US vs China: Who matters more?

SOME WORRY that our outspoken President may be unnecessarily antagonizing the United States for our country’s own good, while sounding deliberately gentle with China—in the name of pursuing an “independent foreign policy.” This piece’s title notwithstanding, I am not about to argue here that we must choose one over the other. It’s fair to say that historically, both of them have helped us, and wronged us as well. In the overall scheme of things, it may not be obvious who has been and who will prospectively be the better friend or worse foe to us Filipinos. It has been argued that our independence would be best asserted by being on good terms with everyone. Indeed, it would be in our best interest as a small country to be seen as impartial in dealing with other countries, particularly the world powers, and in defining our country’s standing in the global community.

Still, I thought it might be interesting to assess and compare the nature of our economic linkages with the two countries, as this looms large in any reckoning of our relationships with either of them. I will steer clear of the political and other dimensions of those relationships, as that would be straying beyond my own area of expertise. On economic relations, the most obvious measures for which we have the data are those pertaining to trade, investments, and overseas remittances.

How important are the United States and China to us as trading partners? Overall, it would appear that they are equally important, as combined exports and imports with each are both in the neighborhood of 13 percent of our total for all countries. The United States is more important to us as an export market, accounting for 15 percent of our total exports in value terms, against China’s 10.9 percent. As source of imports, the reverse is true, with our official figures showing less of our imports (10.8 percent) coming from the United States than from China (16.2 percent). The latter figure is likely to be even higher, given the rampant smuggling of goods into the country, particularly from China. Recently it was reported that China’s data on exports to us are 60 percent higher than our corresponding data on imports from it, indicating the extent of such undocumented imports.

What do we sell to the two countries? Dominating our exports to both (50 percent of our exports to China, and 39 percent to the United States) are electronic products, mostly in the form of intermediate products such as semiconductors and circuit boards. For China, mineral ores are also prominent (14.5 percent), with shiploads of virtual raw earth, mostly nickel ores, being shipped there every week. Rounding up our top five exports to China are chemicals, miscellaneous manufactures and machinery/equipment. For the United States, garments are our second top export (14 percent), followed by coconut oil, miscellaneous manufactures, and ignition wiring sets for motor vehicles. These give us some idea on which industries—hence which types of workers—benefit from our trade with either country, and correspondingly, who would be adversely affected by a cutback in trade, as fallout from possible political conflict. Offhand, it appears that proportionately more workers benefit from our exports to the United States than to China, with labor-intensive manufactures more prominent in our top five exports to the former.

What do we buy from the two countries? Topping our imports from both are electronic products in the form of basic components for further assembly and finished consumer products. These comprise nearly half (48.2 percent) of total imports from the United States against less than a fifth (19.3 percent) from China. Agricultural products in the form of animal feed stuffs, cereals and preparations (including flour), and other food and live animals are prominent imports from the United States, along with industrial machinery and equipment. From China, our other top imports are iron and steel, industrial machinery and equipment, miscellaneous manufactures, and metal products.

As source of foreign direct investments (FDI), the United States is far more important to us than China, accounting for 13 percent of total net FDI inflows in 2015, against China’s negligible 0.01 percent (less than $1 million). In 2014, only 2 percent of total Chinese investments into Asean reportedly went to the Philippines. Chinese Ambassador Zhao Jianhua is reported to have acknowledged that the Philippines invests more in China than China does in the Philippines. Its most visible investments here are in power, shipping and mining. The Chinese government owns a 40-percent stake in the National Grid Corp. of the Philippines, and is also reported to have acquired a controlling stake in Negros Navigation Corp. operating the 2GO Travel lines.

A recent article in the Journal of Political Risk lists some 25 Chinese mining firms known to have investments in the country as of 2012, albeit not officially recorded. It cites investigative media reports portraying Chinese mining companies to be engaged in “improper” and “less than legal” mining operations in the country. On the other hand, US investments in the country have a long history and are much more substantial and varied, spanning the agriculture, industry and services sectors.

As for remittances, Bangko Sentral ng Pilipinas data report that nearly half (43 percent) comes from the United States, and less than 1 percent from China. It would seem from all this that on purely economic terms, we stand to lose more from antagonizing the Americans than the Chinese. But as we’ve stated at the outset, it’s best not to antagonize either. Whether in trade, investments or remittances, we need both—and we need much more.

* * *

cielito.habito@gmail.com

source: 

By: Cielito F. Habito

Philippine Daily Inquirer

Duterte a ‘game changer’ in US-China rivalry

MANILA/HONG KONG -- Just when some of China’s neighbors were seeking to curtail its expansionism, along came Rodrigo R. Duterte.

In less than three months on the job, the 71-year-old Philippine leader has used expletives in talking about US President Barack H. Obama and vowed to end cooperation with the US military in both fighting terrorism and patrolling the disputed South China Sea. He’s moved to boost economic and defense ties with China and Russia.

