In every war, there is bound to be a collateral damage. And in the looming trade war with China and the United States as the chief protagonists, Philippine exporters could just end up as among the unintended casualties.
With this, the Semiconductors and Electronics Industries in the Philippines Inc. (Seipi), the association overseeing the country’s top merchandise exporters, said the government should be ready to launch interventions that will protect the sector.
Seipi President Danilo C. Lachica said the feared trade war between the US and China could really take its toll on the Philippines’s electronics exports. The crucial part to guard right now, he noted, is how China will respond to the United States’s recent trade policies.
“There could be impact, but it would be difficult to quantify at this time. China is one of the big export destinations and import origins,” Lachica told the BusinessMirror.
In spite of the expected collateral damage, Lachica said he has yet to hear from the government of any interventions it can do to protect the electronics industry from the impact of the looming trade war. “Haven’t heard,” he said.
As the world awaits how China will punch back at the US, Lachica argued there is no need yet for the electronics industry to recalibrate its growth prospect of 6 percent this year. “The trade-policy barriers have not been formally implemented, [so] we will not downgrade our 6-percent to 8-percent growth [target],” he added.
Donald G. Dee, president of the Employers Confederation of the Philippines and a former special envoy for trade negotiations, said protectionist policies straight from the White House can affect the growth prospect of the country’s electronics industry.
“The problem is not the trade war between the US and China, [but] the protectionist policy of [US President Donald J.] Trump,” Dee told the BusinessMirror.
Trump has recently enforced stiffer tariffs on steel and aluminum products in a move that further emphasized the United States leader’s protectionist stance. He authorized the imposition of higher tariffs on steel at 25 percent and aluminum at 10 percent in spite of strong opposition from his fellow Republicans and Washington’s trading partners.
The move was seen to impact global trade of steel, as the US is the world’s largest steel importer. In 2016 it accounted for about 8 percent of steel imported globally, with the volume it imported at least 15 percent higher than that of Germany and South Korea, second- and third-largest steel importers, respectively.
With the string of protectionist policies implemented by Trump, Dee said there could be a decline, not only in investments from the United States, but also in its imports of electronics. “This will affect US investments, [and] it will also affect [our] electronics exports,” he added.
“Actually, our electronic chips go into the finished products of Malaysia, India and other countries. If the US reduces its purchases from these countries, then we will get affected,” Dee said.
Last year Washington is Manila’s second-largest importer of electronic products at 12.66 percent, overtaking Beijing at 12.61 percent. Electronics exports ballooned to a record-high $32.7 billion in the previous year, contributing more than half of the country’s merchandise
exports that grew by 9.53 percent to $62.87 billion.
Moreover, the electronics industry is banked on by the government to drive the country toward its target of hitting at least $122-billion export receipts in 2022. This year Seipi is optimistic that electronics’ share in the country’s total exports will grow by 6 percent.
Beijing is not taking Washington’s economic barriers sitting down, and vowed to retaliate if the US carries on with its plan to impose tariffs on more Chinese goods. The world’s two largest economies drew near to a trade war after China issued a statement that it “doesn’t hope to be in a trade war, but is not afraid of engaging in one.”
Last Friday China announced it is considering to slap an additional 15-percent levy on United States products, including dried fruits, wine and steel pipes, and a new 25-percent tariff on pork products and recycled aluminum in response to the US’s duty on steel. If carried out, China is seen demanding more pork from European exporters that have been bolstering its business in China in the last two years.
Also last Friday, over 40 members—including the 28 countries under the European Union (EU)—of the World Trade Organization took a swipe at the consequences that may be brought about by the stiffer tariffs on steel and aluminum. They argued the policy will not only take a toll on traders’ interests, but also on the predictability and stability of the rules-based multilateral trading system under the WTO.
China claimed the additional duties were inconsistent with the General Agreement on Tariffs and Trade and the WTO Agreement on Safeguards. It urged the US to desist from taking unilateral measures, adhere to WTO rules and promote the multilateral trading system.
Russia, on the other hand, argued the new tariffs are above the bound rates that the US committed under the WTO. It also called on the White House to clarify how the measure can be permitted in line with the multilateral trading body’s regulations and to hold meaningful dialogue with its trading partners.
Japan, Venezuela, Brazil, New Zealand, Turkey, South Korea, Hong Kong, Singapore, Thailand, Pakistan, Norway, Australia, India, El Salvador, Switzerland, Paraguay, Guatemala and Kazakhstan all joined China, Russia and the EU in telling the United States of the possible dangers of its recent policies.