Duterte Money: Geoeconomics, America, and the Philippines

Michael Green

“I announce my separation from the United States, both militarily and economically” proclaimed Rodrigo Duterte in mid-October to an audience of Chinese businesspeople. “America has lost.” Having called Obama a “son of a whore” - among numerous other disparaging remarks about America and its president - Duterte has launched an ostensible rebalancing towards China. He speaks of “realigned… in your ideological flow “. This constitutes a drastic break from the policies of his predecessor, Benigno Aquino III, the pro-American foreign policy of whom was epitomised by pursuing a case against China in the Permanent Court of Appeals for UNCLOS. What does this rejection of American security cooperation mean for US policy in Asia? How should the State Department regain favour with the erstwhile linchpin of its much-vaunted ‘pivot’?

Before formulating a prognosis, it is important to note the prior advantages possessed by the US in terms of relations with the Philippines. 90% of Filipinos view the US favourably, there is a millions-strong diaspora therein, and America is its second largest trading partner. Colonial links stretch back decades. There is a longstanding security relationship, including five bases and an American program to help train Philippine forces against insurgents on the southern region of Mindanao. Indeed, the Filipino establishment is outraged by the apparently reckless behaviour of Duterte, and even dignitaries within the government explicitly downplay Duterte’s iconoclasm. In the words of Trade Minister Ramon Lopez, “the statement the President made maintains the relationship with the West”. The US-Philippines alliance is unlikely to disintegrate any time soon.

Nevertheless, overtures to China are clearly being made. This is for two reasons: firstly, Duterte’s brutal and merciless anti-drugs campaign has flagrantly contravened commitments to Human Rights and the Rule of Law, both championed by the US and ignored by China; secondly, and perhaps more importantly, Duterte feels that the economic benefits to be gained by alignment with China outweigh the geopolitical costs. The US thus faces the challenge, without abandoning its values, of convincing ordinary Filipinos that the fruits of pursuing quasi-suzerain obeisance towards China will not match the largesse of the United States.

The US already provides over $40 million per year in military aid to the Philippines, but this is not felt by average Filipinos. Given the already overwhelming military superiority of the US armed forces in the region, there is scope for replacement of some of this military aid with direct investment in development and infrastructure. Certainly, the US already provides significant non-military aid to the Philippines ($150 million in 2012), and is a massive contributor to multilateral institutions like the Asian Development Bank that attempt to achieve these aims. Even so, in order to pre-empt geostrategic realignment on the part of the Philippines, the US could transition into providing a greater amount of more visible non-military aid. Although unable to emulate the Chinese by using State-owned Enterprises to build infrastructure, the US can encourage investment through various incentives, including giving greater support to providers of FDI. This, in conjunction with augmentation of extant aid, can increase both economic ties and American soft power. Tax incentives could even play a part. With enough trade and investment, Filipinos might be convinced of the relative gains of siding with the US. Duterte may have announced separation from the United States, but American munificence could lead to rapprochement. 

In Seeking Distance from America, Duterte Plays into China's Hands

Ed Bithell

Rodrigo Duterte is no stranger to controversy. Having likened himself to Hitler and called Barack Obama a 'son of a whore', the irrepressible Philippine president has seen his relations with much of the world's media and the Philippines' greatest ally, the US, grow increasingly sour. This comes despite relying on the international community's support for his country's ongoing dispute in the South China Sea over ownership of the Spratly Islands, a case that recently went before the International Court of Arbitration in the Hague.

Duterte sailed closer to the wind again by cancelling joint military exercises with the US scheduled to take place in the South China Sea. The Balikatan exercises, meaning 'shoulder to shoulder' in Tagalog, ran for the 32nd time last year, and despite some protests from Beijing formed part of a 'strong message' that the US was determined to send in the Pacific theatre. The exercises are controversial amongst some in the Philippines, and certainly reflect enormous US influence over the Association of South East Asian Nations (ASEAN). Instead, Duterte declared that he ‘can always go to China’, seemingly threatening the US with a divorce in favour of his northern neighbour.

It is tempting to think that this could work out in his favour, leading to preferential treatment from the Chinese in appreciation for rare cooperation amongst South East Asian states - as a bloc, ASEAN opposes China’s claims to sovereignty in the region and until now, the Philippines has been no exception. However, Duterte's ditching Obama may easily lead to gains for nobody but China.

While the US does exert military power through joint exercises and hosted bases in the region, any potential hegemonic aims are fundamentally limited, both by a lack of its territorial claims and the impossibility of subjecting China or dismissing its claims completely without direct action. By contrast, the relatively precarious nature of US influence through cooperation with ASEAN means that China, which claims sovereignty over essentially the entire South China Sea, and refuses to acknowledge rival claims, could use Duterte’s essentially tactical friendship and cooperation to start a strategy of playing one nation off against another in order to weaken all their claims, aiming to turn the South China Sea from a multipolar area, with a united ASEAN balanced against China thanks to US support, into a Chinese lake. This would then further push out any chance of favour from Beijing, as China finds it no longer needs particular friends.

