WORLD TRADE  
ORGANIZATION  WT/REG257/2 
8 June 2010 
 (10-3129) 
Committee on Regional Trade Agreements Original:   English 
  
 
ECONOMIC PARTNERSHIP AGREEMENT BETWEEN  
JAPAN AND THE PHILIPPINES 
 
Questions and Replies
 
 
 
 The following communication, dated 26 May 2010, is being circulated at the request of the delegations of Japan and the Philippines.   This document reproduces the questions addressed to the Parties and the responses submitted. 
 
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  Question from the Delegation of Canada
 
 
1. The Factual Presentation includes general servic es trade and investment data for both 
Parties.  Could Japan and the Philippines fu rther elaborate on how this Agreement has 
stimulated services trade and investment in service sectors between them?   Do the Parties 
expect further benefits to be realized in sp ecific services sectors due to this Agreement?  
 No response received. 
 
Questions from the Delegation of the Republic of Korea  
 
2. According to paragraphs 19 and 20 of the Factual Presentation (WT/REG/257/1), the 
Philippines liberalize 98.6% of tariff lines by 2018,  while Japan liberalizes 90.9% of tariff lines 
by 2023. 
 Would the Parties elaborate on the reasons for this asymmetrical liberalization and how 
they reached the overall balance in the negot iations? As the Philippines have made more 
concessions in trade in goods, has Japan done so in other areas? 
  The figures reflect the results of the negotia tions conducted by both Parties, taking into 
consideration each side's specific interests and concerns. 
 
 The EPA is a comprehensive agreement coveri ng not only trade liberalization but also trade 
promotion and facilitation.  Aside from the benefits  derived from the Agreement in terms of market 
access concessions made by Japan, the Philippines expects to benefit from technical cooperation for 
capacity building commitments by Japan to the Philippi nes, with participation of respective industries 
in Japan.  These programs address the gap in capacity and are expected to contribute positively to the 
benefits derived by the Philippines from the Agreement. 
 
 WT/REG257/2 
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  3. According to paragraph 34 of the Factual Presen tation, special rules of origin related to 
a member of State of ASEAN are set out in th e Agreement.  For agricultural products falling 
within HS chapter 20, non-originating materials may be originating in a non-Party which is a member state of ASEAN.  For some  products falling within HS Chapter 50-63, the technical test 
required may be performed in a non-Part y which is a member state of ASEAN. 
 Would the Parties please provide details about the background and rationale of these 
rules?  
 Non-originating materials from ASEAN members and technical test performed in ASEAN 
members are accepted in relation to HS Chapters  20 and 50-63, respectively, for the purposes of 
promoting the internal trade flows among ASEAN me mbers in addition to facilitating bilateral trade 
between Japan and the Philippines.   In addition, the criteria of origin and basis fo r determination of origin for agricultural products 
falling within Chapter 20 are set out in Annex 2 of the Agreement.   
 4. According to paragraph 38 of the Factual Presentation (WT/REG257/1), it is inferred 
that the Parties are imposing export du ties on some of their own exports.  
Would the Parties please provide which pr oducts are subject to export duties? 
 
 As for Japan, export duties are not imposed on its exports.  As for the Philippines, it has abolished export duty on all products except logs.  
 
