Friday, October 22, 2021
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Where the Philippines Sits

If you listened exclusively to President Duterte’s recent pronouncements you would leave with the impression that the Philippines has been hopelessly reliant on the United States for everything. Thus, his seemingly hyperbolic declaration of the Philippines’ “separation” from the US would also merit a hyperbolic reaction. Suddenly, we’re now supposed to be closer to China, because they would treat us better than our former colonizers.

 

His economic team rushed to clarify the president’s statements, saying that the Philippines would now focus on developing economic ties with its neighbors in Southeast Asia, as well as with China and Japan, two economic powerhouses on this side of the world. But, again, that suggests that we’ve been hopelessly reliant on the United States.

 

So I decided to look at the numbers I could get my hands on.

 

Yes, the United States has always been one of our biggest economic partners. According to information collected by the International Trade Center, in 2015, we imported USD 7.6 billion worth of goods from the US, and exported USD 8.8 billion worth of goods.

 

A big chunk of our imports falls under the category “electrical machinery”. This comprised mostly of electronic circuits and parts, but also includes storage devices (such as hard drives), telephone sets and electrical transformers.

 

Also among our top five imports from the United States are byproducts from food processing, cereals, mechanical machinery and aircraft parts.

 

A majority of our exports to the United States also fall under the “electrical machinery” category, suggesting the Philippines’ role as a toll manufacturer for multinational companies – producing parts to be assembled elsewhere. Rounding off our top five exports to the US are mechanical machinery, oils from animals or plants, knitted clothing (a separate category from non-knitted clothing) and optical and surgical instruments such as lenses and measuring devices.

 

But the United States is not our biggest export market. In 2015, they’re just second behind Japan. We export USD 12.3 billion worth of goods to them, mostly machinery, wood products and mining byproducts.

 

We also do not import most of our products from the US: that honor goes to China. We imported USD 11.5 billion worth of goods from them in 2015 – again, mostly under machinery, iron and steel, mineral fuels (such as petroleum) and vehicles.

 

China is our third biggest export market. In 2015 we exported USD 6.4 billion worth of goods, falling under machinery, ores, optical and surgical instruments and mineral fuels.

 

It’s worth noting that there are separate figures for our trade relationship with Hong Kong, which is a special administrative region of China. We only import USD 1.9 billion worth of products from them, but we export USD 6.2 billion worth of products – again, mostly machinery and optical and surgical instruments, but also precious stones and fish.

 

It is wrong to say that the Philippine economy is hopelessly reliant on the United States. We have strong economic relationships with our neighbors: Taiwan, Singapore and Thailand figure in the top 10. In recent years we have worked to realize ASEAN economic integration, which has seen elimination of tariffs in most items traded with the rest of the region. In fact, our economic ties to China has been bolstered by a free trade agreement between it and ASEAN! We do not have an FTA with the United States, although both countries have continued exploring a possibility, most recently with the Philippine government (under former president Aquino) expressing interest in joining the controversial Trans-Pacific Partnership.

 

It is true that Filipinos still look highly on American brands, but in recent years we have been offered more choice. It’s not atypical for a Filipino to patronize a good mix of products from around the world, as well as our own, now that they have stepped up to the plate to respond to evolving customer needs and demands.

 

Now, of course it is in our best interest to further strengthen economic ties with our neighbors. However, this government should focus on enhancing connectivity, within our islands and with other countries. We should also look into ensuring that the country remains competitive to businesses, both multinationals looking to invest, and budding start-ups looking to make an impact. The Philippines is in a unique position, with its strong ties to both the West and the East.

 

Henrik Batallones is the marketing and communications executive of SCMAP. A former board director, he is also editor-in-chief of the organization’s official publication, Supply Chain Philippines.

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