WORLD TRADE  
ORGANIZATION  WT/REG257/2/Rev.1 
8 July 2010 
 (10-3732) 
Committee on Regional Trade Agreements Original:   English 
  
 
ECONOMIC PARTNERSHIP AGREEMENT BETWEEN  
JAPAN AND THE PHILIPPINES 
 
Questions and Replies
 
 
Revision  
   The following communication, dated 6 July 2010,  is being circulated at the request of the 
delegations of Japan and the Philippines. 
 
 This document reproduces the follow-up
 questions addressed to the Parties following the 
57th Session of the CRTA and the responses submitted. 
 
 
 
_______________ 
  Question from the Delegation of Canada
 
 
1. The Factual Presentation (WT/REG257/1)  includes general services trade and 
investment data for both Parties.  Could Jap an and the Philippines further 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 specific services sectors due to this 
Agreement?  
 While it is too early to evaluate the effects of this Agreement since it has only been in effect 
for one and a half years, we expect that this Agreement will stimulate trade in services through the 
reduction or elimination of restrictions and regulations in each mode of the service sectors. 
 
Questions from the Delegation of the Republic of Korea  
 
2. According to paragraphs 19 and 20 of the Factual Presentation, the Philippines 
liberalize 98.6% of tariff lines by 2018, while Jap an 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. 
 WT/REG257/2/Rev.1 
Page 2  
 
   The Agreement is a comprehensive agreement c overing not only trade liberalization but also 
trade promotion and facilitation.  Aside from the be nefits derived from the Agreement in terms of 
market access concessions made by Japan, th e Philippines expects to benefit from technical 
cooperation for capacity building commitments by Japan to Philippines, with participation of 
respective industries in Japan.  These programs a ddress the gap in capacity and are expected to 
contribute positively to the benefits derive d by the Philippines from the Agreement. 
 
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 Presen tation, it is inferred that the Parties are 
imposing export duties 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  WT/REG257/2/Rev.1 
 Page 3 
 
 
  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. 
 
(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. 
 
 As a single undertaking covering not only trade lib eralization, the benefits derived by the 
Philippines from the Agreement are not only in th e area of market access concessions but also 
from the technical cooperation for capacity build ing commitments by Japan.  These capacity 
building programs are expected to address the ga p in capacity and contribute positively to the 
benefits derived from the Agreement.  In this context, an overall balance of interests was 
achieved by both Parties to the Agreement. 
 
(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 Agreement 
provides that the Agreement's chapter on investme nt is "not construed to expand the scope of 
specific commitments of the Parties pursuant to the chapter 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 commitme nts of the chapter on trade in services, while 
there is no reservation in the same sectors in the chapter on investment." 
 According to the information in the Factual Presentation, Article 87.3 of the Agreement 
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 
Agreement work with respect to sectors th at 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? 
 Response from the Philippines
 
  The chapters on trade in services (Chapter 7) and investments (Chapter 8) are stand alone chapters.  Services sectors/subsectors are not covered by Chapter 8. 
 
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  Response from Japan
 
  Inconsistency is not assumed be tween Annex 6 and 7 of a Party because they were carefully 
verified to avoid such inconsistency. 
 In case that Annex 6 provides more favourable treatment than Annex 7 for service 
suppliers/investors, Annex 6 shall prevail to the extent of such inconsistency. 
 
 In case that Annex 7 provides more favourable treatment than Annex 6 for service 
suppliers/investors, Annex 7 shall not be applied to  the extent of such in consistency in accordance 
with paragraph 3 of Article 87 which states that:  
 "Nothing in this Chapter shall be construed to  expand the scope of the specific commitments 
undertaken by either Party pursuant to Chapter7" 
 
7. Paragraph 61 of the Factual Presentation notes the Sub-Committees on services and 
investment established, respectively, by Articles  86 and 106 of the Agreement.  As noted in the 
Factual Presentation, among the functions of th ese Sub-Committees is reviewing the Parties’ 
services commitments with a view to achieving further liberalization, and reviewing the Parties’ NCM reservations for the purpose of reduc ing or eliminating such reservations. 
 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 Agreement? 
 
 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 Agreement 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, referre d to in subparagraphs 2(a) and (b) above 
[market access and national treatment], shall be li mited 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 commitments in Annex 6 and which are 
indicated with ‘SS’, the Parties' specified terms, limitations, conditions and qualifications with  WT/REG257/2/Rev.1 
 Page 5 
 
 
  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? 
(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? 
 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. 
 
 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. 
 
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 Agreement.  That Article provides 
that the 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 qualif ications on national 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'. 
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  (b) What is the interaction between Articles 75.3 and 86.2.(a) in the Agreement?  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’ Agreement 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). 
(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? 
 For question (a), the "specific cases" are ci ted in Table IV.5 notes that, for Courier 
services, the Philippines commitments under the Agreement are "more restricted" 
compared to its GATS commitm ents.  The same table also notes that the Philippines has 
undertaken no commitments in the Agreem ent on "other" Tourism services, even 
though this subsector is scheduled in the Philippines’ GATS commitments (the same is 
true of several subsectors in Transport services, also according to Table IV.5.) 
 
(b) Among the "new" commitments included by th e Philippines in the Agreement is a mode 
3 commitment for certain data and message management 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? 
 The Parties of the Agreement scheduled the "new" and/or "improved" provisions and did not 
include the Uruguay Round Commitments. 
 
 It may be noted that the Philippines has horizontal limitations that affect Courier services under the Uruguay Round, which reflects constitutional provisions of the Philippines.  The restrictions 
cited in the Secretariat report therefore is more a matter of form rather than further substantive 
restrictions on the sector. 
 
    WT/REG257/2/Rev.1 
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  11. Paragraph 93 of the Factual Presentation no tes that, in the Agreement, 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 Agreement), the Philippines makes no clear commitment to undertake any 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 Agreement).  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 Agreement? 
 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' commit ment to "review" regulatory principles 
makes reference to its own "Philippines Refe rence Paper," which (among other things) 
does not provide for cost-based interconn ection, a key requirement for competitive 
markets.  Does the Philippines' current reg ulatory regime preclude the application of 
cost-based interconnection? 
 To clarify, the Factual Presentation states th at, in the EPA, the Philippines incorporates 
"the reference paper of the GATS on ba sic telecommunications services" not the 
Philippines Reference Paper on Regulatory Pr inciples.  Is the Factual Report therefore 
inaccurate in its description of the Ph ilippines’ commitments under the EPA with 
respect to this issue? 
  Yes, because it is difficult to implement co st-based interconnection due to the Universal 
Service Obligation (USO) imposed by RA 7925 "Public Telecommunications Policy Act of 
the Philippines" dated 20 February 1995 , to the two telecom sectors such as the international 
and mobile services. 
 
 Yes, the first sentence of Pa ragraph 93 should read as, "Unde r communication services, the 
Philippines incorporates the Philippine reference paper on Regulatory Principles in Telecommunication Services, which is in accordance with the GATS and its Annex on 
Telecommunications." 
 
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