Trade agreements, executive agreements

(written in March 2003)

There has been a recent slew of trade agreements that the Philippines has either entered into or is planning on signing up. Some are quite significant, particularly the ASEAN-China Free Trade Agreement and the ASEAN-Japan Free Trade Agreement. In addition is the possible early harvest bilateral agreement which is provided for in the ASEAN-China FTA. Could such agreements be considered executive agreements that do not need Senate concurrence? A reading of present laws and rulings relating to matter indicate as much.

A. Philippine Constitution and Treaties

Section 21, Article VII of the Constitution provides that “no treaty or international agreement shall be valid and effective unless concurred in by at least 2/3 of all the members of the Senate.

It is to be noted that under the Constitution, the power to ratify treaties is vested in the President and not, as is commonly believed, in the Legislature. The role of the Senate is confined to simply to giving or withholding its consent to the ratification. The Supreme Court has held that from the municipal law standpoint, executive agreements are different from treaties but from the standpoint of international law, they are equally binding as treaties.

B. Treaties and Executive Agreements

The Supreme Court, citing the case of Altman vs. U.S. (224 U.S. 583) in USAFFE Veterans vs. Treasurer of the Philippines (105 Phil 1030), held that an “international compact negotiated between the representatives of two sovereign nations and made in the name and or behalf of the contracting parties and dealing with important commercial relations between the two countries, is a treaty internationally, although as an executive agreement it is not technically a treaty requiring the advice and consent of the senate’.

In USAFFE, the Supreme Court stated that executive agreements generally fall under two classes: 1) agreements made purely as executive acts affecting external relations with or without legislative authorization which may be called presidential agreements, and 2) agreements entered into in pursuance of acts of congress which have been designated as congressional executive agreements. Thus, it was declared by the Supreme Court that the Romulo-Snyder Agreement may fall under any of these two classes, for precisely on September 18, 1946, the Congress of the Philippines specifically authorized the President of the Philippines to obtain such loans or incur such indebtedness with the Government of the United States, its agencies or instrumentalities (R.A. No. 16, as amended by R.A. 213). Thus, “even granting arguendo that there was no legislative authorization, it is hereby maintained that the Romulo-Snyder Agreement was legally and validly entered into to conform with the second category, namely, ‘agreements entered into purely as executive acts without legislative authorization’. This second category usually includes money agreements relating to the settlement of pecuniary claims of citizens. It may be said that this method of settling such claims has come to be the usual way of dealing with matters of this kind”.

The Supreme Court also held in Commissioner of Customs vs. Eastern Sea Trading that treaties (which will require Senate concurrence for validity) generally refer to basic political issues, changes in national policy and permanent international arrangements; while executive agreements (which do not require such concurrence) refer to adjustments of detail carrying out well-established national policies, and temporary arrangements.

In Adolfo vs. CFI, the Supreme Court ruled that “executive agreements cover such subjects as commercial and consular relations, property relations like parent rights, trademark and copyrights, postal, navigation, settlement of private claims, tariff and trade matters”.

Under Memorandum Circular No. 89, Office of the President, it is provided that, in case there is a dispute as to whether or not an international agreement is purely an executive agreement, the matter is referred to the Secretary of Foreign Affairs who will then seek the comments of the Senate Representative and the legal adviser of the Department, and after consultation with the Senate leadership, the Secretary of Foreign Affairs shall then, on the basis of his findings, make the appropriate recommendation to the President.

C. U.S., Treaties, and Executive Agreements

It is also interesting to note that U.S. rules relating to executive agreements seemingly are in concurrence to our own. To resolve questions as to whether an agreement is a treaty or an executive agreement, the U.S. government issued Department Circular No. 175, dated 3 December 1995, whereby executive agreements are to fall into one or more categories:

1. agreements which are made pursuant to or in accordance with existing legislation or a treaty;

2. agreements which are made subject to congressional approval or implementation; or

3. agreements which are made under and in accordance with the President’s constitutional power. (Department of State Circular No. 175, 13 December 1955; 50 AJIL 785)

