We—farmers, fisherfolks, rural women, workers from the formal and informal sectors, and non-government organization belonging to the Stop the New Round! Coalition—express our strong opposition to government’s mad pursuit of bilateral free trade agreements particularly with Japan, China and the United States of America.

What’s the deal?

In the SNR! campaign on the WTO in 2003, we raised the issue of information disclosure. We demanded that negotiations in the WTO on possible new agreements, which would have far reaching implications on livelihoods and jobs, are matters of public interest. The negotiating agenda therefore of the Philippine government should be subjected to public scrutiny and debate.

Today, we raise a similar concern over the lack of transparency over these bilateral trade negotiations. Very few Filipinos know that the government is negotiating an economic partnership agreement with Japan, or is negotiating under ASEAN with China and India, or that studies have already been done on a possible US-Philippines Free Trade Agreement.

These agreements remain in the realm of government technocrats and the business community. Information and documents regarding these agreements have not been made available to the public to generate the kind of informed public debate over these agreements that we think is necessary. We do not know what is expected from deals with economic superpowers like China, Japan, India, and the United States under these bilateral and regional trade agreements. At the very least, the government should make an effort to let the people know what agreements we are entering into.

The dangers of bilateral FTAs

The public must be warned that the proliferation of bilateral free trade agreements is yet another alarming facet of the global trade liberalization agenda. Hidden from view by regional and global negotiations and considering their secrecy, they do not attract attention and scrutiny. Yet, they are being used as channels to get faster, deeper free trade and investment commitments than is possible and allowable in a malfunctioning World Trade Organization (WTO).

Bilateral negotiations are more daunting, wide-ranging and more detailed than the multilateral approach. As is often the case, highly developed economies, which have more resources and budget for marathon technical negotiations, enjoy the advantage in the bilateral talks and are able to maximize their interests.

The emerging trend is that the developed countries are more demanding in bilateral negotiations than at the multilateral level. In the area of services, the current model of EPA go further than the General Agreement in Trade and Services (GATS), which theoretically gives developing countries the option to gradually liberalize and to exclude some sectors, for example, the health and education sectors, from the liberalization process. EPAs, on the other hand, call for reciprocal and progressive liberalization of all service sectors as soon as possible. On the other hand, only a few developing countries committed themselves to the deregulation of the services sector under the WTO.

Through the EPAs and bilateral free trade deals, developed countries are trying to bring in new issues (e.g., investment, transparency in government procurement, competition policy and trade facilitation), which were roundly rejected during the WTO negotiations. In fact, the rejection of these new issues led to the collapse of the Cancun negotiations as the developing nations did not want to negotiate on new issues before the old issues have been exhaustively settled.

The case of JPEPA

The negotiations over a Japan-Philippines Economic Partnership Agreement (JPEPA) is now nearing completion. Unfortunately, the terms and documents being negotiated under JPEPA (especially the list of product coverage) and other free trade deals in the pipeline are not publicly available. The JPEPA negotiating process lacks transparency and is unfair! It is disturbing the way the Philippine government has been fast-tracking this highly secretive negotiation process.

Given the dearth of information, civil society participation in these emerging trade agreements is sorely lacking. Apart from some token consultations with select private sector stakeholders, government has not provided any venue for more substantive discussions and deliberations on these important trade issues and developments. As a result, very few people even know about these bilateral and regional trade agreements.

Possible Constitutional Violations

But given its “FTA plus” nature, the Japan-Philippine Economic Partnership Agreement (JPEPA), is in danger of contravening or virtually supplanting at least five provisions of the Philippine Constitution:

1. Article II, Sec. 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.
2. Article XII, Section 1. The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices.
3. Article XII, Section 10. In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities.
4. Article XII, Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive.
5. Article XII, Section 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity.

National treatment—the requirement that foreign investors be treated no less favorably than domestic investors, regardless of the circumstances—is a fundamental principle of EPAs and bilateral free trade pacts. This provision limits the array of options and actions that could be taken by national governments in protecting their economies. Thus, the EPA with Japan will override not only our laws governing foreign investment but the Constitution itself. EPAs will virtually “denationalize” the control of land, natural resources, and public services such as water, energy, health, education, and other vital public services. By extending “national treatment” to foreign investors, the agreement would lead to the near total loss of national control over investment and deprive government of its ability to conduct industrial policy and undertake strategic planning.

Government’s failure to adequately inform the public so that they can have meaningful participation in trade negotiations is in itself a violation of the Constitution. We are committed to promote a broad process of participation by all stakeholders, which allow them to become informed so that they can analyze cost and benefits, develop proposals and present these to government officials.

The false choice between Bilateral agreements and WTO agreements

Raising our serious concern over the bilateral approach does not imply, however, that we are amenable or contented with the current multilateral approach to trade liberalization under the WTO. In fact, the two approaches complement each other. It is not really a question of what approach is best or optimal to promote and facilitate trade. Needless to say, both approaches espouse the same neo-liberal, free trade dogma that threatens the viability and survival of small and large enterprises.

