EUROPEAN ACADEMIC RESEARCH Vol. III, Issue 5/ August 2015 Impact Factor: 3.4546 (UIF) ISSN 2286-4822 DRJI Value: 5.9 (B+) www.euacademic.org The Political History of the US-Philippines Trade Relations of 1946 ROBERT PAUL V. JURADO University of Santo Tomas Manila, Philippines Abstract: The United States as becoming world power, after winning the war in the World War II, it was planned to have their wealth invested to an international setting. Philippines, then was fully devastated, structures fully destroyed, economy failed, and its independence might be at stake. However, this oriental country would want this investment desperately for they needed reconstruction and rehabilitation. The Philippines would want to recover for they do not have the means of how to start anew due to financial losses during the war. The country has the man power, but no money to buy equipments, no industries to lean on to sell these raw materials, and no market or country to sell their harvest in the future. The United States would have a proposed plan to give the rehabilitation and reconstruction of the country, provided there will be a future trade relation between the United States and the Philippines. Later it was known as the US-Philippines Trade Relations of 1946. Hearings held in the United States Congress on April of 1946 to determine on what to take on to have their future executive agreement would be for the next 20 years. Meanwhile, while the hearings happens, United States are doing political moves, having measures on the relief and the rehabilitation of the Philippines, the campaign of the Philippine presidents, aligning their promise of independence for the Philippines and other means to attain their goal of investing in the countries to make the trade relations successful. 5216 Robert Paul V. Jurado- The Political History of the US-Philippines Trade Relations of 1946 Key words: Trade relations, rehabilitation, reconstruction, executive agreement, economy. The World at War During the course of the World War II, the United States is not just world’s dominant in militarism, but it proved to the most in terms of economic stability. Almost all of the countries in the Pacific, particularly which became the war ground, are struggled to find ways on recovering, like that of Southeast and East Asian Regions. With the American dominance in the world economy, there is no place where she could put up his capital in the Pacific area. Countries have fallen during the war, many of it needs rehabilitation. Japan was penalized for its war crimes committed. The whole Pacific Rim needs assistance. The United States surpluses in resources have to find countries for their investments. "...Chastened by the breakdown of the global economy during the inter-war period, the United States began a return to liberalism with the passage of the Reciprocal Trade Agreements Act of 1934. After the Second World War, the trend of increased economic liberalism continued with each successive round of the General Agreement on Tariffs and Trade (GATT), and the result was the rapid expansion of world trade. World exports increased by close to 8 per cent per annum between 1950 and 1973, and by 5 per cent for the subsequent twenty-five-year period." (Ravenhill, 2008, 350). 1 Since then, the United States have to find ways on putting up its capital into the market. The Philippines, one of its potential customer has to distribute through its rehabilitation plan and reconstruct not just the country, but also its financial economic market. 1 John Ravenhill 2008, 350. EUROPEAN ACADEMIC RESEARCH - Vol. III, Issue 5 / August 2015 5217 Robert Paul V. Jurado- The Political History of the US-Philippines Trade Relations of 1946 The Post War Situation The war ended, and countries fail to get on their feet. The Philippines was still trying to recover. The United States is offering help. The communiqué of General MacArthur on July 5, 1945 declared the entire Philippine Islands liberated. It is still at that time the Japanese were defying the Allies. However, it ended on the bombing of Hiroshima and Nagasaki, until it fully surrendered unconditionally on August 15, 1945. There was rapid inspection by US Senator Millard Tydings on May 24 to May 28 1945 on the Philippines. Ten to fifteen percent of all the buildings in the Philippines had been destroyed; light and water services were almost totally destroyed; communication systems and inter-islands transportation were non-existent; tens of thousands of Filipinos were without shelter, food, clothing, and medical care; the food situation was tragic, and there was an acute shortage of seeds, farming implements and work animals; no crops could be exported. The Reparations Commission indicated that a bill for damages amounting to P16 billions should be presented to Japan (Roxas 1947). 