The Circular further provides that where there is serious question as to whether an international agreement should be made in the form of a treaty or in the form of an executive agreement made by the president alone, the matter shall be brought to the attention of the Secretary of the Department of State by a memorandum prepared by the officer responsible for the intended negotiation. This memorandum shall first be routed to the Legal Adviser of the State Department and the Assistant Secretary for Congressional Relations (similar to the Assistant Secretary for Liaison with the Department of Foreign Affairs and Congress of the Philippines) for their clearance and comment. Consultation should be made with appropriate congressional leaders and pertinent committees. In this way, even purely presidential or executive agreements can get the full support of the legislative body.

Interestingly enough, further distinctions are also made by certain authorities. Thus:

1. Congressional executive agreements previously authorized where Congress has enacted legislation delegating to the President the authority to enter into an international agreement;

2. Congressional executive agreements subsequently authorized where after an agreement is negotiated, the President seeks authority from Congress to accept the agreement as a binding international obligation of the U.S.;

3. Presidential executive agreements, sometimes termed “inherent” presidential agreements, where the President accepts an agreement as a binding obligation of the U.S. without any participation of congress on the basis of his inherent or constitutional authority; and

4. Treaty executive agreements, where a treaty approved by the Senate leaves certain details of implementation to be worked out by the various governments at a later time, and may thus explicitly or implicitly authorize the President to enter into international agreements to accomplish such legislation.

Under the foregoing, the General Agreement on Tariffs and Trade is considered an executive agreement accepted for the U.S. by its president in 1947 under the then existing Trade Agreements Act Authority. By such reckoning, the 1967 Anti-Dumping Code would also be considered an executive agreement.

D. Trade Agreements

There have been a series of opinions issued by the Department of Justice that increasingly indicate that trade agreements are generally executive agreements and thus have no need of being submitted to the Senate for their concurrence.

Thus, the Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area was considered an “agreement [that] need not be ratified by Congress”, merely embodying, as it does, “the guidelines on how trade liberalization on a preferential basis can best be achieved”. The DOJ would go on to give the same opinion with regard to the following trade agreements:

1) Framework Agreement on Services;

2) Framework Agreement on Intellectual Property Cooperation;

3) Protocol to Amend the Framework Agreement on Enhancing ASEAN Economic Cooperation;

4) Protocol to Amend the Agreement on the Common Effective Preferential Tariff (CEPT) for the ASEAN Free Trade Area (AFTA); and

5) Protocol to Amend the Agreement on ASEAN Preferential Trading Arrangements (PTA).

It must be emphasized that with regard to trade agreements, the Congress already delegated to the President its authority to enter into such. Thus, Section 402 of the Tariff and Customs Code declares:

“For the purpose of expanding foreign markets for Philippine products as a means of assistance in the economic development of the country, in overcoming domestic unemployment, in increasing the purchasing power of the Philippine peso, and in establishing and maintaining better relations between the Philippines and other countries, the President is authorized from time to time:

a) To enter into trade agreements with foreign governments or instrumentalities thereof;”

E. Free Trade Areas

As can be seen above, a number of trade agreements entered into or about to be entered into by the Philippines are in the nature of or related to the concept of free trade areas. A short discussion on this is therefore appropriate.

Free trade areas are understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the constituent territories in products originating in such territories. The concept of free trade areas has been recognized in Article XXIV of the 1994 General Agreement on Tariffs and Trade. The 1994 GATT, in turn, forms part of the range of agreements informally called the WTO Agreements.

The WTO Agreements have been given concurrence by the Senate (and ratified by the President) in 1994, the validity of such concurrence being fully threshed out in the Supreme Court case of Tanada vs. Angara. It must be emphasized that as Member of the WTO, the Philippines is duty bound in ensuring that its laws, rules, and regulations are consistent with the WTO Agreements. By signing on to the WTO Agreements, the Philippines therefore “recognize[s] the desirability of increasing freedom of trade by the development, through voluntary agreements, of closer integration between the economies of the countries parties to such agreements”. Furthermore, as mentioned above, the concept of free trade areas are provided for in Article XXIV of the 1994 GATT. Said Article clearly provides that: “each contracting party shall take such reasonable measures as may be available to it to ensure observance of the provisions of this Agreement by the regional and local governments and authorities within its territories”.

