The visit to China of President Marcos was brief, but important. As a new president, he was essentially manifesting the importance of close economic ties with the giant economic neighbor.
Economic value. Since its rapid emergence, China has become the country’s largest trading partner. The volume of foreign merchanise trade between the two countries in 2020 amounted to $47.4 billion. Exports to China amounted to $12.9 billion and imports from China $34.5 billion. There is an $11.6 billion deficit, meaning we buy more than we sell to China.
Compare this trade with that of our other two top trading partners. In 2020, the volume of two-way trade with Japan was $28.5 billion, and with the United States, $27.5 billion. With both countries, the Philippines had a trade surplus in that year: with Japan, $2.5 billion; and with the United States, $3.4 billion.
It is imperative that the President pay important attention to economic relations even if only from the trade front! But there are more reasons.
Aside from trade, business relations in terms of direct business investments is also strong. Philippine capital investments in China is also substantial. Major business groups in the Philippines are invested in China’s growth – in industry, in retailing, and in trading. China has industrial investments in the Philippines.
Many large Filipino business groups that are dominant in the Philippine economy have substantial investments in China. Such investments, in fact, are part of the reason why two-way trading relations between the two countries are further strengthening.
Bilateral trade with China could be boosted by direct efforts to engage with the Chinese leadership. It should be noted that this visit is the fourth major trip abroad of the new Philippines president since taking office.
Of course, even though such trade would naturally expand if the Philippines would ratify the RCEP – an expansion of multilateral trade of ASEAN with the inclusion of major industrial and emerging powers that include Japan, South Korea, Australia into the new trade bloc. It is good to remind us that China heavily pushed the RCEP to bring a wider net of trading countries to form the bloc to further boost ASEAN’s trading relationships.
The South China Sea problem. The South China Sea fortifications that China undertook in recent years has heightened the crisis in international navigation in the critical sea lane area. They have brought the possibility of direct tensions between China and our country, and are at the forefront of geopolitical issues between the great powers.
These tensions between the Philippines and China are not unique to the two countries. All the countries bordering the South China Sea also have conflicting territorial claims with China. Once China decided to flex her military and geopolitical muscles by aggressively undertaking military fortifications, those tensions increased the risk of conflicts. To other countries without direct territorial claims, the issue has become one of freedom of navigation rights that trading nations require.
And yet, it must be added that economic relations have continued and even expanded between China and the countries with which it has conflicting territorial claims in the South China Sea. This also includes those other countries who only assert the freedom-of-navigation rights of all countries.
Legal victory on the Law of the Sea issue, which the Philippines won against China, is a reminder that many countries are on the side of our basic position.
The hawks on our side on the China Sea issue want strong assertion of Philippine rights in our territorial claims. Direct confrontation could only heighten bad outcomes for us. Former president Rodrigo Duterte’s tack to downplay this approach, as foolhardy as it was, was realistic. We are no match to China’s military prowess.
All the other countries involved in the South China Sea problem have essentially followed a no-conflict approach. A useful approach to deal with it is to liven up some form of alliances with other countries concerned by the military developments in the area. Only the big boys – the big military powers – can be provocative and get away with it.
ASEAN as a group had foreseen the potential for conflict years ago by insisting on a “Code of Conduct” along the sea-lanes that all trading country participants should follow. Although no such code has yet been adopted, it is a good point to assert as a group. All the ASEAN member countries have flourishing economic relations with China – and all together – these countries have enough clout among themselves to be recognized as an important set of partners for China.
Hence, the Philippine position that working through ASEAN will also help protect our interests in the bilateral relations with China. Also, by expanding the scope of economic cooperation and trade, it is possible to keep both countries occupied on positive developments.
In due time, expanding interests on both sides lead to the search for compromises and useful solutions to the big irritant issues. Hence, it is a good approach to enhance other types of engagements on a bilateral front.
It is also important to point out that the US-Philippine alliance – a friendship rooted in historical relationships – helps to buttress our military position. The continuation of the joint forces training with the US has put stress on the need to improve military preparedness and cooperation.
The Duterte government realized the importance of this relationship late in its administration, even though early in its administration, it tried to threaten its termination, in part to stress the old inequities in that relationship. The new Marcos government has emphasized the need to repair these relationships. Such a refocus has brought clarity to the strengthening of the Philippine territorial claims without directly confronting the China-Philippine tension on the territorial conflict.
Bilateral agreement signed. Many of the agreements on improving the economic relationships were already items of general agreement between the two countries.
Some of these agreements would have been concluded without a visit to China by our president. Yet, they provide good theater for an improving bilateral relationship.
For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/