Let’s talk trade relations
Economics isn’t always the sexiest thing to talk about, but it’s the more sustainable discussion to be had with regards to the geopolitical tension in the region. Through my ongoing Global Security Development Studies trip to the US, in pursuit of my Senior Executive Master’s Degree in National Defense Administration under our eminent National Defense College of the Philippines (NDCP), I learned so much from the Philippine embassy in Washington, DC and information-rich institutions like the Pentagon, the Center for Strategic & International Studies, the US Trade Representative’s Office and US Department of State.
The Philippines’ escalating security threats and economic challenges are inextricably linked. Nurturing our economy, including our trade relations, goes hand-in-hand with protecting our state sovereignty. An undeniably substantial aspect of the equation is our foreign policy with the US, which finds swelling significance in view of the US presidential elections in November 2024.
US President Biden grabbed news headlines when he described Philippine-US relations as “ironclad” and asserted that “[a]ny attack on Filipino aircraft, vessels or armed forces will invoke our mutual defense treaty with the Philippines.” It came at a historic moment in May 2023, when he welcomed President Marcos Jr. to the White House. It was the first visit by a Philippine president in more than a decade. Further, it came after US Vice President Harris visited Palawan in November 2022, and the largest Phl-US Balikatan joint military exercises were held in April 2023.
The meeting between President Marcos and President Biden was later followed by a key meeting under the US-Philippines Trade and Investment Framework Agreement (TIFA) in December 2023. The White House visit, furthermore, witnessed the announcement of a US Presidential Trade and Investment Mission to the Philippines in March 2024, a first of its kind. Such a series of actions is a demonstration of the comprehensive package required to maximize the partnership between our two nations, an integrated interplay of diplomacy, military affairs and trade.
Taking good care of our “special” relationship with the US is crucial for our people, provided we ensure dealing with each other on equal footing as sovereign nations. There is much at stake. The US is home to 4.4 million hardworking Filipinos, an untapped political and energetic economic force. The US is our top source of overseas Filipino remittances amounting to $13.4 billion or P749.52 billion, by itself contributing nearly four percent to our Gross Domestic Product (GDP) in 2022. The US is one of the Philippines’ top trading partners; our top export market and fifth largest import supplier. China ranks quite similarly as our second largest export market and our top import supplier in 2022; a vital factor in the calculus of our three nations.
Since Presidents Biden and Trump are poised to be the main contenders to the US presidency, we ought to understand their priorities and how it will affect us. President Trump characterized the US as having a “great relationship” with the Philippines. His administration oversaw military support to the Philippines during the siege of Marawi in 2017 and a visit to the Philippines when we hosted the 31st Association of Southeast Asian Nations (ASEAN) Summit. When President Duterte almost oversaw our VFA’s termination, President Trump said: “I don’t really mind if they would like to do that, it will save a lot of money.”
Whether it be another Trump or Biden presidency, the Philippines MUST leverage its undeniable importance in the balance of power in Asia and global peace.
We should also keep an eye on the US congressional election. There are key policies that need to be pushed.
Take for instance the Generalized System of Preferences (GSP) under the US Trade Act of 1974. GSP is a trade program that had granted duty-free privilege to more than 3,500 Philippine exports. The Philippines was among the GSP’s top beneficiaries. It made our products more competitive, and US consumers enjoyed high-quality Filipino-made products like leather bags, electronics and rubber tires valued at $1 billion or P55.93 billion. In 2020, GSP-admitted Philippine products amounted to $1.56 billion or P87.34 billion.
However, the GSP expired on Dec. 31, 2020 and has remained unrenewed by the US Congress. American firms have hence been paying $121 million in extra tariffs, making Philippine products less competitive. We appreciate the existing momentum for the renewal of the GSP from President Marcos Jr. and US Ambassador Tai, who is principal US adviser on US trade policy. A White House and US Congress composed of public servants supportive of GSP renewal, or a free trade agreement (FTA), with the Philippines would be best, because they support the talent, sweat, and ingenuity of Filipino workmanship.
Furthermore, it’s important to note that President Biden, Trump and not even Ambassador Tai, support the FTA, understandably to “protect US jobs and businesses interests,” but we need to find a way to make it favorable for both the US and the Philippines, since a bilateral FTA would be a critical boost to our economy. The upcoming US trade mission to the Philippines from March 11 to 12, 2024 may be an avenue to push the envelope. Now is one of the best times, as it could synergize with the economic liberalization legislation that we, in the Senate, had successfully passed, including the amended versions of the Retail Trade Liberalization Act or Republic Act (RA) 11595, the Foreign Investment Act or RA 11647 and the Public Service Act or RA 11659.
We must be cognizant that our national security paradigm must be holistic, taking trade into the equation. Philippine national security lies not only with the exchange of guns and ships but also with the fair trade of goods and services, so let’s talk trade relations.