Academic journal article Contemporary Southeast Asia

Politics in Command: The Case of the US Proposal for an FTA with the Philippines

Academic journal article Contemporary Southeast Asia

Politics in Command: The Case of the US Proposal for an FTA with the Philippines

Article excerpt

Introduction

On 11 March 2002 Senator Richard Lugar presented to the United States Congress Senate Bill 2004. The bill authorizes the American President to negotiate and conclude a free trade agreement (FTA) with the Republic of the Philippines. Washington's offer of an FTA to Manila has very strong political-strategic undertones. (1) It should be noted that Washington's choice of a bilateral negotiating partner is based on several factors ranging from the open trade policy of the partner country, hemispheric political grounds (as in the case of Central America), global strategy (as in the proposed negotiations in the Middle East), and to support for the wider US foreign policy objectives (as in the cases of the Israel, Jordan, and Australia). The Philippines is not a major trading partner of the United States. However, an FTA with the Philippines will have important strategic and foreign policy implications for the Bush Administration's current war on terror and for the revitalized security relations with Manila.

A free trade deal with the Philippines will not only manage practical trade problems with the latter, but more significantly, it will build closer bilateral economic and security ties. The Bush Administration considers the proposal as part of its international counter-terrorism initiative. Washington extends an FTA to the Philippines to elicit political compliance and loyalty from the country. It is also aimed at minimizing political disputes between the two allies in the light of the war on terror and other future conflicts in East Asia. From the Bush Administration's view, an FTA deal will provide the Philippines a better chance to compete in a changing and globalizing international economy and, possibly, enable it to lift the majority of the population from poverty through international trade, and to contribute to regional stability and order.

This article raises these questions pertinent to the FTA proposal: (1) What are the strategic and political agenda of the Bush Administration in its current efforts to promote competitive liberalization in international trade? (2) How will the American FTA proposals in East Asia affect the regional commerce and trade considering the growing economic competition among the United States, China, and Japan? (3) What are the possible politico-strategic issues relevant to the US offer of an FTA to the Philippines? (4) What are the prospects of an FTA between the two allies?

The Bush Administration's Trade Policy

The United States is the largest trading state in the world. It is, however, not only a trading state. More importantly, it sees itself and acts as a leader or a hegemon in an open and a liberal trading order. According to American economist Charles Kindleberger, an open and a liberal international trading system requires a strong political leadership by the most advanced economy at a certain point in time. This concept, known as the theory of hegemonic stability, postulates that the leader or the hegemon facilitates international economic cooperation and prevents states from defecting through the use of side payments (bribes), sanctions, and/or other means that can (seldom, if ever) coerce reluctant states to comply with the rules of a liberal international economic order. This theory likewise assumes that a liberal and open international trading regime requires certain private good that will be provided by the hegemon--the United States. A public good has the properties of non-exclusivity (inclusiveness) and non-rivalrous consumption (Gilpin 2001, pp. 97-98). In managing the international economy, the hegemon guarantees the following public goods: (1) maintenance of the flow of capital to countries; (2) provision of some order and stability in the foreign exchange rates, at least among the key countries, and (3) arrangements for at least moderate coordination of macroeconomic policies among the leading economies (Gilpin 2001, pp. …

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