President Trump and our economy

Will Donald Trump as US president be good or bad for the Philippines? Let me focus here on the economy, and leave it to better-equipped experts to comment on the noneconomic implications of a Trump presidency for us.

One could surmise the possible economic fallout from Trump’s victory on the basis of positions he espoused during the election campaign. It would appear that the risk to the Philippine economy stems mainly from his campaign pledge to bring jobs back to the United States. Among those jobs are the estimated one million in our burgeoning business process outsourcing (BPO) industry, which mostly serves the US market. Indeed, BPO workers have been worrying about their jobs since President Duterte began spouting anti-US rhetoric. Now, the risk they face appears even more real with a US president who has vowed to take away their jobs and return these to Americans.

But short of prohibiting US firms outright to outsource various parts of their operations, it’s not clear how exactly he would do this, and whether he could even succeed at it. With the large differential between American wages and those overseas, the economic advantage of outsourcing probably well outweigh any tax incentives the US government can realistically offer their firms to repatriate those jobs, or discourage even more such outsourcing by American firms. It’s not the first time, after all, that the promise to bring back outsourced jobs has been made in a US presidential campaign, which proved to be no more than campaign rhetoric. Will Trump be truer to his word on this? If he is as good a businessman as he claims he is (which his critics dispute, calling him the bankruptcy king), he should know that it would not make good business sense to practice what he preaches. Neither would it make economic sense to America as a whole.

Among Trump’s loudest advocacies is his opposition to free trade, on the belief that too many American jobs were lost due to freer entry of foreign goods into the US market, especially from Mexico and Canada under the North American Free Trade Agreement. He also denounced how US firms had transferred their labor-intensive value chain operations to countries with cheaper labor, thereby literally exporting American jobs. The backlash from displaced American workers, especially in the inner states which host much of the affected manufacturing, was in fact highly instrumental in his election victory.

Will our merchandise exports to America, our second largest market next to Japan, be affected? Our top exports to America, already accounting for more than half, are electronic products, garments, coconut oil and wiring harnesses. Unlike some of our neighbors, we don’t have a free trade agreement with the United States, hence are slapped import tariffs on most products we export to it. This suggests that we have little to lose if America removes duty-free access to its market, as Trump’s campaign rhetoric implies he would do. He also promised to withdraw from the US-dominated Trans Pacific Partnership (TPP), the new megatrade agreement signed and awaiting ratification by 12 countries on both sides of the Pacific Ocean, of which we’re not part so far. We already know that the Philippines stands to lose a lot to Vietnam and Malaysia should the TPP come into force without us in it. Trump’s rejection of the pact could thus actually work in our favor. But the question is whether his fellow Republicans in Congress would uphold him on his anti-TPP stance, given its substantial economic and geopolitical importance to them.

Trump’s promised clampdown on immigration could be a threat, especially with almost half of our overseas remittances coming from the United States. Will he drive Filipino immigrants, most of whom are productive professionals, out of his country? I don’t see it likely. Will Filipinos find it harder to migrate there, legally or otherwise? Maybe so.

In the end, we can only wait and see whether Trump can make good on his threatening campaign rhetoric. I’m rather skeptical, and I know I’m far from alone on this.

cielito.habito@gmail.com