• Manila must balance trade with sovereignty

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    MANILA TIMES FORUM: In its dealings with China, the Philippines will have to cautiously strike a balance between asserting its sovereign claim over parts of the West Philippine Sea and keeping Chinese investments, according to Stratfor analyst Rodger Baker.

    Picking a fight with China over maritime issues will certainly have huge economic consequences on the Philippines, said Baker, vice president for East Asia and Pacific of the US think tank Stratfor Global Intelligence.

    “I think some of the impacts are unavoidable. It’s a huge disproportionate impact if the Philippines is trying to take economic action against China, and the Chinese will barely notice that,” he said in an interview with The Manila Times. “One percent or two percent of change in Chinese consumption of, say, copper can strike a mine dead in a country. The problem is that China is a huge importer and from the Chinese perspective, it’s Philippine imports are a tiny percent [but]from the Philippine perspective, it’s a big percent.”

    China has been the Philippines’ third largest trading partner since 2006, moving up from ninth place in 2002, and the fastest growing market for Philippine exports.

    The balance of trade between the two countries has been heavily in favor of China over the years. In 2013, total bilateral trade stood at $16.39 billion. China’s investments abroad totaled $90 billion last year, but only less than 2 percent of that went to the Philippines.

    Philippine investments in China in 2012 were recorded at $130 million, but Chinese investments in the Philippines stood at $65.45 million, according to government figures.

    Based on a five-year program for trade and economic cooperation signed in 2011 between President Benigno Aquino 3rd and Chinese President Hu Jintao, the two countries set a $60 billion target on two-way trade by 2016.

    Baker said the Philippines cannot shelve or put on hold its territorial claims over parts of the West Philippine Sea (South China Sea) in view of the deadlines set by the United Nations for the filing of claims before the UN Convention on the Law of the Sea with the view of seeking feasible solutions to the decades-old maritime disputes among claimant countries, including Vietnam, Malaysia, Brunei and Taiwan.

    “The challenge with shelving the maritime dispute is that it simply accepts China as the authority over that territory,” he said.

    “Can any Philippine president accept going down in history as the president who gave up a chunk of Philippine territory?” he asked.

    “There’s a political pressure that seriously constrains the options that they have.”

    Baker said it would sound easy to set aside the territorial problem and keep talking about investment opportunities, and reassert the country’s claims later on, just like what previous administrations had done. But with the UN deadline for the filing of claims with the UNCLOS, all claimants had to lay their claims over the disputed territories, forcing China to strengthen its presence in those areas.

    “They’re [referring to the Chinese]making these things and they’re doing these as a way to politically assert their stake, but the reality is that it doesn’t increase their strategic capability and, in some ways, it may actually reduce its strategic capability because it will force them, if there were a real conflict confrontation, to extend the resources to try to preserve that space or to expend political capital by giving up that space,” he explained.

    He said the Philippine government should create multiple export markets so that it will not be overly dependent on China.

    “The other thing is to look at the things that China is trying to focus on, that China wants to expand. So China is very interested these days in overseas real estate and real estate development. Chinese companies are looking for places to park money for the long term. They’re looking for places where to put their money,” Baker emphasized.

    “The ability to build relations with smaller companies rather than the big state companies provides more balance as to what to do. Obviously mining and minerals, agriculture are big places for big Chinese companies trying to put their money,” he noted.

    According to Baker, China is looking at Philippine businesses supplying labor, materials, equipment, among others, to Chinese investments in the country rather than having more Philippine investments in China.

    “Now that depends on the Philippine government to open this willingness, open regulatory environments on how they perceive Chinese investments. There is in what we see in many places now sort of resource nationalism, economic nationalism that’s starting to push back increased Chinese investments in the country,” he said.

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