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Mr. President:

Supplementing our preliminary report of September 15th, 1934, attached hereto you will find the Constitutional precepts that have been finally approved by the Committee.

For a better understanding of the position taken by the Committee, we beg to submit the following explanatory statements in connection with the Constitutional precepts recommended;

Comments on Section 1. In addition to the considerations already contained in our preliminary report, it is essential that the retail business be the exclusive privilege of the nationals because it is essential that only nationals should handle rice, corn, and other cereals of food value produced in the Philippines. Rice is the principal food of the country. It is produced by Filipino farmers, yet the business of warehousing, milling and trading in rice, whether wholesale or retail, is entirely controlled, monopolized and manipulated by aliens, notwithstanding efforts undertaken at different times by the Government and private individuals to dislodge this alien control. This situation has given rise to serious troubles in the past; it is very harmful to our economic self sufficiency and may cause great social disorders in the future. The evil is so deeply rooted in our land and of such harmful consequences that its connection has become imperative with the only means in our hands — a constitutional precept reserving this fieid of our national economy to Filipino nationals.

Comments on Section 2. The decision of the Supreme Court of the United States in the case of Yu Cong Eng v. Trinidad, 271 U.S. declared unconstitutional Act No. 2972, commonly known as the Bookkeeping Law, apparently on a mere defect of the law. The Supreme Court stated its position on the matter as follows:

"In view of the history of the Islands and of the conditions there prevailing, we think the law to be invalid, because it deprives Chinese persons—situated as they are, with their extensive and important businesses long established — of their liberty and property without due process of law, and denies them the equal protection of the laws.

"Of course, the Philippine Government may make every reasonable requirements of its tax­payers to keep proper records of their business transactions in English, Spanish, or Filipino dialect, by which an adequate measure of what is due can be had from them in meeting the cost of government; but how detailed those records should be, we need not now discuss, for that question is not before us. But we are clearly of the opinion that it is not within the police power of the Philippine Legislature, because it would be oppressive and arbitrary to prohibit all Chinese merchants from maintaining a set of books in the Chinese language and in Chinese characters, and thus prevent them from keeping advised of their business and directing its conduct..."

However, it was the prevailing opinion in the Committee that the Legislature could be given the power of prescribing the language and regulating the manner of keeping the books of accounts of persons and firms engaged in business, so that there should be no further doubt and question as to the power of the Legislature on that matter.

Comments on Section 3. The National Economic Council herein recommended is similar in some respects to the National Economic Council provided for in the Constitution of Germany (Art. 165 thereof). The difference is that while the German Economic Council is composed of more than three hundred members, the one we are suggesting shall be composed of not more than fifteen members.

We earnestly insist in giving the Council the power to submit recommendations to the Legislature on economic matters and to give its members voice in both Houses of the Legislature. It is only in this way that we can provide the Council with the necessary prestige. There is no reason to believe that the members of the Council will abuse this power to alternate in the deliberations of the Legislature on economic matters. Unless the members are given this power, their recommendations will not receive the proper consideration of the Legislature and will most likely die in the committees of the latter.

The problems that confront our new government in the future will be mostly economic. We trust that the National Economic Council which we are recommending will embody the formula which we lack up to this time, whereby a close cooperation could exist between the government and our private enterprises.

We trust that the proposed National Economic Council, if properly organized by law and having regard for the peculiar conditions of the country, will become an effective organ of specialized advice articulating important economic projects. In the framing of such projects, the interests directly affected will have a reasonable opportunity to present their views to the Government and, most important, to help push them through.

The constitution of Ireland provides for the creation of a "functional or vocational council representing branches of the social and economic life of the nation," but it was left to the law "to determine the powers, rights and duties and its relation to the government of the Irish Free State." (Art. 43.) Up to this time the legislature of Ireland has not thought it wise to create the council so that the constitutional precepts on it have not been given any chance to prove their value. Therefore, unless the provision is made mandatory, the legislature will be inclined not to take action on the matter.

The National Economic Council of Germany since 1923 has ceased to hold plenary sessions; but it is still exercising its functions under reduced membership—from 326 to 114. A movement to abolish it did not prosper, the German government having declared that the reports of the Council have been in many cases of great utility to the government as contrasted with the partisan policy that at times has dominated that government.

The German Constitution provides for the Council to be "constructed so that all important economic groups shall be represented therein proportionally to their economic and social importance." We have deemed it advisable not to incorporate this requirement in our Constitution so as to give the Legislature the most ample discretion in the manner of organizing the Council. We do not envisage for our country an Economic Council wherein the different economic groups should all the time be represented in proportion to their respective importance. Rather, we prefer these groups to be confronting the groups at different times in the Economic Council.

The Committee has abstained from incorporating in its recommendations the creation of a Board of Trade to whom the Legislature might delegate legislative powers in order to encourage and promote foreign trade, and under certain conditions and limitations to regulate industry and commerce. A provision similar to these, submitted to the Committee by its Chairman, was the one already included among the recommendations of the Committee on Finance and to a certain extent the same is also included in the recommendations of the Committee on Tariff.



Section 1. Five years after the inauguration of the Commonwealth Government, only citizens of the Philippine Islands and of United States, partnerships or corporations of whose issued stock or capital at least seventy-five per centum is held and owned by said citizens, may engage in the retail business and in the business of warehousing, milling, selling, or in any way dealing in rice, corn and other cereals of food value produced in the Philippines.

The operation of this provision shall be suspended insofar as it may be in conflict with any treaty of the United States applicable to the Philippines until one year after the said treaty has ceased to be operative in the Philippine Islands.

Sec. 2. The Legislature shall prescribe the language and regulate the manner of keeping the books of accounts of persons and firms engaged in business.

Sec. 3. There shall be a National Economic Council of not more than fifteen members, composed of representatives of the different economic forces of the nation, in a manner to be regulated by law. The members of the Council shall exercise their office without compensation. The Council may submit recommendations to the President and propose bills in the Legislature dealing on economic matters, and its members shall have a voice in both Houses of the Legislature.