Questions from the Delegation of the United States
 
 5. According to Paragraphs 19-20 and Annex 1 Table AI.1 and AI.2 of the Factual 
Presentation:  
 Japan
 eliminates duties on 90.9% of all tariff lines covering 91.2% of imports from the 
Philippines under the Agreement.  However, though 97% of industrial tariffs are duty-free, only 64.8% of agricultural tariff lines are duty-free under the Agreement. 
 The Philippines
 eliminates tariffs on 98.6% of all tariff lines covering 97.1% of imports 
from Japan under the Agreement.  98.5% of industrial goods are duty-free and 99.2% of 
agricultural lines are duty -free under the Agreement. 
(a) How does Japan explain the disproportionate  tariff elimination between its industrial 
and agricultural sectors?  
 The figures concerning the liberalization commitm ents reflect the results of the negotiations 
between both Parties, taking into consideration each Party's specific interests and concerns.  
Japan is of the view that the liberalization commitments should be s ubstantial and high-level 
which are consistent with the WTO benchmark, i.e. liberalization of tariffs on "substantially 
all the trade."  With this principle in mind,  certain tariff lines were excluded from the 
elimination given the possible impacts on domestic industries. 
     WT/REG257/2 
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  (b) Could the Philippines please explain why it a ccepted from Japan a disproportionately 
lower level of tariff elimination in agriculture?  
 As agreed in the modalities of the negotia tions, the Philippines and Japan negotiated the 
Agreement with flexibility to address the sens itive areas of each side.  The concessions 
exchanged in agriculture is the result of givi ng due consideration to these sensitivities.  For 
this reason, the commitments were made based on voluntary offers by both sides as well as 
requests and offers for items of interest. 
 
(c) For what reasons did Japan commit to eliminate tariffs on a lower percentage of tariff 
lines than Philippines?   
Please see response to point (a). 
 
(d) According to paragraphs 19 and 20 of the Factual Presentation, Japan’s implementation 
period is five years longer than the Philippines.  Could Japan please explain why it requires a longer implementation period than the Philippines? 
Please see response to point (a). 
 
6. Paragraph 59 of the Factual Presentation notes that Article 87.3 of the EPA provides 
that the EPA’s chapter on investment is "not construed to expand the scope of specific commitments of the Parties pursuant to the Ch apter on trade in services."  The Factual 
Presentation further notes that, "According to th e Parties, [this] provision serves to reserve the 
Parties’ right to adopt and maintain measures relating to investments in the services sectors 
that are not scheduled in the specific commitments of the Chapter on trade in services, while 
there is no reservation in the same sectors in the Chapter on investment." 
(a) According to the information in the Fact ual Presentation, Article 87.3 of the EPA 
addresses a situation in which a services sector is neither included in a Party’s Annex 6 
schedule nor in its Annex 7 list of non-conf orming measure reservations.  How does the 
EPA work with respect to sectors that are both included in a Party’s Annex 6 schedule and in that Party’s Annex 7 NCM reservations?  In the event of an inconsistency between a Party’s Annex 6 commitments and Annex 7 reservations for a given sector, which prevails? 
No response received. 
 
7. Paragraph 61 of the Factual Presentation notes the Sub-Committees on services and 
investment established, respectively, by Articles 86  and 106 of the EPA.  As noted in the Factual 
Presentation, among the functions of these Sub-Co mmittees is reviewing the Parties’ services 
commitments with a view to achieving further liberalization, and reviewing the Parties’ NCM 
reservations for the purpose of reducing or eliminating such reservations. WT/REG257/2 
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  (a) Have Parties agreed on the modalities by wh ich these objectives will be pursued by these 
two Sub-Committees?  Are the Sub-Committees to meet regularly, and have any goals 
been established with respect to the number and nature of liberalizations or reductions of reservations to be achieved within a partic ular time frame?  Can the Parties’ report 
any actual further liberalization and/or reduction or elimination of reservations 
resulting from this process since entry into force of the EPA? 
 The Parties note that services and investments have their separate chapters and respective 
annexes.  The two Sub-Committees are also i ndependent of each other, and have their 
respective responsibilities. 
 
 The Sub-Committees on Trade in Services and I nvestment are held as needed.  The first 
Sub-Committee on Trade in Services was held on April 2009.  Both Parties have not set any goals with respect to the number and nature of liberalizations or reducti ons of reservations to 
be achieved within a particular time frame. 
 
