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Are we prepared to weather economic consequences of US vassalage?

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THIS administration has decided for the country to become a US vassal, taking advantage of the American-created hysteria over an imagined Chinese aggressiveness. President Ferdinand Marcos Jr.’s economic managers should brainstorm ASAP on how our economy can weather the economic consequences of our belligerent stance against the new military and economic superpower in the world, China.

It is astonishing how our officials can say without laughing that the bases we are allowing the US military to use under the Enhanced Defense Cooperation Agreement (EDCA) are meant mainly for disaster-relief operations.

Everyone knows those in Cagayan province are obviously for quick development of American forces to Taiwan to prevent China from reclaiming its rogue province. The one on Balabac Island in Puerto Princesa, on the other hand, is quite obviously intended to be a platform for US forces to attack Mischief Reef where China has an island-fortress.

Four of the Asean countries β€” Vietnam, Malaysia, Brunei and Indonesia β€” have claims disputing those of China in the South China Sea. Vietnam even fought two battles with the Chinese over territory during which it lost more than 100 sailors and marines. None of these nations have given the Americans their platforms for war. Asean has resisted all efforts for any other power β€” including China β€” to become independent. No longer is it really independent now: one of their members β€” the Philippines β€” is now a US vassal, which will have to do the bidding of the US.

A nation’s foreign policy is logically based on careful consideration not just of security issues, but also what would be good for its economy. Much less should it be based on the pack of lies the powerful US propaganda machine which portrays China as the new Evil Empire replacing the USSR, out to grab territory.

It is probably not unexpected for our leaders β€” given the fact that they are in their 60s and 70s β€” to be stuck in that frame of mind that it is the US, which is still the unchallenged global hegemon, and that China is after all still a developing country, with its people wearing Mao suits.


With such insanity as Americans mass-shooting Americans for no reason at all (199 such carnages so far) this year and with their nation fighting wars for 225 out of the 243 years since its birth in 1776, I’m convinced the US is in steep decline as a superpower.

The ignorant do not realize that China is now the second-biggest economy in the world after the US, and even the biggest since 2014, if GDP is measured by the actual value of their currencies (i.e., using the purchasing power parity measure). Whether we like it or not, small countries have to be careful in dealing with powerful nations.

It wouldn’t have mattered at all just two decades ago. But China has grown so fast since then, its trade with the Philippines has expanded from less than 15 percent then to last year’s 30 percent of our total trade.

Following are important data our leaders should have studied well before they chose to make the country the US vassal to be used against China.


In 2021, our imports from China accounted for 23 percent of our total imports. Our exports to China, on the other hand, represented 16 percent of our total exports. For China, however, its trade with us is small: its exports to the Philippines represent 1.7 percent of their total, while imports, just 0.9 percent.

What do those figures mean? It would be disastrous for us if China were to stop or even just reduce its trade with us. Visit any supermarket, any department store, probably 50 percent of their products are imported from China. It would be the masses here who have for decades relied on cheap Chinese imports who would be hit hard. Don’t forget that China is still a command economy; one morning they can just tell private companies to boycott the Philippines, and the next day it’s done.

For Chinese consumers though, the Philippine economy can just vanish and they wouldn’t notice it, except for a small elite fond of dried mangoes perhaps and a shadowy group running online gambling here.

During the last 26 years, our imports from China have increased at an annualized rate of 16 percent, from $1.03 billion in 1995 to $48.9 billion in 2021. During the last 26 years, our exports to China have increased at an annualized rate of 17 percent, from $254 million in 1995 to $15.1 billion in 2021.

Main exports

Our main exports to China have been integrated circuits (IC), nickel ore and refined copper. But we are not even the biggest exporters of such products. China will just ramp up its IC imports from Singapore, Malaysia and Taiwan. For nickel ore, China would source it from the biggest exporter, Zimbabwe β€” which is the reason why China has drawn closer to that African country in recent years.

But “what is ours is ours,” the late President Benigno Aquino 3rd kept saying when he started our belligerent policy toward China in 2011, a frame of mind echoed by President Marcos Jr. when he said we will not give up “an inch.”

