Philippine Trade Policy and the Japan-Philippines Economic Partnership Agreement (JPEPA)

Article excerpt

On 11 December 2008 the Japan-Philippines Economic Partnership Agreement (JPEPA) entered into force, after more than six years of negotiations and a difficult ratification process in the Philippines. In a region where spectacular growth in welfare is partly due to a significant opening up to international trade, it appears the Philippines had every reason to welcome the chance to improve its trading position. This paper aims to identify the reasons behind the country's reluctance to do so within the wider context of Philippine trade policy, past, present and future.

The lacklustre economic performance of the Philippines from the 1980s onwards earned it the title of the "sick man of Asia". According to the Asian Development Bank (ADB), between 1986 and 2006 the Philippine's GDP growth rate was 1.8 per cent, the lowest of all Asian countries, except Brunei Darussalam. Measured in US dollars, average growth was 4.1 per cent, the lowest of all countries except Japan and again Brunei. (2) Worse, the ADB does not expect any significant improvements. The Philippines will likely remain the poorest of the founding members of Association of South East Asian Nations (ASEAN), with a projected GDP per capita in 2020 of US$1,607, approximately $750 less than Indonesia, a third less than Thailand, and only just ahead of Vietnam at $1,200. Needless to say, Malaysia ($10,064) and Singapore ($48,980) will also remain far ahead of the Philippines in 2020. (3) Despite its significant natural resources and a relatively well educated and English-speaking workforce, the Philippines has the highest incidence of poverty among the six core ASEAN countries, suffers from high income disparities, low levels of socio-economic development and attracts less Foreign Direct Investment (FDI) than most of its neighbours. (4) Existing FDI is directed mainly towards labour intensive, low skill production and electronics assembly, and contributes to intra-industry trade flows without significant spillover effects into the rest of the economy in terms of productivity or knowledge. (5) Analysts blame this situation on poor economic and political governance, demonstrated by high levels of corruption, a lack of political will to implement credible fiscal reforms, high business transaction costs, incoherent industrial policies, mediocre basic social services and inadequate infrastructure. (6)

Compared to most other Southeast Asian countries, the Philippines is under-analysed in academic studies on International Political Economy (IPE) in general and trade politics in particular. Most likely this is because it has not enjoyed spectacular economic success or experienced newsworthy political troubles in recent

years, at least compared to Myanmar or Thailand. Nevertheless, the Philippines is the twelfth most populous country in the world and a founding and active member of regional organizations, such as ASEAN, Asia-Pacific Economic Cooperation (APEC) and the ASEAN Regional Forum. Through its membership of ASEAN, the Philippines participates in many regional Free Trade Agreements (FTAs) including those with India, China, South Korea and Australia. (7) The literature on ASEAN FTAs concentrates on the main players and tends to take the smaller countries for granted. A focus on the Philippine side of the JPEPA case offers additional insights into this dominant feature of Southeast Asia's political and economic relations. Together this provides a compelling reason to examine Philippine trade policy.

The analytical framework of this paper builds on insights from both International Relations (IR) theory and International Political Economy (IPE). Moreover, it attempts to show that IPE could benefit from foreign policy analysis, which is an important, although sometimes undervalued IR sub-field. According to Christopher Hill, foreign policy analysis has been neglected because it was seen as too operational in methodological terms and too closely related with the state-centred realist paradigm in International Relations theory. …