 The Sub-Committee on Trade in Services conve ned its first meeting in April 2009 and 
discussed the current situation relating to trade in services in each country, preparation of the 
transparency list in accordance with paragra ph 2 or Article 79 of the Agreement and the 
procedures and arrangements of future meetings  which shall be convened as needed.  There 
has not yet been actual further liberalization fro m entry into force of the Agreement since the 
current focus is on transparency from both Parties. 
 
8. Article 75.3 of the EPA provides that, "With respect to sectors or subsectors where the 
specific commitments are undertaken and which are indicated with 'SS', any terms, limitations, conditions and qualifications, referred to in s ubparagraphs 2(a) and (b) above [market access 
and national treatment], shall be limited to existing non-conforming measures."  However, 
Paragraph 77 of the Factual Presentation notes that, " For the majority of sectors or sub-sectors  
in which the Parties have taken specific commitm ents in Annex 6 and which are indicated with 
‘SS’, the Parties' specified terms, limitations , conditions and qualifications with respect to 
market access or national treatment are limited  to those based on existing non-conforming 
measures (Article 75.3)." 
(a) Could the Parties clarify whether an 'SS' indication in their Annex 6 schedules designate 
existing non-conforming measures in all cases, as  suggested in the text of Article 75.3, or 
in a majority of cases, as sugg ested by the Factual Presentation? 
 An 'SS' indication in the Annex 6 schedul es is designated for existing non-conforming 
measures in all
 cases, as suggested in the text of Ar ticle 75.3.  However, 'SS*' shall only 
apply to modes 1), 2), and 3) with respect to the sectors and sub-sectors where specific 
commitments are undertaken under Articles 72 and 73.  'SS**' shall only apply to mode 4) 
with respect to the sectors and sub-sectors where specific commitments are undertaken under Article 73. 
 
(b) If the latter, in which sectors have the Part ies undertaken services commitments that are 
designated with an "SS" but are not limited  to existing non-conforming measures; and 
how is this consistent with Article 75.3 of the Agreement? 
 The understanding of the phrase "majority of sector s or subsectors…." in paragraph 77 of the 
Factual Presentation is that each Party has indi cated "SS" in most of the sectors/subsectors 
inscribed in their respective schedule of commitments. 
  WT/REG257/2 
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  9. Paragraph 77 of the Factual Presentation also notes that the scope of market access and 
national treatment limitations and conditions may be reviewed by the Parties in the future, with 
an aim to further liberalization, citing Article 86. 2.(a) of the EPA.  That Article provides that 
the EPA Parties will review, among other things, "the scope of commitments to be indicated  with 
'SS' pursuant to paragraph 3 of Article 75." 
(a) What is the legal function, if any, of use of "SS" in the Parties’ Annex 6 schedules of 
services commitments?  Is a designation of " SS" simply meant to be illustrative; that is, 
an indication that the inscribed market a ccess and national treatment limitations are 
limited to existing NCMs?  Or, is it inte nded to bind the Parties to their existing 
practice, irrespective of the conditions and limitations inscribed in the Parties’ Annex 6 
commitments? 
 The entry or designation of "SS" means that any terms, limitations and conditions on market 
access, and conditions and qualifications on natio nal treatment are limited to existing non-
conforming measures. 
 
 Item 5 of the Philippine Schedule of Commitm ents and item 4 of the Japanese Schedule of 
Commitments in the Explanatory Notes clea rly states that the entry 'unbound*' means 
unbound due to lack of technical feasibility.  The entry of 'SS' in the sector or sub-sector under paragraph 3 of Article 75 shall not prev ent the Philippines and Japan from maintaining 
nor adopting any measure with respect to the modes where 'unbound' is entered.  Besides, 
Item 5 of the Philippine Schedule of Commitments in the Explanatory Notes noted that where 
the mode of supply thought to be inapplicable is in fact applicable, or becomes so in the 
future, the entry means 'unbound'. 
 
