How China trade ‘sanctions’ could hit PH

The Philippines stands to lose its 3rd biggest economic partner if China uses its economic might in the Scarborough Shoal conflict

TRADE SANCTIONS? How will China's moves against Philippine products, like local bananas, affect the country's trade? File photo by AFP

MANILA, Philippines – In moves seen as sanctions amid the Scarborough Shoal standoff, China has advised its citizens not to travel to the Philippines, and also blocked the entry of Philippine bananas supposedly due to crop diseases.

While China has not officially labeled them as Scarborough-related trade sanctions, officials have raised concerns about their possible impact on the Philippine economy. 

The Philippines’ newly appointed socioeconomic planning secretary, Arsenio Balisacan, said the ban on Philippine fruits will likely have “modest effects” on exports.

It’s the same with regards to the travel advisory. “It’s not something that will cripple our tourism industry at this point,” he noted.

But he said “it doesn’t mean we don’t have to pay attention to it.”

What’s at stake

China, the second-largest economy in the world, is the Philippines’ third biggest trading partner.

If it uses its full economic might against the Philippines due to the territorial dispute, it could shave off millions of dollars from the latter’s export earnings, one of the major drivers of local economic growth.

ONGOING TENSION. Has the month-long standoff over Scarborough Shoal (in this photo) affected Philippine-China trade?

Based on the March 2012 data from the National Statistics Office (NSO), China accounts for 14.9% of the Philippines’ total exports, with shipments amounting to $642.07 million.

NSO, however, separates China’s shipments from Hong Kong’s. If exports to Hong Kong are combined with China, China would trump the United States as the top recipient of Philippine exports.

Hong Kong accounts for 9.1% of the Philippines’ total exports, based on March 2012 data. Together with China, the two will comprise 24% of Philippine exports – higher than the United States’ 15.5% share.

In terms of imports, China is also the third biggest source of Philippine raw materials, accounting for 8.9% of the country’s total import bill as of February 2012.

The following 2011 statistics provide a snapshot of the Philippines’ economic relationship with China:

Exports 

  • Biggest export: electronics (55.62% of exports to China)

  • Second biggest export: minerals (15.24% of exports to China)

  • Banana exports: $75,259,631 (1.23% of exports to China)

Imports

  • Biggest import: electronics (21.99% of imports to China)

  • Second biggest import: chemicals (11.62% of imports to China)

Not one-way

An economist, who is former National Economic and Development Authority (NEDA) director-general, however, sees the situation not as a “one-way loss.”

ECONOMIC IMPACT. If the Scarborough Shoal standoff spills over to trade, an economist says the loss is not one-way.

“If China completely stops importing our electronic semiconductors and circuit boards; our nickel and copper ore; our bananas, pineapples and mangoes; our furniture and other products—then it would have the problem of sourcing these from somewhere else, and many of these cannot be readily bought from our neighbors or elsewhere,” said economist Cielito Habito in his Philippine Daily Inquirer column.

“As many of these are vital raw materials, its industries would have to slow down somewhat,” Habito added.

If China cuts its exports to the Philippines, domestic producers and workers will benefit, he also said.

The possible layoffs of overseas Filipino workers (OFWs) in China, meanwhile, will pose a “major short-term problem.” The economist, however, said the characteristic Filipino resilience and the high demand for OFWs should help laid off workers eventually find employment.

What about the possibility of China banning tourists from the Philippines? Habito said this could also benefit domestic tourism.

“Could economic sanctions from China choke us? Not really. A dog bite need not be fatal,” he wrote.

Diversify markets

Nonetheless, Balisacan said the Philippines must be ready for any trade sanctions. More than anything, he said these point to the need “to intensify our efforts to diversify trade with other countries.”

Speaking to reporters Thursday, May 17, Balisacan, who was appointed NEDA director-general this month, echoed President Benigno Aquino’s statement that the Philippines needs to seek new markets for its bananas amid its conflict with China.

He said this will make the Philippines less vulnerable to shocks.

“There is an urgent need for various sectors — tourism, agriculture industries — to really diversify markets sources of inputs to make themselves less vulnerable to shocks.”

He said the diversification should not just be a government effort, but a close coordination between government and the private sector. “They are the ones making the investment,” he said. – Rappler.com, with reports from Leandro Inumerable

 

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