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Expanded EDCA will have severe economic backlash

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With friends like this… Marcos with Xi on Jan. 6 2023, and with US Defense Secretary Austin 27 days later.

PRESIDENT Ferdinand Marcos Jr.’s stunning announcement last week that four more of our military camps may be used by the US armed forces in case of and a US war with China — this time directed to defend Taiwan from a Chinese invasion — endangers both our national security and our economy.

I discussed last Monday the rather obvious risk that the new agreement puts us in the Chinese line of fire in case of a war with the US. No other Southeast Asian country or territory has such US or any foreign military bases.

Congress in 1991 expressed the national consensus that Filipinos don’t want foreign arms and troops on our soil. The late President Benigno Aquino 3rd disregarded this consensus and agreed to allow the US to transform five military camps into theirs under the so-called 2014 Enhanced Defense Cooperation Agreement (EDCA). President Duterte in practice shelved it. Marcos has not only revived it, he has expanded it.

The agreement’s name is a misnomer. It enhances only the US military presence in a region it has no business being in. It endangers our national security and economy.

What is worrying is that with its rise starting in the late 1980s, China has demonstrated that it will use its newfound economic power to pursue its geopolitical interests, just as any other nation has done.

In response to the stand-off in 2012 at Scarborough Shoal between the ships of the two countries, China blocked the entry into its markets of Philippine fruits, mainly bananas and pineapples, using as a pretext that pests were ostensibly found in a sample of the shipments. The fruits rotted in China’s piers supposedly waiting for inspections that never came, resulting in hundreds of millions of pesos in losses for our fruit growers.


In 2017, South Korea agreed to the deployment by the US of an anti-missile system in a golf course near Seoul, which the Korean conglomerate Lotte had owned, instead of being located in one of the main US military bases in the country. While intended to defend the city from missiles from North Korea, China feared it could be used to monitor whatever missiles it is testing in its territory.

China couldn’t put pressure on South Korea through trade, as the latter accounts for about a fourth of its exports and imports: both countries would suffer. Instead, it harassed Lotte, the owner of the golf course, into stopping the missiles’ deployment. It shut down 74 of Lotte’s 99 convenience stores in China, on flimsy reasons that inspections had shown them to be fire hazards, resulting in over $1 billion in losses for one of South Korea’s biggest conglomerates. The Chinese also stirred up nationalist fervor against Korea, resulting in the steep reduction of sales in China of Korean companies like Lotte’s Shanghai Foods, Hyundai, LG and cosmetics manufacturer Amorepacific. The campaign against Lotte ended only in 2018, and the missile system wasn’t deployed at Lotte’s golf course but in several of the US military bases in South Korea.

While one adage by US policy wonks is that the only predictable thing about Chinese leaders is their unpredictability, China may just follow their Korean precedent in the case of the Philippines, which would hurt our biggest taipans.

Our biggest conglomerate the SM Group has seven malls in China. Jollibee has over 100 through its Tim Ho Wan, Yonghe King and Hong Zhuang Yuan brands. Carlos Chan’s Liwayway Marketing Corp. has 15 factories in China making the Oishi noodles, reportedly the most popular instant-noodle snack in that country; Andrew Tan’s Megaworld completed its first high-rise condominium in 2020 in Nanyang; the Gokongweis have four Robinsons Galleria malls in different Chinese cities.


But harassing these Philippine companies in retaliation against the expanded EDCA may not even be necessary. While South Korea is the biggest trading partner of China, accounting for a fourth of its exports and imports, the Philippines is a tiny one, accounting for only 2 percent of the superpower’s total trade. China though is now the Philippines’ largest trading partner, accounting for 21 percent of our total exports and imports.

That means the Chinese would probably not even notice if China’s trade with the Philippines stopped. For Filipinos, though, it would be devastating at all levels. Go to any grocery or department store and one would find most items made in China, rather than in Japan or the US. The masses depend on cheap Chinese products for much of their needs. Recently, if not for the onions quickly imported from China, we probably would have had the first Onion Revolution in the world. China for instance accounts for the Philippines’ biggest supplier of cellphones and telecom equipment.

As important as reduced trade with China is the fact that a drastic deterioration in Philippine-China relations would be a disincentive to foreign investments. This comes at the worst time as US and European companies have started to move out of China, not just because of rising wages for the white-collar workers but because of perceptions that its on-and-off tiffs with the US have become risky for such companies as Apple and other hi-tech manufacturers.

While China-haters such as Yellow columnists claim China’s$23 billion investment pledge to the Philippines made during Marcos visit to that country in January won’t materialize, it did add to the country’s image as poised to build better infrastructure even if funded by foreign countries. How would the country look like to the world if China formally announced it is aborting all its official aid to us?


Do you think the Philippines will be an attractive investment site, after it announced that there will be more military camps that the US can use in the country in a war with China, something no other country in Southeast Asia has done? The Vietnamese leadership most likely called for a celebration in Ho Chi Minh City the day Marcos and the US defense secretary announced that EDCA would be expanded to include four more Philippine camps.

Did government have to risk such scenarios, when we were doing perfectly well, with President Duterte’s decision not to officially abort EDCA nor the Visiting Forces Agreement as he initially intended, but still having it “there”?

If the US needed an expanded EDCA so much, couldn’t our government try at least to wangle concessions from them, like at least a $1billion annual rent for the camps. Or $500 million from their “front” financial institutions (like the World Bank) to fund Marcos’ pet project, the Maharlika Investment Fund.

The timing for the announcement of an expanded EDCA couldn’t have been worse. Marcos had a three-day state visit January 4 to 6 in Beijing during which he had talks with Chinese President Xi Jinping. Marcos pledged to strengthen the Philippines’ diplomatic relations with the superpower. Twenty-seven days later he meets with US Defense Secretary Austin to give the Americans another tool to encircle China in Southeast Asia. “No doubt Xi lost face,” an Asian diplomat said. “And that’s very, very bad, to piss off China’s most revered leader since Deng Xiaoping,” he added.

(To be continued on Friday, February 10)

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This Post Has One Comment

  1. Dorina Rojas

    Ridiculous but even more dangerous for the Philippines, and here we are, with most of our mediamen expressing all-out support and onesidedness with the US. I find China’s attitude on the West Philippine Sea not acceptable but having nine US military camps with undisclosed terms in our country gives me nightmares.

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