But Vietnam has been actually more militant in its stance in defending its territories in the South China Sea, building a dozen military outposts on the kind of structures used for open-sea oil drilling. Like China, Vietnam has reclaimed land to expand the dry land of its islets and reefs. It even undertakes regular military exercises to defend its islands in the Spratlys from a Chinese invasion.

In the 2017 meeting of the Asean foreign ministers, Vietnam rocked the assembly by unexpectedly asking the body to include in its communique its concern over “island building and militarization” in the South China Sea, an obvious reference to China’s building of installations on the seven reefs it controls.

Useless suit

But wisely, Vietnam did not file a useless suit in an international body against China, which only provoked the superpower to transform its reefs into artificial island-fortresses. I found it even a bit hilarious that Vietnam stood as an observer in that arbitration hearings while just keeping silent. It was the equivalent of a street-smart guy pushing and whispering to a nincompoop, “Go ahead fight that bully, I’m behind you.” Vietnam has not antagonized China as Aquino did and now Marcos.

Vietnam did enter into an agreement like the EDCA with China’s main rival, the US, which the Chinese are convinced will be used to encircle it and prevent its rise as a superpower. Vietnam did not become a US vassal, while fiercely defending what it occupies in the Spratlys.

As a consequence of its clever stance, Vietnam was in a position to take advantage of the Chinese capital’s historic moves to flow abroad on a huge scale. Chinese direct investment stock in Vietnam more than doubled from $4.7 billion in 2018 to $10.9 billion by 2021. In contrast, Chinese investments in the Philippines haven’t even reached a billion dollars, expanding from just $572 million in 2018 to $884 million in 2021.

There have even been capital outflows of US investment in the Philippines, with its stock falling from $5.5 billion in 2018 to $4.7 billion in 2021. While not being a US vassal, Vietnam β€” to which American capital went only starting in the 1980s β€” has steadily received US investments, which now stand at $2.6 billion (see table).

The torrent of Chinese capital going abroad β€” a new, historic phenomenon that has been a feature of capitalist countries swiftly developing β€” will be bypassing us because of EDCA, going instead to Vietnam and Malaysia.


“But Marcos just secured $1.3 billion in investment pledges from US firms in his recent trip,” the pro-American commentators would say. That is an old, old US propaganda trick from Corazon Aquino’s time that Americans astonishingly still like to use. This means totally nothing; if at all, it is a measure of our tycoons’ ability to get their friends to help out in portraying a president’s trip as worth millions of pesos in taxpayer’s money.

In his first trip to the US in 2010 the late president Benigno Aquino 3rd, boasted he got $1.5 billion pledges. Maybe some of that did materialize, but overall, US investment stock fell by $1.3 billion from 2010 to 2015.

But surely the US can’t let its new vassal in Asia go under? Perhaps during better times, but underestimated has been the disastrous impact of the Ukraine war on its economy and the damage done by the Covid pandemic. US government debt is now 124 percent of its nominal GDP. (We’re better off with our government debt being 60 percent of our GDP.)

Quite obviously the country’s economic managers were left out of the loop in the decision to make the Philippines a US vassal. Now they should get up from their asses and do some serious brainstorming. How about charging the US rent for the use of our bases?

They still have time; China will move only after there’s real implementation of the EDCA, as in American boots on the “designated sites,” not before. It is the height of naivetΓ© if we think China won’t retaliate in a big way.

Because of a mere lawsuit β€” the arbitration suit β€” that really yielded nothing for the Philippines, the Chinese retaliated by transforming the reefs they controlled since 1988 into island-fortresses, even if it cost them an astronomical $100 billion, by one estimate.

China will likely similarly transform Scarborough Shoal Aquino lost to it in 2012 into an island-fortress as soon as the EDCA sites become operational, on grounds that it has no choice but to counter those US military facilities in Luzon aimed against them. That could be one step closer to nuclear war between the two superpowers.

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This Post Has One Comment

  1. Dorina S. Rojas

    No, we are not prepared to weather the economic consequences of US vassalage but our officials are ready to migrate to the US when worse comes to worst. After all, when the Marcoses were allegedly kidnapped and sent to Hawaii in 1986, many joined them or at least wanted to go along. Us poor and without any resources to leave even if threatened by war will just sit and wait until doomsday. Will US or China care for us? Friend to all, enemy of none but beggar to both.

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