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US/Philippines Trade: With Friends Like Us…

I sometimes wonder what our government is thinking.

They always say they love the Philippines, but how they express that love is confusing.

The late-great US Senator from the State of Hawaii, the Honorable Daniel K. Inouye, was a big supporter of anything Filipino.

But, even Senator Inouye had serious concerns over our private and public persona with regard to that expression of Filipino love. He believed that the US had taken advantage of the Philippines, and that we had not given back to the extent that was deserved. Senator Inouye dedicated much of his career to even out the score. At the time of his death last year, he was working hard for Filipino War Veterans and for improved Philippine trade preference reform with the United States.

In 2011, after hearing the Senator’s passionate speech at the celebration of the 113th Anniversary of Philippine Independence, I tried to impress a Congressional staffer when I said to this twenty-two year old:

“You know, we need to help the Philippines with trade. They are the only former colony of the USA that doesn’t have some sort of trade preference”

The response of the young staffer was interesting:  “No kidding, the Philippines is a former United States colony, when did that happen?”

I guess it’s generational. Today’s young people just don’t know history.  Perhaps they were never taught, don’t remember, don’t understand, or just don’t care that from 1898 to 1946 the Philippines was OUR colony.

Names like Corregidor and Bataan were for Grandpa……not for them. Truth is, today is built on yesterday.  They need to know:

*On December 7, 1941, the Japanese attacked Pearl Harbor

*By March of 1942, the Japanese had taken over every country in the Western Pacific EXCEPT the Philippines

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*Still, a part of the commonwealth of the US (and with great human sacrifice), the Philippines deployed Philippine Army soldiers, Philippine Scouts, and US National Guardsman to honorably defend the Bataan Peninsula against the Japanese invasion until they were forced to surrender in April of 1942. After the fighting stopped, 16,000 Americans and 54,000 Filipinos were walked 65 miles in what was called the “Bataan Death March,” where over 7,000 soldiers were slaughtered along the route.

*In the days prior to the surrender, General Douglas MacArthur had to leave the Philippines as the Japanese were gaining ground. He said at that time: “To the people of the Philippines whence I came, I shall return. Tonight, I repeat those words: I shall return!”

*On Oct 20, 1944, MacArthur did return, and helped liberate the Philippines from the Japanese. He said: “I have returned. By the grace of Almighty God, our forces stand again on Philippine soil.”

Such power in these words, uttered just seventy-nine years ago.

How the Philippines must have admired and respected the United States of America.

OK, so why does all this matter, and what does it have to do with US trade? As the mother country, we’re supposed to hover over our family. What did we really do?

Over the last seventy-nine years, we talked a good game, took advantage when we could, and gave little back.

On July 4, 1946, The United States granted full Independence to the Philippines.

In the same year, the US Congress passed the Bell Trade Act. The Bell Act established quotas and pegged the Philippine peso to the dollar, but Filipinos strongly objected to a so called “Parity Amendment,” which allowed US citizens equal rights with Filipinos in an attempt to exploit natural resources and to operate public utilities. The Bell Act proved to be extremely unpopular in the Philippines and was replaced with the Laurel-Langley Act in 1955 (which only moderately improved the Bell Act). The Laurel-Langley Act expired in 1974, and there have been no new Trade agreements since 1974…and that was forty years ago!

Senator Inouye was particularly distressed with the treatment of Filipinos by our military. In defense of freedom and democracy, the USAFFE (United States Armed Forces in the Far East) fought side by side with US Soldiers in the Philippines, even wearing the same uniforms as regular US Army troops. It is often reported that the US offered veterans benefits and naturalization as an incentive for Filipinos who enlisted in the fight to defend the Philippines.

At the end of World War II (in June of 1944), our Congress passed the GI Bill of Rights, providing full benefits to all who served in defense of the United States. A total of sixty-six countries were included with full benefits. However, Filipino soldiers were excluded.

If that wasn’t enough, in 1946 the US congress passed a rescission act to deny veteran’s benefits to new Philippine Scouts who, at the time, were considered as regular US Army. While naturalization was allowed in 1990 for those who served honorably in USAFFE (with active duty status, and also in the other recognized Philippine troop organizations from 1939 to 1946), US veteran benefits were still NOT included in that legislation.

In addition to the Army, the US Navy had its hands in the action by restricting Filipinos to being Stewards, until that was modified in 1971.

Tough love!

Senator Inouye vowed to make amends. On behalf of the approximately four million Filipino-Americans, he tried hard to make a difference in any way he could. Whether it was for veterans or for US / Philippine trade, he was there to help.

As China ascended to the WTO (2005) and quotas were eliminated (2008), the Philippines suddenly lost the bulk of their apparel industry. They had benefited for years by being allowed quota (the right to ship) to the USA. Fabric was brought to the Philippines, assembled into garment form and the finished apparel was sent to America.

Unfortunately, the Philippines never developed sufficient capacity of raw material (fabric) and with quota going away by 2005-2008, suddenly the fabric stopped flowing, and the apparel assembly industry was left to wither on the vine. Logically, it was just no longer necessary to send fabric to the Philippines for assembly into garment form, when one could now make the entire garment in China. The once robust Philippine apparel assembly industry saw its’ numbers drop from approximately 700,000 employed to 200,000. Senator Inouye championed the Save Our Industries Act, to try to resurrect the assembly industry with a combination of US fabric and non-competing foreign inputs. The bill floated around Congress for a long time and has yet to surface.

While apparel assembly in the Philippines has flattened out over time (albeit at a low level), it is soon to get hammered again by the pending Trans-Pacific Partnership Agreement. When China took the business away, it was because there was no more quota, however there was still duty to contend with.

Vietnam will be duty free under TPP. The Philippines, sensing trade problems would accelerate with this new TPP agreement, were interested to be included in the talks. They were told that they could be included — but — during a “second tranche.”  In all honesty, (as viewed through the eyes of the remaining Philippine apparel assembly industry), by then the funeral will be over and the attendees will have gone home.

Funny, when one really thinks about this TPP situation, Vietnam and Japan are included in the talks, but the Philippines (our former US Colony) is excluded.

The Philippines fought with the United States against Japan during World War II, yet Japan is included in TPP, and the Philippines is not.

At the request of the United States, the Philippines sent troops to fight against North Vietnam in the Vietnam War, yet Vietnam is included in TPP, and the Philippines is not.

Tough love!

There is no special trade agreement between the Philippines and the US, since the Laurel Langley Act expired 40 years ago.

Good luck to that Congressional staffer I chatted with, who didn’t know that the Philippines is a former USA Colony.

Good luck to Congress and the Obama administration, who should try much harder to help the Philippines establish a better and more favorable trade relationship with the US.

With friends like us……..

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RickHelfenbein

Rick Helfenbein is President of TellaS Ltd (Luen Thai USA) and Vice Chairman of the American Apparel and Footwear Association. He is a strong advocate of a robust US Trade Agenda and often lectures on the subject of supply chain and international trade at prestigious universities around the country. He participates annually in the Consortium for Operational Excellence in Retailing at Harvard University and the Wharton School of Business.