THE Philippines is among the countries that will significantly benefit from the escalating trade tensions between China and the United States, according to the United Nations Conference on Trade and Development (Unctad).
In its Key Statistics and Trends in Trade Policy 2018 report released this week, the Unctad estimated that the Philippines will gain an addition of 3.2 percent of total exports due to the trade conflict.
However, the Unctad estimated that this would amount to less than $10 billion for the Philippines. The European Union will see the largest benefit in exports at $70 billion of the US-China tensions.
“Other countries would capture substantially less. Although these numbers are not very large in relation to global trade [about $17 trillion in 2017], for many countries they represent a substantial share of export,” Unctad said.
“Substantial effects relative to the size of their exports are also expected for Australia, Brazil, India, the Philippines, Pakistan and Viet Nam,” it added.
The Unctad said the substantial share of United States-China trade will be captured by other countries whose firms are close competitors of Chinese and US companies. In the case of the Philippines, most of the benefits that the country will gain will be due to US tariffs on China.
The Unctad estimated that of the $250 billion in Chinese exports that are subject to US tariffs, about 82 percent will be captured by firms in other countries.
The UN agency also said that about 12 percent will be retained by Chinese firms and about 6 percent will be captured by US firms.
The report said that of the $110 billion in US exports that are subject to China’s tariffs, about 85 percent will be captured by firms in other countries. US firms will retain less than 10 percent, while Chinese firms will capture only about 5 percent.
“The results are consistent across different sectors, from machinery to wood products, and furniture, communication equipment, chemicals to precision instruments,” Unctad said.
Risks
However, Unctad warned that while some countries are bound to benefit from the trade tensions, certain risks could have global effects.
The trade conflict could lead to “disturbances” in commodity prices, financial markets and currencies which will affect developing countries. Trade tensions, Unctad said, could “spiral into currency wars.”
Further, other countries could chime in on the “tit for tat moves” of the China and the US. This could see an increase in tariffs that could affect assembles and suppliers in value chains.
Unctad said in a statement that the ongoing trade tensions initially came to a head in early 2018 when China and the US imposed tariffs on about $50 billion of each other’s goods.
By September 2018, the US had already imposed 10-percent tariffs covering about $200 billion of Chinese imports, to which China retaliated by imposing tariffs on imports from the US worth an additional $60 billion.
The 10-percent tariffs were initially due to rise to 25 percent in January 2019.
However, in early December 2018 the parties agreed to freeze the tariff increase until March 1, 2019.