By means of Kyle Aristophere T. Atienza, Reporter
THE PHILIPPINES need that stimulate domestic demand to protect the economy against a possible setback to multilateralism, which will probably happen when Donald J. Trump will return to power in the United States, according to economists.
“It is not just the Philippines that will be adversely affected if the US turns away from multilateralism, something that is certain under the Trump presidency,” Diwa C. Guinigundo, country analyst for the Philippines at GlobalSource Partners, said in an e-mail mail.
The United States’ trading partners “will suffer the consequences of a fundamentally closed trading system – higher tariffsFfs will effectively reduce US imports and growth, while its trading partners will experience compressed markets, lower trade profits and lower economic growth,” he said.
Mr. Trump, the Republican candidate, faces Democratic rival and Vice President Kamala Harris in the Nov. 5 presidential election.
If he wins, Mr. Trump has said he will impose a 10% tariffFf on imports from all countries and 60% tariFf on imports from China.
Philippine Finance Secretary Ralph G. Recto said last week that a potential Trump presidency poses risks to global growth as increased protectionism could weaken global trade.
“We are concerned that there will be a setback for multilateralism, especially in the area of trade. We know that the driving force behind global growth is more trade. So that is a concern,” Mr Recto said curtlyFmeeting of the Governing Council of the Intergovernmental Group of Twenty-Four (G24) in Washington, DC on October 22.
Mr Recto said the Philippines is counting on its relationship with the US to encourage companies to do moreffto the Philippines.
“If the U.S. takes a more protectionist stance, the Philippines, as a net exporter with a $2.3 billion trade surplus in goods trade with the U.S. in 2023, could be negatively affected,” said George N. Manzano, who teaches trade at the university. of Asia and the Pacific, said in an email.
“A total rateFA US increase would have a negative impact on Philippine exports.”
But Mr. Manzano said it is an advantage for the Philippines that electronic products account for a large share of exports to the U.S., thanks in large part to a 1990s World Trade Organization (WTO) agreement that eliminated all tariffs on many information technology products were abolished. products.
“About 67% of the Philippines’ merchandise trade with the US in 2023 was in the electronics sector, which currently benefits from duty-free access, likely due to the Information Technology Agreement (ITA) under the WTO,” he said.
According to the statistics bureau, electronic products accounted for 52.9% of the country’s total exports in August, with a total profit of $3.57 billion.
The United States was the top destination for Philippine goods in August with an export value of $1.22 billion, accounting for 18.1% of the total. This was followed by Hong Kong ($942.56 million), Japan ($935.33 million), People’s Republic of China ($849.38 million) and Republic of Korea ($332.64 million).
IMPACT ON BPO SECTOR
“The Philippines probably could be more affected in business process outsourcing (BPO), given our comparative advantage in this sector compared to other Southeast Asian countries,” said Mr Guinigundo, a former central bank deputy governor.
The IT and Business Process Association of the Philippines (IBBAP) aims to generate $38 billion in revenue this year and expand its workforce to 1.82 million. The group aims to generate as much as $59 billion and employ 2.5 million people by 2028.
However, the IT-BPM sector is under pressure due to talent and skills shortages, rising business costs and increased global competition.
Fitch Solutions’ BMI unit said earlier this month that the Philippine BPO sector is at a disadvantage amid the growing shift towards artsFcial intelligence agencies, pointing to a possible relocation of call centers to “even developed economies cost eFfective.”
“This is not a win-win situation. Everyone would ultimately lose,” Mr. Guinigundo said, “China’s retaliatory response could even worsen this scenario.”
Trump’s recent policy comments, including his famous America First policy and emphasis on burden sharing, have raised concerns that Washington could adopt an inward-looking and isolationist approach.
During his presidency, Mr. Trump withdrew from several global institutions, including the Paris Climate Agreement and the Trans-PacFic partnership.
