operationally and materially capable of countering the full spectrum of traditional and non-traditional threats.

    Cooperate on building the Philippines’ maritime security presence and capabilities and strengthening its maritime domain awareness in order to contribute to national defense and enhanced regional security related to issues such as illegal fishing, transnational crime, and natural disasters. To that end, the United States intends to transfer a second High Endurance cutter to the Philippines this year.

    Review joint exercises and training activities and afford priority to those that have high value and great impact with regard to our common objectives, such as but not limited to maritime security.

    Continue our joint counterterrorism efforts, including through U.S. non-combat support to the Philippine security services in combating al-Qaida-linked terrorist groups in the southern Philippines.
    Continue joint training and exercises such as the recently completed Exercise Balikatan 2012 to enhance force interoperability.

    Support the National Coast Watch System and work to expand joint intelligence, surveillance, and reconnaissance (ISR) activities to deter and respond proactively, rapidly, and seamlessly to various situations in the region.

    Enhance cooperation in information sharing in a timely manner particularly during emergent situations, and work towards establishing appropriate mechanisms for this purpose.

    Maintain our cooperation with respect to the protection of cyberspace. Enhance the resilience of critical infrastructure to counter cyber threats.

    Strengthen cooperation and participation in United Nations peacekeeping operations.

    IV. Burgeoning Economic Relationship

    The United States and the Republic of the Philippines are long-standing economic partners that share a mutual commitment to free trade, economic opportunity, and poverty reduction. We intend to work together to deepen and enhance our bilateral economic relationship through the following:

    Reaffirm the Partnership for Growth Joint Statement of Principles signed in Manila on November 16, 2011 and seek to mobilize a broad range of US and Philippine entities within and outside our governments to achieve a more accelerated, sustained, and inclusive growth path for the Philippines.

    Endeavor to increase bilateral trade and investment through continuing our Trade and Investment Framework Agreement discussions, among other efforts.

    Note our shared desire to continue discussing the Philippines’ interest in eventually joining the Trans-Pacific Partnership (TPP) trade agreement. Seek to support cooperative activities that promote readiness in key areas, including mutually beneficial legislative measures that may serve as building blocks to the TPP.

    Continue implementation of the five-year, $434 million (USD) Millennium Challenge Corporation compact between the United States and the Philippines in order to reduce poverty, promote inclusive economic growth, and create new opportunities for the Filipino people.

    Reaffirm the U.S.-Philippines customs and trade facilitation agreement signed during the 2011 APEC summit in Honolulu.

    Support programs to increase tourism exchanges between the two countries, and identify and address obstacles to more vibrant tourist exchanges.

    V. Mutual Commitment to Government Transparency and the Rule of Law

    Our nations are committed to principles enshrined in the Universal Declaration of Human Rights, the UN Convention against Corruption, and other applicable international instruments related to human rights and good governance.

    As joint steering committee members of the Open Government Partnership, we support a set of common principles guiding the relationship between governments and their citizenry. We support continued efforts to promote greater government transparency and the rule of law.

    Among other measures, we intend to promote the establishment of a National Justice Information System for the Philippines, an integrated criminal justice database system that will facilitate the efficient recording, monitoring, tracking and reporting of crimes, cases, offenders, and victims.

    We also intend to continue our close cooperation in countering the global scourge of trafficking in persons.

    VI. Conclusion

    The U.S.-Philippines alliance remains an essential element undergirding regional peace, security, and prosperity. As our nations reflect on the strength and durability of our alliance, we also look to enhance our relationship in order to address even more effectively the range of regional challenges and opportunities that are of interest to both our governments. Both nations therefore resolve to continue our regular consultation and coordination on these issues.

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