Venezuela. Zimbabwe. Cuba. North Korea.
And The Philippines?
Once an appealing destination for U.S. exports and investment capital, The Philippines is fast becoming a foreign trade pariah. For Western firms attracted by fair treatment and respect for property rights, that is.
Amidst tensions spawned by President Rodrigo Duterte’s populist surge, U.S. and Philippine officials held trade talks in July described, perhaps generously, as “constructive.” They ended without substantive progress.
The American Chamber of Commerce of the Philippines (AMCHAM) even acknowledged that economic relations are regressing between the two countries.
An AMCHAM official told the Philippine Star this week that the country is no longer a “priority” for the U.S.
Duterte has been more pointed, mulling openly about breaking ties with the U.S. and, instead, expanding his country’s economic partnership with Russia.
“I’ve been talking with PM Medvedev. One-on-one kami. Walang nakalaam noon. I said, ‘I think I am about to cross the Rubicon between me and the US, at least for the 6 years. I would need your help and everything—trade, commerce. I will open up,’” he said.
More than 140,000 Filipino-Americans live in Chicago, according to the U.S. Census Bureau. Illinois has the third-largest number of Filipinos in the U.S., after California and Hawaii.
A surge in Philippine protectionism
Last November, Duterte spoke out against protectionism, claiming it protected domestic monopolies in his country, leading to higher prices and worse services for consumers.
"The only way for deliverance of this country is to remove it from clutches of the few people who hold the power and money," Duterte said.
Foreign companies doing work in The Philippines didn’t realize he was actually talking about them.
Three months later, his Sugar Regulatory Administration (SRA) issued an order that would limit competitive imports, protecting the country’s sugar industry and raising prices on all sweetened products sold domestically.
As a result, for domestically-manufactured beverages requiring high-fructose corn syrup (HFCS), a sugar substitute, Filipinos will now pay some of the highest prices in the world, according to published reports.
The Senate of the Philippines is already considering a Duterte-supported tax on beverages, including everything from soda to instant coffee and tea. All told, beverage prices in the Philippines are expected to rise by 30-150 percent.
The move was cheered by some academics and and journalists who want Duterte to enact policy that favors homegrown industry, no matter what the economic consequences.
“To some extent, it might be true that when domestic consumers buy goods from foreign producers, domestic producers suffer,” acknowledged Percival K. Peña-Reyes and Justin Jerome G. Valle of Ateneo de Manila University’s Economics Department, who have called for “fair trade” that protects Filipino businesses against “dominating foreign firms.”
Business Mirror columnist Rene Ofreneo said President Donald Trump’s stated “America First” policy served as justification for a “Filipino First” one, suggesting that “the American economic and political elite.. sees that the global free trade system no longer serves American interests.”
“Filipino cause-oriented organizations.. have been advocating economic nationalism to free the country from foreign economic stranglehold (and to) wipe out mass poverty,” he wrote. “This is not a new idea.”
Ofreneo called it a “tragedy” that “Filipino First has never been enshrined as a national policy.”
Business World columnist Jemy Gatdula believes they are responsible for The Philippines’ large trade deficit.
“The fact is, there is a huge imbalance in international trade and most of the big players are causing it,” he wrote. “If the Philippines is wise, it will prioritize developing a Filipino-centric trade policy.”
Costs of a trade war—or more
If Duterte continues on his current path, limits on imports will mean Filipino consumers will pay higher prices for ordinary goods, which would be supplied by less-efficient domestic industries.
For middle class Filipinos, however, higher prices for soda pop and bread might prove the least of their worries.
Any retrenchment by outsourcing companies like Chicago-based giant Accenture, which has employed thousands of white collar workers in Manila for its back office consulting operations for more than 25 years, would come at a much larger cost: their jobs.
An estimated one million Filipinos work in the Business Process Outsourcing (BPO) industry, which has rapidly expanded over the past three decades thanks to both the country’s skilled workforce, grasp of English and its respect for rule of law and contract rights.
BPO revenues account for some ten percent of the Philippines’ gross domestic product and are responsible for the rapid growth of its economy.
In his campaign, Duterte promised to crack down on BPO firms hiring contractors and force them to hire only employees with benefits. This would raise human resource costs in the country by 30-40 percent, making The Philippines a less competitive destination for foreign investment and expansion.
The Philippines Department of Labor and Employment is hiring 2,000 more inspectors to ensure “establishments regularize their employees.”
There have been calls for going even further—including passing legislation that would help Filipinos unionize as well as regulate Filipino information workers, “(protecting) online freelancers… from unscrupulous customers and clients” found on websites like Upwork.