Philippines vs China: Who would win the trade wars?

Philippine President Rodrigo DutertePhoto: Philippine President Rodrigo Duterte

By Claire Heffron

A month after The Hague tribunal ruled in favour of the Philippines on in its territorial dispute with China, many Chinese want to hit Manila where it hurts; the economy.

Activists and netizens on both sides are calling for a boycott on the other’s products. The latest data shows China-Philippines bilateral trade from 2009 to 2015 is generally growing in spite of China’s own economic slowdown. Between the two countries the Philippines would be more affected by a Chinese boycott than vice versa. The Chinese economic influence on the Philippines is much larger. 

Mango boycott?

The most common suggestion on the microblogging platform Weibo, is a,”mango boycott,” with users discouraging people from buying Philippine products. America also comes under fire, with many Chinese arguing U.S products and brands (including iPhones) should also be symbolically avoided because they supported Manila’s claim.  However, according to analysts, Mangoes only account for 0.11% of the total of Philippine exports and of that, only 7% are exported to China. 

At the same time, anti-American demonstrators have stormed KFC restaurants in Chinese cities. Protesters are reported to be holding banners and chanting, “Get out of China, KFC and McDonalds” and, “What you eat is American KFC; what is lost is the face of our ancestors”.

However, China’s vice minister of commerce Gao Yan recently said that trade relations with Manila were developing smoothly. When asked if China would take retaliatory trade measures against the Philippines because of the ruling he replied, “I should say that though some netizens have called for boycotts on products from the Philippines, in fact this situation has not occurred.”

Tim Condon, ING Bank chief economist in Asia said boycotts will negatively impact the growth of the Philippines economy considering China is the country’s third-largest exports destination. Condon explained, “an official boycott that reduced exports to zero would be a significant negative growth shock. Obviously there would be offsets: imports would shrink for example. But closure of the China market would be bad.”

Moves from Manila

Last week, straight talking president Duterte said he will ban weapons made in China from the Philippines armed forces.  In a speech at the AFP Medical Centre he claimed that Beijing may have purposefully tried to disrupt the country’s military when it delivered defective 27,000 high-powered assault rifles as part of a recent deal to upgrade military capacity.

However, not everyone agrees this is a good move. One senior police supervisor explained, “we are currently reliant on Chinese manufacturing and its labour. We are in a tense situation and our treaties and agreements with the Philippines is a mutual defence and the action is not yet considered an act of war against the Philippines. “

In the bigger picture many believe the Philippines cannot afford to cut off trade with China, and they are too small to use force. Meanwhile,  America and the European Union won’t be stepping in to assist a boycott of  Chinese goods as too many of their companies depend on trade with China to keep their economy strong. This means the Philippines will get a lot of moral support, but nothing that will help them in reality.

Analysts at Natixis Economic Research say the Philippines is the least exposed to China’s softening growth despite threats of a boycott of local products. Their report explains, “the conclusion is rather simple: when China sneezes, the rest of Asia will catch a cold but the degree of contagion will be very different. The Philippines and India are most immune to both impact of geopolitical tension as well as mercantilist economic policy by China.”