On the economic front, Mr. Trump has cited the need to raise tariffsFfs for the US to usher in an era of ‘manufacturing renaissance’.
On the other hand, Ms. Harris, the Democratic nominee, has vowed to “strengthen, not relinquish” America’s “global leadership.”
“The President of the United States should not look at the world through the narrow lens of ideology, narrow-minded partisanship, or as a tool for their own ambitions,” reads a recent X post by Ms. Harris, who is expected to the Biden will uphold. The administration’s strategy to strengthen a network of U.S. allies and partners to meet shared challenges.
Mr. Marcos has pursued closer ties with the United States amid China’s intrusions into Philippine waters, giving the country access to four more military bases under the 2014 Enhanced Defense Cooperation Agreement.
US-Philippine economic ties have also reached new highs, with a business delegation led by US Commerce Secretary Gina Raimondo pledging in March to help the Philippines set up a wafer manufacturing plant and double the number of semiconductor factories .
Weeks later, the US announced a plan to set up an economic corridor on the main island of Luzon, following a trilateral meeting between Mr Marcos, Mr Biden and Japanese Prime Minister Fumio Kishida.
The project, a “key achievement” under the Partnership for Global Infrastructure and Investment component of the US-led Indo-Pacific Economic Framework, will be pursued by Washington with the help of Japan.
Mr Manzano said the US would likely be forced to strengthen ties with Asia-PaciFic countries “to keep pace with the increasingFluency of China in the Southeast Asian region.”
“The US will continue to deepen its relationship with the Philippines. President Marcos is inclined to do more business with the US than with China given the developments in the West Philippine Sea,” he said.
According to a July report from Moody’s Analytics, the Asia-Pacific region is at risk of an abrupt shift in US trade policy in the event of a Republican victory in the US presidential election.
But the country expects “minimal retaliation” from the Philippines at potentially higher US tariffs, given its strong defense ties with Washington.
Of Asia-Pacific economies, Moody’s says only China is likely to retaliate, given continued trade with the US since 2018, when Trump imposed investment controls and tariffs on hundreds of billions of dollars of Chinese products, mainly over alleged unfair trade. practices of Beijing.
Mr. Guinigundo said that given trade risks, the Philippines should prioritize boosting domestic demand and strengthening trade with the ASEAN+3, which also includes Japan, China and South Korea.
“Two things that may not be quite rightFto cushion potential trade shocks: one is to promote domestic demand, and two is to further boost our trade in both goods and services with our ASEAN+3 partners.”
Mr Guinigundo said promoting domestic demand is anchored in a lower economyFand higher economic growth, driven by personal consumption and investment.
“The latest forecast is quite positive as price movements are starting to subside, while GDP (gross domestic product) growth may be just as targeted – between 6% and 7%,” he said.
He noted that the Philippines has improved trade relations with its neighbors.
“Expanding the liberalized list and reducing rates can help in this direction,” he added. “Additionally, higher financial ties within ASEAN+3 could further boost regional trade.”
Should there be a shift in U.S. trade and foreign policy, Guinigundo said Manila must continue to improve its investment climate “to ensure that private U.S. companies continue to increase their stake here.”
“Trump’s public policies could only restrict international trade to a certain extent. “If the Philippines can convince American businessmen and investors that the Philippines is good for business in the long run, they will and they will come,” he said.
“Let us continue to ensure that there is good governance here, that corruption is under control, that there is the rule of law, that property rights are respected and that it is easy to do business,” he added.
Meanwhile, Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said the Philippines is unlikely to suffer much from a potential protectionist trade policy in the US because the Southeast Asian countries nation has not benefited significantlynot separate from free trade.
“Trade works well when institutions are also reformed to encourage competition and greater e-commercefficiness. None of this has happened, resulting in a moribund manufacturing sector,” he said in an email.
“Industries and elite power continued to rob the economy of its energy and power. Whether Trump wins or not, the overseas Filipino workers will remain our saving grace.”