While Mr. Duterte is unpredictable -- one day calling China “generous” and the next threatening a “bloody” war if Beijing attacked -- his behavior has undermined US efforts to rally nations from Japan to Vietnam to Australia to stand up to China’s military assertiveness.

In doing so, Mr. Duterte risks shifting from the 1951 Philippine-US defense treaty, which has been a bedrock of American influence in the region.

While Mr. Duterte has said he’ll respect the alliance he’s repeatedly stressed the need for an “independent foreign policy” and questioned America’s willingness to intervene if China were to seize territory in the South China Sea.

“This could be the game changer for the South China Sea situation in general and Sino-US regional competition specifically,” said Zhang Baohui, director of the Center for Asian Pacific Studies at Lingnan University in Hong Kong.

“Mr. Duterte’s foreign policy may dramatically shift the geostrategic picture of the region, leaving China in an advantageous position versus the United States.”

One of the biggest benefits for China is the potential for a deal over the South China Sea. Just weeks after Mr. Duterte took office in late June, an international arbitration panel ruled that China’s claims to most of the waterway had no legal basis -- a win for the Philippines in a case brought by Mr. Duterte’s predecessor.

While Mr. Duterte has said he’ll respect the agreement, he’s signaled he’s open to talks with China, the country’s biggest trading partner, and he did not push for the ruling to be mentioned in the communique last week from a summit of Southeast Asian leaders in Laos. Before taking office, he said he’d consider setting aside territorial disagreements to get a Chinese-built railway.

In July, Mr. Duterte sent former President Fidel V. Ramos to Hong Kong to explore common ground with China.

Mr. Ramos later called for a bigger role for the Philippines under China’s plan to link ports and other trading hubs throughout Asia to Europe.

‘WRONG MESSAGE’
Chinese Foreign Ministry spokeswoman Hua Chunying said Sept. 6 that China is “willing to make a joint effort with the Philippine side to rebuild mutual trust and push forward the bilateral ties.”

“Let’s not be naive about this, there’s no other country that will benefit from our differences with the US and our other allies but China,” said Lauro L. Baja, Jr., a former Foreign Affairs undersecretary who served as the Philippine permanent representative to the United Nations under ex-President Gloria M. Arroyo.

“Whether we like it or not, we’re sending the wrong message to the US, China and our other allies with these actions and pronouncements.”

China claims sovereignty over all features that lie within a nine-dash line drawn on a 1940s map enclosing more than 80% of the South China Sea. It says that gives it the right to interdict military ships close to its territory -- a position the US opposes. Fu Ying, who chairs the Foreign Affairs Committee of China’s top lawmaking body, this month framed US-China tensions in the South China Sea as a fight over the freedom of navigation for naval warships and other non-commercial vessels within the 200 nautical mile exclusive economic zones of coastal states.

“The Chinese want the South China Sea to become a Chinese strait, with control of the maritime space and the air space above it,” said Malcolm Davis, a senior analyst at the Australian Strategic Policy Institute in Canberra.

“That is the long term game, and flipping Mr. Duterte over to Beijing’s side is part of the play.”

China’s land reclamation and military buildup in the waters has in recent years pushed some neighbors closer to the US The Obama administration has boosted military cooperation with nations such as Vietnam, the Philippines, Singapore, and Japan.

Still, at the summit last week in Laos, a spat with Mr. Obama over Mr. Duterte’s war on drugs and the thousands of deaths it has caused overshadowed any criticism of China.

“That’s a very bad scenario,” said Hideki Makihara, a senior lawmaker in Japan’s ruling Liberal Democratic Party, referring to a potential Philippine strategic alignment with China.

In that case, “at least we need Vietnam, Malaysia and other countries surrounding the South China Sea in our group,” he said in an interview this week in Tokyo.

BACKLASH RISK
For now, US officials are emphasizing the benefits of defense ties with the Philippines. “We’ve got a wide range of shared concerns and shared interests, and the United States and the Philippines have been able to work effectively together in a variety of areas to advance our mutual interests,” White House press secretary Josh Earnest said Sept. 12.

But a shift toward China may be difficult for Mr. Duterte to sustain. If Beijing refuses to make any tangible concessions on the South China Sea -- particularly over fishing resources at the disputed Scarborough Shoal -- Mr. Duterte may face a backlash at home, according to Richard Javad F. Heydarian, an assistant political science professor at De La Salle University in Manila.

“This is precisely why security relations with the United States will remain indispensable for the Philippines,” Mr. Richard Javad Heydarian wrote in an article last week for the Washington-based Asia Maritime Transparency Initiative.

Still, the US can no longer expect the same level of strategic deference and diplomatic support.

“This is the new normal in Philippine-US relations.” -- Bloomberg