The Market Monitor Minding the Nation's Business
By Luis Leoncio
The protectionist policies of US President Donald Trump may soon hit home to stunt the country’s growth as he will surely have a relook at the trade figures and deals with four Asean members, namely Singapore, Malaysia, Indonesia and the new Beijing “supporter,” the Philippines.
So far, they have escaped Trump’s glare on trade, but he may yet come looking. The US runs trade deficits with all of them—in some cases quite big ones, a regional review released by US-based news network Bloomberg said.
It said Trump’s exit from the 12-nation Trans-Pacific Partnership (TPP), his attacks on the trade policies of Japan, China and South Korea, and a Republican push for tax reforms that would impose a levy on US imports from all countries should be of concern to these Asean members.
“It is clear that a protectionist era is taking shape in the US, and it will hurt growth,” it said.
Trump is likely to look at countries with which the US runs a trade deficit and they may be particularly vulnerable to attacks, it added.
His advisors have handed him a paper in which they pinpointed America’s trade gaps as a cause for what they described as its “slow growth plunge.”
Deborah Elms, executive director of the Asian Trade Centre, a Singapore-based consultancy, said, “trade deficits are a problem. At any moment there could be an angry Donald Trump in your face or a Twitter coming your way.”
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, according to Credit Suisse Group AG.
The aspect, which is of concern to the Philippines, relates to its outsourcing industry and the remittances received from Filipinos settled in the US.
The think-tank Capital Economics 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 outsourcing business of the Philippines is estimated to bring in 10 percent of gross domestic product (GDP). The industry employs 1.1 million people directly and about 70 percent of its revenue comes from US companies.
Meanwhile, remittances from nationals settled in the US form about 3 percent of the GDP.
Due to relatively small amount of goods exports, the Philippines will not be affected by a border adjustment tax, if implemented by the US, as much as its regional peers Malaysia and Thailand.
However Trump has accused outsourcing firms of hurting employment in the US, which was something he wanted to improve upon.
Credit watchdog Moody’s Investors Service said the BPO sectors of the Philippines and India will be greatly disadvantaged if the US tightened rules on outsourcing.
Moody’s in its report: Asia Credit – 2017 Outlook Challenging Global Environment to Test Asia’s Robust Credit Fundamentals” issued last Feb. 8, said Trump’s trade policies was a turnaround from that of former US President Barack Obama’s moves.
It said the new policies “could pose downside risks to the US’s major trade and investment partners.”
“Such a policy shift, if implemented, could pose greater risks to high-value manufacturing exporters in the region, particularly Korea, Malaysia and Taiwan,” it said.
“India and the Philippines would be the most vulnerable if the US were to tighten rules on service outsourcing,” it added.
In 2015, the Information Technology and Business Process Management (IT-BPM) generated some 1.2 million direct jobs and registered revenues amounting to about $22 billion.
On the other hand, remittances grew by 4 percent in 2015, the target growth of the Bangko Sentral ng Pilipinas (BSP), with total cash remittances amounting to $25.61 billion.
As of end-November 2016, cash remittances reached $24.34 billion, 5.2 percent up year-on-year.