US-China Trade War Has a Silver Lining
The United States-China tit-for-tat trade tariffs has been dominating the international business news for over a year now. The trade spat has spooked global financial markets. It has led some traders and investors to believe that the row between the world’s two biggest economies will eventually cause a global economic slowdown.
The trade spat may somehow put a dent on global economic growth, but maybe not so much on Asia. From a recent road show that I joined in key financial centers in Asia, I noticed that Asian investors have remained bullish on the growth prospects of the region despite the US-China trade war.
Fund managers, for instance, are focused on Asia, especially Southeast Asia, and the respective economic growth stories of individual countries in the region. They remain upbeat on the growth prospects of Southeast Asia.
The positive attitude of Asian fund managers reinforces my belief, that the current US-China trade spat presents more opportunities than problems for the Philippines, which we should take advantage of. We must remember that the protagonists in the trade war are the US and China. Both of these super economies have no trade issues with the Philippines.
The Philippines, meanwhile, can actually gain from the trade tussle. Shipments of the US producers to China and those of China to the US will likely decrease due to higher import tariffs from both trading partners. This situation will benefit the Philippine export sector.
Philippine companies can fill in the gap left by Chinese exporters to the US. The US import tariff on certain Chinese goods will result in costlier shipments for the world’s second-largest economy and make Philippine-made products cheaper and competitive in America. Philippine exports to China, at the same time, can become competitive against similar US shipments because of the protective tariffs imposed against American products.
With our competitive exchange rate and reduced borrowing costs through the rate cut initiatives of the Bangko Sentral ng Pilipinas, Philippine-made products can make inroads into either the Chinese or American markets.
We must adapt to this changing world trade environment and assist our entrepreneurs in penetrating both the US and Chinese markets. I am sure China will start focusing toward East Asia, including the Philippines, for its displaced export products. The Philippines, for its part, can work out a bigger free-trade arrangement with China to benefit the two nations and build on the gains achieved by President Duterte in fostering relations with the Asian powerhouse economy.
With the gross domestic product growth likely returning to the normal level of 6 percent next year and the ongoing US-China trade war, the Philippines can now focus on making our manufacturing sector more competitive. We should be alert on the trade opportunities being opened to us by the US-China tiff. Both US and Chinese investors could be looking toward the Philippines to establish operations here in order to skirt the respective protective tariffs imposed against them. Philippine tourism, too, will benefit from the entry of these new investors.
Our economic managers are aware of the possible adverse impact of the trade war on the Philippine economy. But they also recognize the economic opportunities coming from the trade spat.
Trade Secretary Ramon M. Lopez agrees that the trade war is “an opportunity for the Philippines to attract more export-oriented manufacturing foreign direct investments,” while conceding that “it is necessary to address key constraints in attracting investors to the country.”
Lopez cited short-term strategies to lure foreign investors, like eliminating investor uncertainty over the Corporate Income Tax and Incentives Rationalization Act, and supporting amendments to the Foreign Investment Act, Public Service Act, and Retail Trade Liberalization Act to further liberalize the market.
For Finance Secretary Carlos Dominguez III, game-changing reforms and sound fiscal policies will keep the Philippines among the ranks of the world’s best-performing economies in the years ahead.
Dominguez is optimistic that the growth momentum will be sustained beyond the medium term by making the Philippine market more competitive and the economy more inclusive.
Despite the US-China trade war and other headwinds, he says, the Philippine economy will still be among the fastest-growing in the world.