How relationship between China and Philippines affect trade

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Recent trade issue between China-Philippines

On 25 March, China customers destroyed 34.78 ton of substandard bananas from Philippines because the carbendazim in sample is almost one time higher than China food requirement. The total value of the destroyed bananas is $33,000. China urged Philippine to take measures to improve the quality of bananas and at the same time, China stopped importing bananas from certain Philippine exporters. These actions were taken after Philippines raised issue against China over South China Sea in the international Court of Arbitration. This is not the first time for China to take actions against Philippine in trade. The first time could be dated back to 2010. Will such actions help to deal with South China Sea issue or just hurt both side instead?

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The bilateral relationship

The bilateral relationship between China and Philippines is most complicated and grim. The dispute over sovereignty and territory of China South Sea has been ongoing for years, with claims of various countries. It is important in territorial integrity, natural resource especially in oil, fishing resource and freedom of navigation. Among these factors, fishing opportunity and oil exploration are most valued by both China and Philippines. The tension has increased recently mainly because China naval patrols in Xisha islands. Philippines, on the other side, asserted that China’s behavior is against international law and expelled Filipinos from fishing.

The Philippines is the 47th largest export economy. China, Japan and the United States are three largest exporter destination and also importer countries of the Philippines. In 2013, Integrated Circuits takes the largest share in Philippine export, followed by computers. Banana is the fifth largest export product and the strongest food product globally, bringing 1.36 billion US dollars for export revenue. More than half of the exported bananas, about 75 million packs, are sold to China every year. In 2011, Philippines bananas took up 84.75% of total China imported bananas. Philippines is the second largest banana producing nation in the world, only followed by India.

Personal view

Personally, I don’t believe it is proper for China to hurt the trade between the Philippines and China just for political reasons. China has kept taking measures against Philippines banana exports in the decade. However, Philippines didn’t make any compromise on the China South Sea issue. There is a trend for Philippines politicians to talk tough with China regarding the maritime issue to win support from citizens. Even though Philippine politicians pretend to be tough with China, they actually didn’t do anything meaningful. Most things they did were seeking the help of Court of International Arbitration and strengthen alliance with the United States. Clearly, the Court doesn’t want to get involved in this dispute and also, China refused to taking this issue to court. For me, it is more like a show among politicians. Also, a large number of Philippines banana planters are Chinese and thus, these measures are hurting Chinese most. Last but not least, China has already become a member of WTO and should obey WTO rules. Even though China has found excuses to reject Philippines bananas, the world know what China is really trying to do. This will undermine the reputation of China as a reliable trade partner.  If China would like to conduct economic sanction on Philippines, it should do it openly, which will have more influence on Philippines’s attitude on China South Sea issue.

Reference

1. China and the Philippines: Asia’s Most Toxic Relationship, Richard J. Heydarian   http://www.huffingtonpost.com/richard-javad-heydarian/china-and-the-philippines_b_7997158.htm
2. China destroys 35 tons of bananas from Philippines Reuters
http://news.abs-cbn.com/business/03/26/16/china-destroys-35-tons-of-bananas-from-philippine
3. Philippine Overview http://atlas.media.mit.edu/en/profile/country/phl/
4. Philippine’s view on China South sea http://news.sohu.com/s2012/shijieguan-280/
5. Overview of Philippines – China relations, Embassy of the Philippines, http://www.beijingpe.dfa.gov.ph/phl-china-relations
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4 Responses to How relationship between China and Philippines affect trade

  1. I agree with you that the political issue should not affect the trade in this bilateral economic relationship, since it will lead to dead weight loss for both parties. Philippine banana exports to China reached $32.2 billion in 2011, up 22 percent from $27.7 billion in 2010. China is the second largest banana importers for Phillippine. The decrease in banana import will increase the price for Chinese consumers since the supply decrease. For Philippine’s banana producers, the shrank in demand from China will also lead to less profit. Furthermore, it will not help to solve the diagreement in territory. So free trade is a better choice in terms of the welfare for both countries.

  2. siyingh says:

    This article combined recent political issues with possible trade policy revision between China and Philippines. In terms of structure, I like the way you presented your personal opinion at the end, which makes your post more like a critic. The two countries have disputes over the sovereignty of some islands and shoals in Nansha for quite a long time. However, after rounds of consultations, both sides agreed to strive for a solution through bilateral agreement. According to NY times, US has build up a new agreement with Philippines, which driven partly by China’s action in the South China sea. In this context, I think it would be more comprehensive to discuss trade relationship with US as well, since this situation is no longer bilateral. Imports into China, as the second largest world economy, will be a growing force for global economic expansion. China is expected to become the world’s largest importer over the next few years. Therefore, both Philippines and United States should take account China’s influence if further action is taken place.

  3. chiarol says:

    Political issues always somehow affect the international trade. Even countries have been members of some international trade organizations, they still use trade as a method to resist other countries. Several Southeast Asian countries have been involved in South China Sea Issue. I believe many of them put the political issue in front of the economic growth. As we can see from this article, China has kept taking measures against Philippines banana exports, but Philippines didn’t make any compromise. I think political issue cannot be ignored when we talked about trade between countries. However, hurting trade because of political issue is not a good idea.

  4. tristazhang says:

    It’s true that political issues shouldn’t influence the international trade. But political issues will affect the relationship between China and Philippines, and thus influence the trade between two countries in the future. I have to say that it’s not a good way to show China’s political stand. From this event, we can see the huge influence of China’s market on terminational trade. This also shows that nowadays, global economies are linked more closely. Trade could have much more profound influences than we thought. Free trade allow countries to take advantage of their plenty resources, but also increase their vulnerability.
    There is no doubt that taking measures against Philippines banana exports hurt Chinese customers as well. Decreasing import of banana from Philippines will decrease supply, leading to higher banana price. Both countries won’t benefit from such measure. China should take other measures to deal with the territory issue. Things won’t be better if use economic measures to cope with political issues.

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