While Duterte appears to be able to pick and choose his friends on the international stage, the reality is that this could easily backfire. If he gets his way and US influence in the region - or at least the Philippines - declines, replaced with growing Chinese involvement in infrastructure and natural resources as well as Beijing calling the shots on territorial claims, he may soon realise that the Chinese are interested in being much closer than the Americans ever were - and more demanding too.

Image: President Duterte meeting Chinese Ambassador Zhao Jianhua. By Presidential Communications Operations Office [Public domain], via Wikimedia Commons.

Just How Special? Brexit leads to new questions on Anglo-American relations

Ed Bithell

Barack Obama is a man used to having his voice heard. 

And yet, when he came to the UK, often referred to as the US’s closest ally, to express his views on our biggest foreign policy decision in forty years (in fact, since the one we might be about to reverse), that didn’t quite happen. The irony, of course, is that it was the very Eurosceptics who tout our “special relationship” with the with the US as more important than Europe that dismissed his statement that a post-Brexit UK would be at the “back of the queue” in US trade priorities (a statement which clearly showed his pro-British sentiments with its concessions to the word “queue”, whatever Boris Johnson says). 

Suddenly, Obama was irrelevant, his views on Brexit an intrusion on our decision as a nation, despite his government’s policy being the cornerstone of Brexiteers’ trade plans. He was also accused of having bias against the UK informed by his Kenyan ancestry, an accusation that combined the unpleasant tactic of deemphasising his American nationality with a possible admission that the narrative of strong links and trust with former colonies being a somewhat rose-tinted view of the past.

But the cat was out of the bag. Despite what Boris thinks, the elected president of the United States doesn’t think that the UK is more of a priority than the EU - and even if he did, the least active Congress in the history of the United States would be unlikely to hammer out a brand new trade agreement in the foreseeable future for him anyway. On the other side of the political spectrum, Brexit has only been championed by Ted Cruz with even Donald Trump, whom even Boris Johnson found himself dismissing as talking xenophobic nonsense, declining to endorse the Leave camp. 

However, the main reason that nobody else’s views can really be examined is that Barack Obama is pretty much the only politician in the entire United States who has time to spend more than a sentence at a time discussing something other than the next presidential election. Hillary Clinton and Bernie Sanders have expressed support for the EU and Ted Cruz has attacked it, both because it stands for big government and because it was an opportunity to contradict Obama, but these are merely facets of their overall statements on US foreign policy - because that is, and will remain, their priority until November, by which time the EU question will be long decided. It is further symptomatic of Donald Trump’s general attitude to politics that he did not express a view - after all, it might find itself in conflict with a more important view that he wishes to hold later on. Presidential candidates aside, prominent members of the US Congress have uniformly declined to express any view. In fact, politicians in the US are remarkably unified in their opinion that it is the decision of the British people alone.

As a result, we see more from the response of the rest of the USA’s political heavyweights (and Ted Cruz) than we do from President Obama. It isn’t that the top flight of American politics are anti-British, or in cahoots with the Eurocrats. It’s simply that our relationship with the EU isn’t their priority. And when we notice that, perhaps we can re-evaluate our relationship with them.

Photo from the Executive Office of the President of the United States.

Bull in a China Shop: Trump's Frightening Take on Asia

Taylor Yu

Videos like this are why the internet is a great, great thing. For those of you too lazy to click the link, it’s a three-minute clip of Donald Trump - the billionaire/reality TV star/’politician’ whose unbearable personality and equally unbearable hairdo have somehow propelled him into the forefront of the US elections race – just saying the word ‘China’. Over and over again.

I’ve no shame in saying that I found this way funnier than I should’ve, but it did get me thinking: what does this man actually want from China? Beyond all the jokes and the weirdly hilarious video-compilations that currently constitute the only media coverage of Trump that I actually care about, was there much substance or practicality behind Trump’s very much explicit dislike for China? Would China-bashing make America great again?

No, not really. In fact, it’s so unlikely to help the United States that the China Press, a Chinese-language newspaper based in the States, recently referred to Trump as ‘China’s secret agent in America’.

Let’s start with the 45% tariff on exports that Trump has proposed as part of his campaign. In theory, this would protect American jobs and promote American business; in reality, the implementation of such a drastic measure would set in motion an avalanche of global economic consequences. Basic economic intuition suggests that higher import taxes equate to higher prices, especially in a large open economy like that of the United States. Shrinking sales of Chinese products would not only hurt the average American consumer, but also damage American businesses who are actually heavily involved in the production and distribution process of goods that are ‘made in China’. Hufbauer and Lowry at the Peterson Institute for International Economics studied the impact of a 35% tariff imposed on Chinese tire imports by Washington in 2009 and discovered that for American consumers had to spend $900,000 dollars more on tires for every job saved - a trade-off scary enough to keep policymakers up at night.