2 June 9, 1945, the First Congress of the Philippines met for the first time since 1941. The Congress passed various measures concerning the rehabilitation and reconstruction of the Philippines (Zaide 1994, 353).3 On the day of the lowering of the American flag, the Philippines step up on enjoying its independence, but wavering on how to stabilize their work into prosperity upon its recovery from austerity. When Manuel Roxas was inaugurated as the last president of the Commonwealth on May 26, 1946 up to July 4, 1946, he felt his work for the free and independent 2 Roxas, Manuel. National Problems during the Roxas Administration. Manuel A. Roxas. Extracts from the Final Speech on Parity of his Excellency, 707. 3 Zaide 1994, 353. EUROPEAN ACADEMIC RESEARCH - Vol. III, Issue 5 / August 2015 5218 Robert Paul V. Jurado- The Political History of the US-Philippines Trade Relations of 1946 Philippines. While on July 4, 1946, he became the First President of the Third Republic of the Philippines. As the High Commissioner McNutt said, “a nation is born” (Zaide 1994, 353) 4. However, as it is the rise of the post war problems of the republic. According to Dr. Sonia Zaide: “The third problem was the financial poverty of the government. The new Republic began to function on an annual deficit of over P200,000,000, with little prospect of a balanced budget for some years to come. For operational expenses, it had to borrow heavily from the United States and to depend upon American monetary aid.” (Zaide 1994, 353). 5 The campaign to extract the Philippines away from the Japanese left it in ruins. Claims from all the countries damaged by the Pacific costs to billions of dollars. “The Allied reparations committee, however, could not agree on the amount Japan could pay.” (Francia 2010).6 Most of these payments, which MacArthur compelled, were in the form of industrial equipments. In 1952, Japan signed a peace treaty with forty- nine nations that they would negotiate separately with not just the Philippines but other war-damaged countries. In the economic setting, the General Agreement on Tariffs and Trade (GATT) was negotiated in 1947 and entered into force in January 1948. There were twenty-three (23) countries which originally signed it were at the time, engaged in drawing up the charter. The GATT has governed the trade of its members, in which the United States of America and the Philippines are members. In 1933, the US Congress provided a period of 5 years (1941 to 1946) for adjustment of Philippine economy, enactment of a measure for political independence. This measure requires enactment by the Philippine Congress, in which case the President of the United States acting through the Department 4 Ibid, 354. 5 Ibid, 355. 6 Francia, Luis H. 2010. EUROPEAN ACADEMIC RESEARCH - Vol. III, Issue 5 / August 2015 5219 Robert Paul V. Jurado- The Political History of the US-Philippines Trade Relations of 1946 of State set up a Joint Preparatory Committee on Philippine Affairs (Paul McNutt Confidential Letter to Mr. Richard R. Ely, January 18, 1946). 7 A representative of the Department of State of the United States has been invited to present on Trade Relations of the Filipino Rehabilitation Commission. It was a discussion which was referred to the committee endorsing the following positions: 1. An arrangement under which there would be free trade between the United States and the Philippines for as long a period as twenty years after the Philippines become an independent country would be inconsistent with the objective of this Government to obtain the removal of preferences and discriminations which obstruct the expansion of world trade and such an arrangement should not, therefore be undertaken. 2. It is recognized, however, that in establishing nonpreferential trade relations between the United States and the Philippines it may be desirable with a view to the economic rehabilitation of the Islands to provide for period of declining preferences. 3. It is further recognized that the rehabilitation of the Philippines, to which the United States desire to make, on a sound and lasting basis, the fullest possible contribution, involves other important considerations, and it is proposed, after further study, to suggest other measures for promoting such rehabilitation.” (Memorandum by the Acting Secretary of State to President Roosevelt March 20, 1945). 8 7 Paul McNutt, Confidential Letter by the United States High Commissioner in the Philippines (McNutt) to Mr. Richard R. Ely, of the Office of United States High Commissioner addressed to President Truman, January 18, 1946. 8 James Byrnes, Memorandum by the Acting Secretary of State to President Roosevelt, March 20, 1945. EUROPEAN ACADEMIC RESEARCH - Vol. III, Issue 5 / August 2015 5220 Robert Paul V. Jurado- The Political History of the US-Philippines Trade Relations of 1946 While this happens, the Philippine government submitted to Senator Millard Tydings a proposal under which there would be a free trade between the United States and the Philippines, but this does not include basic quotas which were previously defined under the Philippine Independence Act as amended.