The mind-blowing actions of US President Donald Trump in line with his campaign vow to make America great again is currently focused on concerns nearer the homeland but many experts expect his policies to also soon hit countries in the region where the US has a huge trade shortfall that included the Philippines.
On that front, Rody appears a step ahead of his neighbors in the region as he had from the start of his term adopted an independent foreign relations policy away from the United States.
Trade diversification had resulted in the opening of once dormant relations with China and Russia.
Experts are now hailing the move as having the benefit of foresight.
British newspaper The Independent noted that Rody has prioritized trips around Asia to take advantage of trade and investment opportunities in the region, including with China in anticipation of a shift in US trade policies as a result of Trump’s protectionist agenda.
The Philippines may be vulnerable to a proposed “border tax” because its export mix is heavily reliant on electronic and capital goods, which can be easily replaced by US-based producers, it said, however, citing a study of Credit Suisse Group AG.
It added that Trump will surely have a relook at the trade figures and deals with four Asean countries, namely Singapore, Malaysia, Indonesia and the new Beijing “supporter” the Philippines due to the huge trade deficit the US has with these countries.
Considering that business process outsourcing, which contributed about $25 billion to the economy last year, is considered as part of service trade that adds to the trade imbalance with the US, the Trump administration is expected to soon zero in on BPO firms.
Regional think tank Frontera said prime concern on the Philippines relates to its outsourcing industry and the remittances received from Filipinos working in the US.
Capital Economics also noted that “Mexico and China were the focus of Donald Trump’s anti-free trade rhetoric on the campaign trail. But the Philippines also stands out as one of the most vulnerable emerging economies to any moves by the US toward protectionism.”
The BPO industry employs 1.1 million people directly and about 70 percent of its revenue comes from US companies.
While the economy is not expected to take a direct hit from Trump’s border adjustment tax due to relatively small amount of goods exports, the booming BPO industry is expected to suffer heavily.
Trump has accused outsourcing firms of hurting employment in the US, something on which he wants to improve on.
As far as remittances are concerned, Fontera said Trump has talked about halting or taxing cash transfers from Mexico but there has been no explicit reference to remittances by Filipinos.
If cash transfers undergo a blanket taxation regime regardless of where the transfer is headed, then the Philippines will certainly see a marked impact, it said.
It added, however, the Philippines has strategic importance for the US and even though it is pivoting toward China and away from the US, Trump may want to keep his relations cordial with Rody.
Still Rody seems to be getting the best advice amid the emerging economic shift as a result of the Trump era since most his economic advisers had long foreseen the need to boost local industry as pillar of the economy rather than sources of income reliant on external influences.
Budget Secretary Benjamin Diokno has long advocated that the country should not heavily rely on the BPO industry and remittances since a sudden shift in policies of foreign governments can greatly disturb local economic prospects.
The government is currently pouring in P1 trillion a year to improve infrastructure and spur economic activity.
Rody and his independent foreign policy and the prospect of cordial relations with Trump will be a major bonus for the economy.