It is in this context that the Stop the New Round! Coalition reiterates its opposition to further trade and trade-related liberalization whether through bilateral and regional trade agreements or the WTO.

We urge the government to seriously rethink its mindless pursuit of bilateral free trade agreements. Initial government projection shows that the government stands to lose PhP16.9 billion in foregone revenues starting this year (PhP15.37 billion in potential Customs duties and PhP1.54 billion in value-added tax payments) if the provision calling for the tariff elimination of select commodities under the JPEPA would be approved. It is indeed incomprehensible why the government rabidly pursues bilateral free trade while the country is experiencing its worst fiscal crisis in decades.

We are calling on the Philippine Congress to investigate the economic impact of the various bilateral free trade deals being pursued by the Executive branch. The Legislative branch must now act to defend Philippine national interests not only in the WTO negotiations, but more importantly in bilateral and regional free trade talks, particularly in the ASEAN Free Trade Area (AFTA), the Japan-Philippine Economic Partnership Agreement and the RP-China Free Trade Agreement. The protection of domestic markets and local sources of livelihood should be the guiding principle in determining the Philippines’ decision whether or not to participate in any form of trade agreement.

With VAT increase, government is asking workers to cough up more, when it should find the money somewhere else. We stand in resolute opposition against the proposed expansion of the value-added tax coverage and its 2-step increase from the current 10% to 12 and 14% over the next two years.

It is a sign of desperation and utter incompetence for the government to shore up its ailing finances by reaching deeper and deeper into the pockets of its citizens. The VAT makes no exceptions between rich and poor, and thus defeats the goal of an equitable taxation system.

In 2004 alone, there was an estimated 59% collection gap in VAT, which clearly demonstrates that the problem still remains with tax collection and administration. For as long as the government turns a blind eye to the inefficiencies and corruption that underlie the underperformance of its revenue generating agencies, then we fear that tax measures such as the VAT rate increase will only continue to line up the pockets of a few while the broader ranks of workers everywhere will continue to foot the bill.

The cost of living in Metro Manila alone is already somewhere north of P500, and continues to rise. A VAT rate increase will only end up being paid for by workers as this regressive tax finds its way to products that are socially sensitive. Experience has shown that, the VAT is prone to abuse, thru under-declaration of sales and over-declaration of claims for input-VAT.

Government is well advised to plug the loopholes first before imposing even more taxes. Lately, it has been reported that 22 independent power producers (IPPs) coughed up a combined total of P6 billion or so in taxes last year, a figure scandalously no more than a fourth of the amount which the million or so government employees alone shelled in taxes for the same period. And yet these IPPs, with their lucrative and shady deals, continue to rake in the profits with their take-or-pay agreements and other subsidies, while workers
everywhere continue to subsidize their greed. How government can keep mum to this injustice is inconceivably absurd.

The Alliance of Progressive Labor believes that a two-pronged approach may offer a more viable and less painful way out of the fiscal blunder, which the government seeks to evade by passing on the burden to the people. The bankruptcy of its liberalization program, resulting in massive losses after tariffs were lowered into indecent levels that were much more than required, even by the standards among the economic blocs were we have commitments.

A study conducted by the Labor Education and Research Network (LEARN) has shown that the real problem is not the fiscal deficit but the jobs deficit! Thus any proposed solution to the so-called fiscal crisis must not be at the expense of jobs generation! New tax measures (and spending cuts) will force the economy to contract. An economic contraction simply means fewer jobs when joblessness is already high and rising further. It means lower incomes when real incomes are already falling. It means greater poverty in the midst of widespread poverty!

Government should take a second, much harder look at these IPP contracts and take a more aggressive stance against those that are grossly disadvantageous to the public.

If the government is truly serious in looking for money, then it has to scrap the VAT expansion, find that money somewhere else, and stop picking on
helpless workers everywhere.

Labor leaders insisted today that an adjustment in the monthly pension received by retired SSS members is long overdue, but cautioned against substantial increases in premium rates estimated at around 11-13% of current premiums without holding the SSS responsible for its investment losses.

“SSS pensions should reflect the current cost of living, but we can’t take hook, line and sinker the SSS position that a pension adjustment will result in fund depletion, which while true, will not fully explain why the SSS would run short of funds,” asserted Danny Edralin, Chairperson of the Alliance of Progressive Labor (APL). “The SSS should first explain how its various investments totaling P155 billion as of March 2004, using workers’ money, has been spent and in instances where it has lost money, make its officials answerable,” Edralin said.

Edralin stated that the SSS is imbued with public interest, and its officers should be held accountable for management decisions that imperil the welfare of its 25,940,236 members. The SSS-BDO deal last year was a glaring example, he said, because members were not even aware of the transaction, and what it meant for the fiscal health of the pension fund. The SSS acquired the 188 million Equitable PCI shares at P90 per share during the Estrada Administration. Then it was sold for P43.50 per share. Of the P14 billion total acquisition cost, only P1 billion will be paid outright by Banco de Oro. The balance of about P13 billion will be paid after 6-1/2 years with no interest earned during the period through a “zero coupon, non-amortizing note” scheme.