If Trump’s wish is to strengthen the United States by weakening China, then this policy might work in an alternate universe in which the major economies weren’t connected in any way – one only needs to look at the relationship between the recent performance of the financial markets and China’s declining growth to comprehend the influence that China’s economic downfall may have the global economy. All of this, in addition to the fact that there would be nothing to stop the notoriously impulsive and unpredictable Chinese government to set up tariffs of its own on American goods and services, clearly suggest that Trump’s proposed tariff would only serve to undermine the United States.

What about in the wider context of the Wild Wild East arena? As a recent article in The Diplomat suggested, ‘the United States simply cannot be made great again by defining its closest global relationships purely in transactional terms or by insisting on going it alone while making others pay’. For years, Trump has argued for colder relations with Japan, who currently serves as the United States’ fourth-largest trading partner’, as well as South Korea, claiming that the United States should consider withdrawing its troops if Japan and South Korea don’t pay more for their upkeep. I don’t know what’s more concerning: the fact that the $2 billion Japan pays annually toward the upkeep of U.S. troops isn’t enough, or the fact that Trump cannot see that withdrawing from Asia would only play to China’s favour, giving it more leverage in future negotiations and allowing it to dictate terms in the Asian sphere.

The United States have spent years trying to build up a strong presence in Asia – with Trump at the helm, all of this may potentially vanish for the sake of ‘making America great again’ and at the expense of stability between two of the world’s great powers. It’s a thought that makes the video linked above a little less funny and a lot more frightening.

Photograph: Donald Trump via photopin (license)

Who Benefits from the International Arms Trade?

Oliver Ramsay Gray

The arms trade is big business, with global military spending last year totalling just over $1.5 trillion. Although the (legal) international arms market was only a fraction of this, at $83 billion, this still represents a significant market for potential profits. But who really benefits from the international arms trade, and what about the non-financial costs and benefits?

The clearest beneficiaries of the arms trade are, unsurprisingly, arms companies themselves; last year, the largest ten in the US and Europe had revenues of $203 billion (excluding non-military sales), the lion’s share of the international arms business. These international revenues, as David Cameron never fails to insist, contribute jobs and economic prosperity to the exporting country. For instance, the 1985 Al-Yamamah arms deal with Saudi Arabia has brought the UK $45 billion already and could bring in another $40 billion. However, the picture is not as simple as that. A shift in resources and demand over the long-term towards non-military economic sectors would likely bring about greater increases in standards of living. Although a challenging aim, this holds the greatest potential benefits to any exporter and can be seen in the past, for example when military spending fell by over 1% of global GDP in the years following the end of the Cold War. We must recognise that although the arms industry will always benefit from the international arms trade, the idea that the exporting nation inevitably benefits as well, as David Cameron persistently argues, is flawed in the long-term view.

Arms exports can also be used as a political tool, another means by which a state can strengthen strategic relations, bring others under its sphere of influence and project its power into other parts of the world. This is visible in Russia’s relationship with Syria, which has been tied up with the sale of missile defence systems and fighter jets – in part, a means to increase Syria’s dependency on Russia. Recent years in Syria serve to show how these exports have also helped Russia secure its strategic aims in the country by buttressing the Assad regime and so have worked as a type of limited intervention (though this was of course escalated last year). Clearly the exporter benefits in numerous ways here, as does the does the direct recipient, though the picture muddies when wider considerations are taken into account. Was Assad’s strengthening a “beneficial” development?

Arms sales are well known to increase the frequency and intensity of conflict. Even the legal international arms trade is closely tied up in this damaging situation and the costs of conflict are huge in both human and economic terms. This hurts not only those directly involved in conflict but has damaging knock-on impacts around the world. Although war might benefit its few victors politically, its costs are huge to everyone else involved. However, with the current international arms trade system the actions of one state can do little to affect the legal supply or demand for arms. Thus, in terms of the benefits to the exporter laid out above it makes sense for arms exporters to not take a unilaterally moral position. Of course, in the longer term, the benefit shifts towards a situation in which the supply of arms is restricted. However, this can only be achieved at a multi-state level rather than by one state taking it upon themselves.

We can see that it is overwhelmingly arms companies and, to a lesser extent, exporting states who benefit from the international arms trade. The situation is more complex when looking at recipients and considering the wider world. What does seem apparent, however, is that it would be counter to an individual state’s interests to clamp down on its own arms exports unilaterally when, without multi-state agreement, the benefits would shift to other exporters while the damaging impacts of supplying arms remain.