F. Conclusions

From the foregoing, it would appear that trade agreements, meaning agreements dealing in matters relating to trade or tariff matters, are executive agreements that do not need Senate concurrence. Accordingly, the A S E A N -China FTA and the ASEAN-Japan FTA may be considered as merely those which refer to adjustments of detail carrying out well-established national policies and constitute relatively temporary arrangements. It must be stressed that Philippine policy, as embodied in the Medium Term Philippine Development Plan 2001-2004, has long recognized that the “increasing integration of the Philippines with the rest of the world’s economies provides net benefits to society”. Furthermore, “in the area of regional and international economic cooperation, the government will uphold its commitments under the ASEAN Free Trade Area-Comprehensive Effective Preferential Tariff (AFTA-CEPT), the Asia-Pacific Economic Cooperation (APEC), and the World Trade Organization (WTO)”. The strengthening of the ASEAN is of course a commitment undertaken by the Philippines and one of the ways to strengthen ASEAN (as agreed upon unanimously by the ASEAN members) is by entering into regional free trade arrangements such as those mentioned above.

The Supreme Court, it must be emphasized, ruled in the USAFFE case that “international compact[s] negotiated between the representatives of two sovereign nations and made in the name and or behalf of the contracting parties and dealing with important commercial relations between the two countries, is x x x an executive agreement” not requiring the advice and consent of the Senate. This ruling was further made clear in Adolfo vs. CFI, whereby the Supreme Court declared executive agreements as those which “cover such subjects as commercial and consular relations, property relations like parent rights, trademark and copyrights, postal, navigation, settlement of private claims, tariff and trade matters”.

To the foregoing must be added the fact that the WTO Agreements - of which the Philippines is a signatory and for which the Senate has already provided concurrence thereto - clearly recognizes the concept of free trade areas. Also, the DOJ has consistently opined that with regard to trade agreements, the same needs no concurrence by the Senate. It is well worth adding that United States jurisprudence seems to be in agreement with ours, as the 1947 GATT was considered an executive agreement. Finally, it must be stressed that by legislating the Tariff and Customs Code, the Congress itself delegated its authority to the President to enter into trade agreements.

The reasons stated for the ASEAN-China FTA and the ASEAN-Japan FTA apply also to agreements that are mere components of other trade agreements and a prime example of this would be the bilateral agreements pursuant to the early harvest program provided for under the ASEAN-China FTA. Being a mere component of the ASEAN-China FTA, as the latter can be considered an executive agreement, then, clearly, any early harvest agreement needed to fulfill the provisions of that FTA would necessarily be an executive agreement as well.

Having said that, the conclusions inevitably brought by the foregoing clearly invite difficulties and dangers. Trade agreements, though perhaps merely filling out details of established policy, are however quite significant, with effects definitely trickling down to the smallest Filipino business. Due to the mass of details and technical information contained in such agreements, it is important that ordinary Filipinos and their elected representatives have a say regarding the matter. As the Philippines strives to become truly globally economically competitive, trade agreements are too important and too far reaching in its effects to be left purely in hands of bureaucrats (no matter how experienced or talented they are). A process clearly needs to be established whereby there is a review of the trade agreements being entered into. It would therefore be advisable for laws to be legislated directly dealing with the matter, expressly classifying trade agreements as treaties needing Senate concurrence (or making distinctions among the different trade agreements as are appropriate). Congressional hearings (with a government official or officials clearly designated as responsible for overseeing trade agreements) should also be set up - either annually or at regular periods - for purposes of reviewing trade policy and agreements currently being negotiated into. Finally, the President’s authority to enter into trade agreements should perhaps be re-studied by Congress, with Section 402 of the Tariff and Customs Code being amended to limit the President’s authority to specific delegations subject to certain periods of time.