Eyeing Asia could get the United States back in the game of opening foreign markets, and the Philippines could be the place to start.
One tangible outcome of President Trump’s recent visit to Manila was an agreement that the two countries would hold exploratory talks on a bilateral free trade agreement. As the joint statement between Trump and Philippine President Duterte said, “The United States welcomed the Philippines’ interest in a bilateral free trade agreement and both sides agreed to discuss the matter further through the United States– Philippines TIFA [Trade and Investment Framework Agreement].”
This low-key announcement was followed promptly by a Philippine government delegation visit to Washington in late November led by under Secretary of Trade Ceferino Rodolfo, during which initial discussions were held. Both sides agreed to continue exploratory work, assessments, stakeholder engagement, and reconvene at some point in the early spring. Prospects for an FTA were played up in the Philippine press, while U.S. Trade Representative’s office was at pains to emphasize that this conversation was at a very preliminary stage, and the ultimate direction of the discussions will not be determined for some time.
Viewed one way, these talks can be seen as the administration following up on its pledge to pursue bilateral trade agreements, having abandoned the Trans-Pacific Partnership (TPP), and eschewed multilateral trade agreements in general. As President Trump said in his speech to the APEC Leaders Meeting in Danang, Vietnam, “…we will no longer…enter into large agreements that tie our hands, surrender our sovereignty, and make meaningful enforcement practically impossible.”
Any movement on the part of the administration to open foreign markets to U.S. exports of goods and services is to be welcomed, and the Philippines is a logical partner. It is a sizeable market, with U.S. exports totaling nearly $7 billion through the first 10 months of 2017. In this year’s ASEAN Business Outlook Survey, a joint effort between the U.S. Chamber and regional Chambers in the ASEAN countries, Manila-based executives representing U.S. companies were optimistic about growth prospects. For example, 85% of those surveyed expect increased profitability from their Philippine operations in 2018, and 70% expect to expand their operations in the country over the next couple years.
Moreover, in recent years the Philippines has undertaken a number of market opening measures in different industries, improved its intellectual property protection and enforcement environment, and initiated a public debate about reforming the country’s constitution in order to permit greater foreign investment in certain sectors. The previous Philippine administration under President Aquino had publicly signaled its interest in joining the TPP, and with support from the U.S. Chamber and USAID, prepared a readiness assessment which identified areas in which further reform would be needed if Manila were to join the agreement. Manila certainly seems equipped for such a negotiation.
However, Asian governments have approached possible trade talks with the Trump administration warily. The U.S. withdrawal from the TPP, threats to withdraw from the U.S.-Korea Free Trade Agreement, and a series of heterodox proposals in the NAFTA negotiations have left foreign governments leery about entering into negotiations with Washington.
In the meantime, the exploratory dialogue should by all means be supported. A trade agreement between the two countries is potentially a new opportunity to establish high standards, including those which the administration abandoned when it pulled out of the TPP. It is an opportunity for the Trump administration to demonstrate leadership on trade by taking positive, concrete steps to strengthen U.S. economic engagement in Asia.
For the near term at least, it is the United States’ only market-opening trade initiative in Asia. It is the only game in town. We need to play.