A Philippine delegation is reportedly traveling to Washington today to negotiate something in the wake of United States (US) Pres. Donald Trump’s “Liberation Day” hyper-tariffs. Trade Secretary Ma. Cristina A. Roque said that officials will try to bring the US tariff rate on goods from the Philippines down to zero. Maybe their objective should be a little more self-respecting – negotiating a deal that upholds Philippine economic development.
With more than a little characteristic bluster, Pres. Trump claims having already struck “200 trade deals” although without naming any particular country. The Philippines will likely be on any such list because it seems that Sec. Roque and Special Assistant to the President for Investment and Economic Affairs Frederick D. Go, among the officials flying to negotiate with the US Trade Representative (USTR), are willing to give, give, give.
Misguided
It’s unfortunate that our economic managers remain fixated on the misguided notion that lower tariffs are somehow a badge of honor or a mark of economic success. This mistaken belief assumes that Filipino producers somehow have the domestic agricultural and industrial capacity not just to withstand an influx of cheap imports but also to compete in foreign markets. Yet while Philippine tariffs have plunged from a nominal average of 41.4% in 1980 to just 6% today, manufacturing has fallen to its smallest share of GDP in 75 years, and agriculture to its smallest in our history.
Which makes the negotiating stance of the PH delegation to Washington all the more perverse. Free trade rules have long been biased for the industrialized countries and the direction of reform should be to allow for special and differential treatment for underdeveloped countries.
Yet, if anything, Pres. Trump’s unilateral hyper-tariffs overturned decades of already developed country-biased multilateral free trade rules, seeking instead to replace them with a US power-driven regime. The Philippines, rather than asserting our rights even under existing trade deals, is rushing to make itself even more vulnerable by offering lower tariffs on imports from the US.
The asymmetry is staggering. While the US is raising its tariffs to protect its industries, the Philippines still clings to the fairy tale of “free trade” with its former colonizer – the Trump administration is protecting its economy while the Marcos Jr administration sacrifices ours.
It is baffling how the Philippine government can so badly misread the US’s unambiguous “America First” statements and actions as signaling an interest in Philippine development. The Marcos Jr administration has become so deeply conditioned that it believes that our development depends on giving concessions in the face of bullying.
Defeatist
It is also disappointing that the Philippine government still cannot see the importance of a holistic and domestically-oriented approach to economic development. The Trump administration is clearly protecting and supporting American and other manufacturers based in the US and it is bizarre that the Marcos Jr administration is going in the opposite direction to dismantle our defenses even further. This is a development strategy that embraces destruction from without and complements this with hollowing-out from within.
Lowering tariffs even further after half a century of premature liberalization has already crippled Philippine agriculture and industry. Negotiating more of the same just doubles down on our underdevelopment.
The starting point of the Philippine position should be that we will protect and support our domestic production base and undertake a national industrialization program, exactly as the US is doing. We should demand fair, not unequal, trade and recognize that comprehensive policies are needed beyond mere tariff adjustments.
It’s not even clear if the Philippine government realizes that offering the US lower tariffs could trigger similar demands from other countries where the cumulative result of further tariff reductions is increased competition from imported goods harming local farmers and fledgling manufacturers unable to compete on equal footing.
The Philippines cannot assume a position of weakness from the beginning. Our negotiations with the US will benefit from telling the US that we are not dependent on it and can pursue regional trading and even financial alternatives, and from reminding the US that the Philippines is a key element for moderating the rising influence of China in the region. Our posture of dependency on the US is extremely self-defeating.
The government’s direction of lowering our tariffs further – aside from likely offering the US other concessions – is counterproductive and will exacerbate vulnerabilities rather than mitigate them. It is a surrender of economic sovereignty, dressed up as diplomacy to continue an imagined strong relationship with the US. This isn’t negotiation but capitulation. ###