“It was reported that the deal would result in millions of pesos in losses for the SSS,” Edralin recalled, “and the images that immediately comes to mind is of millions of SSS contributing members who, toiling in jobs that never pay enough, patiently continue to pay their SSS premiums, and an image of their money being flushed down the drain because of the irresponsibility of a few people,” Edralin illustrated.

The labor leader also said that the SSS should go after employers and even banks who fail to remit their SSS contributions on time, further straining the pension fund’s coffers. “These employers and banks are holding on to money which does not belong to them, and as a result, when members apply for loans, or benefits, SSS records show that they have not contributed when it is these banks and employers who are at fault,” Edralin explained. “They should be also penalized.”

The Alliance of Progressive Labor, a labor center of workers from various industries, in principle supports various bills lodged at the Senate, including Senate Bills 393, 669 and 1136 which seek to increase the monthly pension being received by retirees and other claimants from the SSS. “But our Senators would be well-advised to take a closer look at how the SSS functions and makes decisions at the same time that they are pushing for pension increases,” Edralin suggested, “because in the end, it will still be workers who will foot the bill for what increases may come to their benefits,” he said.

“The SSS should get its act together to make it more efficient and be able to deliver more quality services to its members,” Edralin added. “The Senate can go farther than passing for pension increases, but also by investigating SSS management and making sure that officers remiss in their duties are severed from their multi-million peso jobs and held accountable,” Edralin said.

AFTER A CAREFUL REVIEW OF THE PROVISIONS OF THE Barangay Micro Business Enterprises Law, the Alliance of Progressive Labor finds it not only unnecessary but fundamentally anti-worker!

IT IS UNNECESSARY, since the incentives it provides, except for the exemption from the Minimum Wage Law, are already available, either in existing laws or in practice, particularly the exemption from income tax. The so called special loan windows from the LBP, DBP, SBGFC, and PCFC are likewise unnecessary as there are some other financing institutions and government programs that can provide better interest rates while asking for simpler loan requirements. More importantly, we believe that these government financial institutions could provide better interest rates than other lending institutions and simplify their loan requirements even in the absence of the BMBE law, if only government is really serious in assisting small business-persons.

The worst part of the law is its provision exempting BMBEs from the minimum wage law. The numerous minimum wage statutes issued by the ineffective Regional Tripartite Wages and Productivity Boards (RTWPBs) around the country have one thing in common: they are not sufficient to provide for the basic needs of the working people and their families. Thus, providing a legal instrument for BMBEs to pay their workers BELOW the practically inutile minimum wages is a direct attack against the worker’s constitutional right to enjoy the fruits of his or her labor which would no doubt lead to super exploitation of the working class.

Adding insult to injury, it even further undermines the already flawed wage setting mechanism by calling on the RTWPBs to issue wage advisories exempting BMBEs from the minimum wage laws.

Therefore, the BMBE law, if truly implemented, will intensify the exploitation of workers in two ways: it will provide unscrupulous employers the authority to abuse their workers; and, it will render an already ineffective RTWPBs patently useless!

Premises considered, the APL therefore strongly opposes the BMBE law and demands for its immediate repeal.

Alarm bells should be ringing by now over suspicious proposals coming from the Department of Finance regarding the lifting of tax exemptions for cooperatives, which form part of the reasons why they continue to flourish in the country.

As of 2003, the 31,000 operating cooperatives in the country have contributed more than P517 billion to the national economy, almost 12% of the GDP! Removing what little incentives they enjoy, amounting to only a little more than P5 billion as compared to the hundreds of billions enjoyed by multinationals in export processing zones is to threaten the jobs of the 1.5 million of Filipinos and the welfare of 5 million coops members nationwide.

While it is true that there have been instances in which certain dubiously constituted cooperatives have abused such incentives, it is no reason to punish the whole cooperative movement. In a globalized economy in which large multinationals continue to reap in the profits to the continued detriment of workers everywhere, cooperatives are able to perform several social service functions that an inefficient government has neglected.

It is poor people which mostly compose cooperatives, even those so-called multi-million coops, hence should not be compared with multi-million corporations, which are owned by a few capitalists. Multi-million coops are created through tens of thousands of members and over more than 10 years of regular savings. They should never be mistaken for cash cows that can afford to bleed for a cash-strapped government that does not even know how to get the acts of its revenue-generating agencies in order.

Cooperatives extend low-interest rate loans to members, with minimal documentary requirements, and practically no collateral, thus enabling the poor to have access to small capital for livelihood. Cooperatives also sell low-priced goods in various consumer cooperatives, particularly, in company-based employees consumer cooperatives, as they are not subjected to VAT. Some of them even provide insurance coverage because of the absence of VAT on such services.

Those cooperatives that have abused these incentives should be investigated and their officials punished accordingly. But it is not the incentive structures themselves that are to blame, but the indiscretions of a few. Government is better advised to go after the hundreds of billions in foregone revenues lost to tax incentives handed out like candies to union-busting foreign investors in export processing zones and their patrons in agencies like the Board of Investments and the Philippine Export Zone Authority who should be scrutinized, not the little people from the ranks of workers everywhere.