CAFTA YEAR 1 REVIEW: FILIPINO PERSPECTIVE Amado M. Mendoza, Jr.

Javad Heydarian

University of the Philippines

Elements of presentation

• Overview of PH-PRC relations• Trade and investment relations from both sides’ perspective

• PH-PRC relations—year 1 of Aquino presidency• PH-PRC in context of 2 triangular relationships

• US-PH-PRC• PRC-PH-Taiwan

• Back to CAFTA: some conclusions and insights

Overview of PH-PRC relations• 1975—start of diplomatic relations• Roller-coaster relationship

• Marcos: very warm• Corazon Aquino: lukewarm to cold• Ramos: re-heating• Estrada: too short to merit an adjective• GMA: warmer relative to Marcos period• Noynoy Aquino: ?!

Trade and investment relations• Trade is in favor of the Philippines

• Surplus position up to 2007• Slump and deficit in the 2008-2009 period• Recovery and surplus in 2010

• Vigorous movement of investments between the two states• Fil-Chinese investments in China: real estate, commerce and other

services• Chinese investments in PH: utilities, transport, mining

PH-PRC trade: FOB value in US billion dollars, PH figuresYear Total Trade Exports Imports

2004 5.31 2.65 2.66

2005 6.99 4.01 2.98

2006 8.28 4.63 3.65

2007 9.75 5.75 4.00

2008 9.71 5.47 4.24

Current PH-PRC relations: Year 1 of Noynoy Aquino• August 2010 bus hostage fiasco• Appeasement ?

• Boycott of Nobel Price awarding ceremony• Deportation of Taiwanese drug traffickers to China• Groveling to stay execution of 3 Filipino drug mules

US-PH-PRC triangle• US: IN-out-in-out-in of the Philippines

Mutual Defense Treaty & Military Bases Agreement

Mischief Reef incident

VFA

Angelo de la Cruz incident

• PRC: Charm offensive; followed by semi-hardball position as PH tilts to the US

• PH: tilt to PRC; followed by tilt back to US; “accommodation with hedging” (Baviera 2011)

PRC-PH-Taiwan triangle• PRC-Taiwan: ECFA signed; consolidates NEA economic

region

• Singapore-Taiwan FTA: reactive; wants piece of the action

• PH-Taiwan: tailing Singapore; announced readiness to sign PH-Taiwan FTA to link up with ECFA

ADB (2010) study on East Asia FTAs• Survey of 841 East Asian firms re FTA usage• 28% of EA firms used FTAs

• 25% of firms in Thailand• 20% of firms in the Philippines

• Impediments to FTA usage (PH)• Lack of sufficient info/knowledge (70%)• ROOs and administrative considerations (30%)

Back to CAFTA• Recovery of PH-PRC trade• Strong investment relations• Low FTA usage in RP: lower than EA average• Knowledge impediments to FTA usage• Recovery in 2010 cannot be attributed to CAFTA alone

Discrepancy in trade figures• China’s exports to the Philippines should = Philippine

imports from China

• China customs’ figures for exports to the Philippines are always greater than Philippine figures for import from China

• Discrepancy averages USD 1.0-1.6 billion annually

• Double-counting? Smuggling?

PH-PRC economic relations > CAFTA

• Other important issues below the radar• Smuggling/dumping of cheap, mixed-quality Chinese products

(also true in other SEA states esp. in mainland SEA)

• Relations ‘greased’ by corruption?

• Discrepancy between PH and PRC trade figures (overstatement?; double-counting? Measure of smuggling? I don’t know!)