(b) What is the interaction between Articles 75.3 and 86.2.(a) in the EPA?  Put another way, 
what actions with respect to the use of "SS"  do the Parties envision would result as a 
consequence of the review to be undertaken pursuant to Article 86.2?   
 Do the Parties envision that an "SS" design ation would be added to more sectors?  If so, 
would this require making changes to the conditions and limitations inscribed in the 
Parties’ schedules for those sectors, or would the simple addition of "SS" be enough to 
bind Parties to their existing practice?  (This question is related to the one above.) 
  The result of the review of commitments under Article 86.2(a) could mean inscribing "SS" to 
more sectors if such will contribute to the impl ementation of the Agreement.  But inscribing 
"SS" to more sectors is not obligatory. 
  Any changes would depend on the sector/sub-sect or, i.e., if these are committed but have no 
 "SS" and are reflective of existing conditions, then no changes are necessary. 
 
10. Table IV.4 of the Factual P resentation notes that Japan has included new or improved 
commitments across a broad range of services sect ors, relative to its GATS commitments.  For 
the Philippines, Table IV.5 of the Factual Presentation notes areas of new or improved commitments, but also several areas in which the Philippines’ EPA commitments have less 
coverage or more restrictions than in the GATS , including a new horizontal limitation on Mode 
3 market access (paragraph 91 of the Factual Presentation). WT/REG257/2 
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  (a) What is the Parties’ rationale for concludi ng an RTA in which one Party’s services 
commitments are in some respects lesser than  those provided on an MFN basis to all 
WTO members? 
(b) Among the "new" commitments included by the Philippines in the EPA is a mode 3 
commitment for certain data and message ma nagement services, subject to several 
limitations, including that satellite space segment service provisioning "shall be on the 
basis of reciprocal arrangements."  How co uld the Philippines enforce such a reciprocity 
test, given its GATS MFN obligation and the fact that it has taken no GATS MFN exemption for such measures? 
 It would be appreciated if specific cases ar e cited where commitments are less than those 
 provided to all WTO Members. 
 
11. Paragraph 93 of the Factual Presentation notes that, in the EPA, the Philippines 
"mainly incorporates the reference paper of th e GATS on basic telecommunication services."  
Could the Parties clarify whether the Factual Presen tation is accurate in its description of the 
Philippines’ commitments with respect to the WTO Reference Paper on basic 
telecommunications services?   
 The Philippines incorporates the Philippine Reference Paper on Regulatory Principles in 
Telecommunications Services, which is in accordance with the GATS and its Annex on 
Telecommunications.   In particular, could the Parties address the following: 
 
(a) Unlike Japan, which clearly "undertakes" the additional telecommunications services 
commitments inscribed in its Annex 6 schedule (page 685 of the EPA), the Philippines makes no clear commitment to undertake an y additional commitments.  Rather, the 
Philippines’ Annex 6 entry simply notes that certain regulatory principles "will be 
reviewed in the future in accordance with the developments of its laws and regulations" 
(page 793 of the EPA).  Is this intended to be a binding commitment?  If so, how does it function, legally?  On what basis could a breach of these provisions be addressed under the FTA? 
 The Philippines only committed to review th e Philippine Reference paper on Regulatory 
Principles in accordance with the development in  its laws and regulations but this does not 
form part of the Philippine commitments in basic telecommunications services. 
  Since there have been no laws enacted sin ce the Agreement was signed, there are no changes 
in the regulatory principles. 
 
(b) Unlike Japan’s additional commitments, which replicate (and expand on) the WTO 
Reference Paper, the Philippines' commitment to "review" regulatory principles makes 
reference to its own "Philippines Reference Paper," which (among other things) does not provide for cost-based interconnection, a key requirement for competitive markets.  
Does the Philippines' current regulatory regim e preclude the application of cost-based 
interconnection? 
 Yes, because it is difficult to implement co st-based interconnection due to the Universal 
Service Obligation (USO) imposed by the law to the two telecom sectors such as the 
international and mobile services. 
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