NOW is the time for the Philippines to push the United States for more trade and investment deals. Because of intensifying competition between China and the US, American officials have been reaching out to the Philippines to deepen security cooperation. For its part, the Philippines wants to develop a minimum credible defense, and to do that, the country needs a stronger economy.
Of course, the Philippines is getting something for allowing the American military access to more local bases under the Enhanced Defense Cooperation Agreement (EDCA). The US has allocated $82 million for projects at five EDCA sites. Plus, the Philippine military is getting training from US forces, something valuable in improving the country's defense capabilities.
Improving economic relations with the US will be even more helpful to the Philippines. Like efforts to modernize security cooperation, trade and investment relations with the US that need upgrading.
On that note, Philippine trade officials have been negotiating the renewal of the General System of Preferences (GSP) with the US. Under this agreement, 70 percent of Philippine exports to the US are tariff-free. But the Philippine eligibility for that program expired in December 2020.
The delay seems related to the US preference for a broader trade arrangement with Asean or the Association of Southeast Asian Nations, a regional bloc of 10 countries that includes the Philippines. Other Asean countries, including Thailand and Vietnam, are also struggling to renew their GSP programs with the US. But to put things bluntly, no other Asean member has defense cooperation with the US like the Philippines. That should matter.
During the Duterte administration, the Department of Trade and Industry (DTI) tried to expand the US GSP program for the Philippines. The DTI wanted to have similar tariff exemptions for more agricultural goods and locally made garments.
What would be even better is to have a free trade agreement (FTA) between the Philippines and US. It might surprise many that there is no such pact between those two allies that celebrated more than 75 years of diplomatic relations.
Ironically, the US is the third-largest trading partner of the Philippines, after China and Japan. Bilateral trade is about $19.64 billion, which is slightly in favor of the Philippines. The US is the second-largest export market of the country and its fourth-largest source1 of imports. As good as that sounds, bilateral trade relations could be even better.
Another aspect of Philippine-US ties that is already good but can also be improved is in investments. There are many major American firms already here, like ON Semiconductors, Concentrix, Procter & Gamble, Johnson & Johnson, Texas Instruments Inc., JP Morgan Chase and Google Services Philippines Inc. Still, groups like the American Chamber of Commerce in Manila reportedly want to see more US firms locate here.
Obviously, that wish depends on commercial decisions made by private companies. But the US government could do more to promote the Philippines. For instance, it could organize more trade and investment missions to the Philippines.
The Philippines, however, has to resolve many issues that repel prospective foreign investors, like high power costs. But entrepreneurs should consider viewing those shortcomings as possible investment opportunities. Besides, the Philippines has many positives that it can highlight, like how English is widely spoken here. Plus, Filipinos and Americans share many core values.
Also, the Philippines is a good base for firms looking to cater to the Asean market, which is more than 686,000. If the bloc were a country, it would be third-largest, after China and India.
Foreign firms looking for a base where they can sell goods to an even bigger market should also consider the Philippines. It is a signatory to the Regional Comprehensive Economic Partnership agreement, the largest free-trade zone in the world. Besides the Asean countries, the other members include China, Japan, South Korea, Australia and New Zealand.
Like many have said, the Philippines is open for business. It benefits the US to step in and help make this country economically capable of doing what it must to protect common interests.
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