The proposed Japan-Philippines Economic Partnership Agreement (JPEPA) is expected to cost at least P3 to P4-billion in foregone revenues due to a lowering of tariffs on covered commodities.
The Department of Finance (DOF) said yesterday that initial estimates brought revenue losses up to P4 billion although studies have been initiated to determine if there are offsetting factors that could reverse this impact.
Finance Undersecretary Gil Beltran told reporters that the net effect could be revenue-positive if the agreement could actually spur an increase in trade as well as economic activities in both countries.
“We have to look at the overall economic impact over time,” Beltran said. Initially, however, Beltran said the static model indicated revenue losses especially if lowering the tariff barriers did not result in a corresponding increase in trade.
“In a lot of cases, the reduction in tariff results in an increase in volume that offsets the initial losses from lower tariffs,” he said. “We just haven’t come up with the numbers yet.”
Beltran said the DOF’s official stand was to just factor in the revenue losses that would result from the JPEPA, pointing out that revenues have ceased to be the basis of trade policies.
“We’ll just have to factor these losses into the budget,” he said. “In the end, it’s an increasingly borderless world and there really is not much we can do other than maximize these trade agreements.”
JPEPA, however, has been severely criticized not for its economic terms but for its environmental impact and the implication on the country’s healthcare industry which is already strained by steady manpower drain.
Beltran said the DOF is also conducting a review of all existing free trade agreements and their long-term impact on the economy to determine what areas the country has benefited and areas that it has lost critical ground in the global market.