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Philippines-Taiwan – a sensitive trade-off

Philippines-Taiwan Trade Relations

There is every incentive for Taipei and Manila to vigorously pursue plans to expand trade ties – which they are doing.  The Philippines is the island state’s nearest entry point to Southeast Asia, a region it desperately wants to cultivate as an export resource. By the same token, given the long-standing cultural ties between the two countries, Taiwan is a natural market for many Philippine products and exchanges. But there is a but. An extremely sensitive one; China.

Beijing’s unrelenting efforts over decades to undermine the legitimacy of Taiwan – a country it sees as a province of its own – has left the island state without a membership in any international or regional trading bloc. It is neither a signatory to the US-conceived Trans Pacific Partnership (TPP), nor the China-led Asia Infrastructure Investment Bank. Nor is it likely to become a member of the Regional Comprehensive Economic Partnership (RCEP) – a proposed TPP alternative – in which China is a player. As the Republic of China (ROC), Taiwan is recognised by only 22 countries – and the Philippines is not one of them.

Thus, Taiwan’s entire foreign trade is dependent on bilateral agreements, and its ‘New Southbound Policy’ – an effort to loosen the island’s economic dependence on the Mainland –  is specifically targetting the member countries of the Association of Southeast Asian Nations (Asean). Against this background, it’s easy to understand why Taipei sees the Philippines – just 746 air miles apart, capital to capital – as the natural launch point for an Asean trade push.

Taiwan’s representative in the Philippines, Gary Song-Huann Lin – a personal friend of President Rodrigo Duterte – has said that Manila would be Taipei’s most important regional partner for its ‘New Southbound Policy’ and wants to make the Philippines “Taiwan’s Gateway to Asean”. It is, he says, “a natural fit”. Duterte has said that he is fully supportive of the Taiwanese Government’s initiative.

However, Lin’s hope that the Philippines could support Taiwan’s membership of both the TPP and the RCEP is a wish too far. That cannot be part of any deal, given Duterte’s desire to establish closer relations with the Mainland. For while Beijing needs a strategic partnership with Manila to frustrate US ambitions of increasing its sphere of influence in East and Southeast Asia, that pales by the side of Beijing’s desire to bring the prodigal child of Taiwan to the bosom of the Motherland. Nothing in the whole of Chinese foreign policy is as important as that. Nothing.

Currently, bilateral trade between the Philippines and Taiwan is small. In terms of Philippine exports, it was worth US$7.4 billion last year. That accounts for just 2.7% of all Taiwanese imports and marks a modest 7% increase over the past five years. That performance needs to improve and both sides are determined to ensure it does.

To this end, their de facto embassies – the Manila Economic and Cultural Office in Taipei and the Taipei Economic and Cultural Office in Manila – have been stepping up contact and are working on a number of agreements. Cooperation is being discussed across a range of sectors, including: investment, banking, agriculture, fisheries, aquaculture, food-processing, electricity-generation, electronics, pharmaceuticals, climate-change, and ICT. Education is also being looked into: prior to 1975, when Manila severed formal diplomatic relations with Taipei – recognising the People’s Republic as the sole representative of China – the ROC managed every Chinese school in the Philippines.

One other area on which they are also likely to be focusing is tourism: Taiwan is now the seventh largest tourist market for the Philippines which receives around 210,000 Taiwanese arrivals annually. Air-service agreement between the two countries have been expanded, and by next year weekly passenger seats are expected to reach 30,000. On top of this, Taiwan carriers have established direct charter flights to the Philippines three main tourist destinations of Boracay, Cebu and Palawan.

Certainly there is much to build on here and there is plenty of good will between these two geographical neighbours. But while trade and investment issues will not be thwarted by China, any formalising of diplomatic relations between Manila and Taipei will remain off limits.

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