Giving incentives to local initiatives

The Philippines, like many of the developing economies in Southeast Asia, can only watch from the sidelines as many big countries like the United States, United Kingdom, and lately some of those in the European Union, like Germany, have escalated protectionist policies against China.

The US had imposed tariffs on half of its imported goods from China starting in 2019, and until today, shows no inclination to relax this trade policy, although such moves have not reduced the trade gap, which had grown even wider last year with its economy reopening.

The US has openly labeled China as “a strategic competitor,” and together with allied countries like Taiwan and South Korea, have influenced tighter controls of semiconductor exports to China to suppress the growth of its chip industry. Just recently, Japan and Netherlands have agreed to cooperate with the US’s initiatives.

Such moves aim to starve China’s technology development, and therefore dampen its growth and competitiveness in areas like smartphone manufacture, advanced robotics, as well as information technologies dealing particularly with artificial intelligence.

There is clearly a drifting apart now of China, with a growing number of nations that are dependent on the goodwill that the US represents, which can be in the form of continued trade in export and import of consumer products, military protection, or a market or source of technology.

Clearly, China is at a disadvantage because it is considerably behind in advanced chip technology, and will be hard-pressed to develop the know-how to manufacture the kind of chips that will be needed for tomorrow’s smart consumer gadgets and, perhaps more importantly, military equipment.

For now, China continues to resort to diplomatic measures to peacefully convince the US and other countries to be less hostile in their trade policies. It realizes that any drastic retaliatory move could have adverse effects on its economic growth moving forward.

China, too, has become dependent on the rest of the world to keep its economy moving forward. To strongly pursue a protectionist policy would only mean slower economic growth that would have dire consequences on its own economy.

Playing it smart

Understanding this new global dynamics in trade is necessary for the Philippines to come up with new policies in dealing with its relationships with the US and its allies, and with China. We must learn to play smart, and with a firm grasp of what we have to offer and how we can maximize returns.

First of all, we need to define the kind of economic security we need to have to be assured of the least disruptions if and when the interplay between the US and its friends vis-a-vis China hits the fan and all hell breaks loose.

Unfortunately, now is not the time to build up the image of a “new leadership” being at the helm of our government. When a decoupling of China and the US really happens, every country in the world that will be affected will only be too busy trying to ensure that their respective economies will keep on churning.

The Philippines remains vulnerable to imports, from salt to heavy infrastructure equipment. Last year, our imports totaled $137.16 billion, of which 31 percent are raw materials and intermediate goods, and with China still the biggest source of imports.

The country continues to be import dependent on a range of raw materials and intermediate goods, while also dependent on Japan, HongKong, and the US for purchases of our exports. We are undeniably a consumer-led economy whose local manufacturing capability has deteriorated over the years.

More so for agriculture, imports have remained on the high side. Aside from rice and corn, the country already imports onions, garlic, mongo, beef, dairy products, chicken, and even fish. Many are seasonal, mainly to augment during the lean months between harvests.

Food security

Obviously, food security is a priority where our very own agriculture system must be given the proper attention so that local production is not at the mercy of importations, more so, of local supply manipulators. Our past experiences dealing with the scarcity of pork because of the African swine fever, or more recently, with sugar and onions because of delays in the arrival of imports show a vulnerability in food supply that is far too close to every Filipino’s gut.

A growing call now is for government is find ways by which private business can be more open to investing in agriculture, especially when it has to involve farming large tracts of land. Our land reform laws have not helped our small farmers, and neither has it contributed to improving the share of agriculture in the overall economic productivity.

Local investments

More local businessmen are now increasingly becoming enlightened about contributing to national growth by investing in areas where they deem government is restrained, either because of the huge amounts needed or the technologies necessary to make such ventures a success.

San Miguel Corp., for one, has heavily invested in infrastructure, and its investments in toll roads have eased travel time in many parts of the country.  SMC’s Ramon Ang has also been passionate about putting in money in our power sector, an area that needs continuous incentives to keep up with economic growth.

Metro Pacific, led by Manny Pangilinan, is pouring in new money for the local dairy industry. Its planned P2-billion dairy farm in Laguna is a welcome move that will ensure that our dependence on imported milk will eventually be addressed by local production.

We need more of like-minded people, and government can play a big role.

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