Why the Philippines Matters

AF – Hello, my name is Allison Fedirka, I am a senior analyst at Geopolitcal Futures, and we are giving you today our second podcast. Here with me is our director of analysis, Jacob Shapiro. Jacob, thank you for joining us.

JS – It’s always a pleasure.

AF – Today I want to talk to you about a lesser known country, we’re always hearing about Russia and China and Iran, and it is to the point of becoming dinner table conversation for most of our listeners. The Philippines have come up several times in Geopolitical Future reports, and I’m just wondering why a small island nation like that is of any interest.

JS – That’s a good question. The reason that we’re so focused on the Philippines, in particular, is because of geography, it’s because of where it’s located. We are a geopolitical company, and geopolitics is really the intersection of geography and power. The Philippines does not have a great deal of the latter, but it has a great deal of the former. It’s located in a very important, strategic location. So, if you had a map in front of you, or if you were looking at a map, you would see that the Philippines is one of the major countries that makes up the U.S. strategy to basically encircle China to make sure China is not going to be able to extend its influence outward. So, the reason the Philippines has become so important from our point of view, and the reason that you have China and Japan and the United States and everybody else chasing them around and trying to give them nice things is that China is trying to burst out of its cage in the South China Sea, and it can’t do that with its own navy because its navy capability is not up to standards when it comes to the United States. It wouldn’t be able to fight its way out. The thing that China could do is China could try and forge an alliance with the Philippines. So, we’re talking about a country that has been a staunch U.S. ally since the end of World War II, and we’re talking about a country that gives China a great opportunity to burst out of the cage. If China was able to forge some kind of relationship with the Philippines, it would be able to solve a lot of its problems without having to fire a shot. And the reason this has become more relevant is that the Philippines has a relatively new president, Rodrigo Duterte, and Duterte has said some not-so-nice things about the United States and has even said he wants to separate from the United States, and that he wants to embrace China, that he wants China to be a new strategic ally for the Philippines. So you put all of these things together, you put the strategic need that China has, you look at the political opportunity that is offering itself to China and the Philippines, and you look at the one real place where China might be able to cause problems in the region. And so we are very, very focused on the China-Philippines relationship, and on what both sides are doing.

AF – Ok, so I can understand China and the U.S., and we’ll get back to their interests and bilateral relationship and how the Philippines might figure in with that, but you did mention that they have a new president, Duterte, in power. I’m pretty sure we have all seen some interesting comments that he has said, as he is known as the Donald Trump of the Philippines, so he is a bit of a hot wire in terms of media headlines. You’ve also said that the Philippines is a country that does not have much of its own power, and yet with a president like Duterte, he doesn’t seem like the kind of guy that, or any president for that matter, that want their country to merely be a pawn in a duel between China and the U.S. So, if you are the Philippines, and you still have your national pride and your national sovereignty that you want to assert and protect their interests, but you’re small, how do you make use of that power that you do have? How do you create a strategy to combat two giant countries like the U.S. and China?

JS – First of all, let’s give a little respect to the Philippines. You said that Duterte could be the Philippines’ Donald Trump, I don’t know why we shouldn’t just call maybe Trump the United States’ Duterte if we want to be respectful to the Philippines. But this gets back to the whole point about, and we write about this all of the time, that individuals, especially individual leaders, are incredibly constrained, so what Duterte says, and what Duterte wants really doesn’t matter. If you want to understand what the Philippines is doing and the greater geopolitical gain that is happening in the South China Sea, and in the East China Sea as well, in the U.S.-China relationship, you should really just ignore everything Duterte says and you should try and discard the things that he wants, and just look at his position. And his position is that he has come to power as a populist president, outside most of the typical centers of power in the Philippines. This is a country that is no stranger to military coups, that is no stranger to instability, also because of its geography, it’s a collection of islands, with a lot of different things going on in it. So, you’ve got someone for whom the chief thing of importance is to make sure his house is in order in the Philippines itself. At the same time, Duterte has ideas about how he wants the Philippines to exist in the world and he is playing a weak hand fairly well. Because there is this rising competition between China and the United States, Duterte realizes that the Philippines has something major to offer. Its strategic location means that both the United States, and China and Japan, all of these countries want relationships with the Philippines. So, what can that give Duterte? On one hand, it can give him – it can’t make the Philippines powerful, it can’t make the Philippines grow a navy that would be able to take back Scarborough Shoal from the Chinese. What it can do is that it can create leverage on both sides. So, the Philippines isn’t exactly happy with the relationship with the United States in some ways. The Chinese took Scarborough Shoal and some in the Philippines are mad that the U.S. wasn’t there to protect Philippine interest. The Philippines, especially Duterte, would like the United States to stop criticizing his domestic issues so much. The Philippines also, the United States is one of the main providers of foreign direct investment into the Philippines and if you are a populist president like Duterte, money is something you’re definitely going to want, because you are going to try and make the economy better, so one of the things that Duterte has done is he has recognized that the United States needs him and needs the Philippines and he’s recognized that for China being able to have some kind of new relationship with the Philippines would also be incredibly important and he is able to play them off of each other. He goes to Beijing last October and signs all of these deals worth tens of billions of dollars, more than China has given to the Philippines probably in the last five years combined. But then the deals don’t get signed and he comes back and either himself, or some of his other protégées walk back some of his comments, or the defense minister comes in and plays bad cop and then the Japanese prime minister comes and he promises aid and it was just revealed last week that the Japanese are going to loan some patrol ships to the Philippine navy to help with that. So all of these things, you shouldn’t take it as an example of “oh Duterte, he’s this mercurial guy who doesn’t understand what’s going on, or he’s a little off center, he doesn’t know what is going on.” He knows exactly what’s going on, he sees that the Philippines is very valuable to some of the biggest countries in the world right now, and some of the most powerful countries in the world right now, and he is trying to preserve as much independence for Philippine foreign policy as he can, and he is trying to get as much out of those relationships as he can.

AF – And, previously in this, we have talked about, a little bit about China and the United States, you just mentioned Japan. How do we factor in Japan with this dynamic, is it as strong a player? Is it truly trying to vie for influence over the Philippines, how does it figure into this dynamic of strategic control in the South China Sea?

JS – We should think about Japan as the main U.S. ally in the Asia-Pacific. It’s the most powerful, it’s the closest. The interests are for the most part aligned, we actually published a piece yesterday about some of the mismatch in the influence, but generally speaking Japan and the U.S. have similar interests. So, Japan is not interested in seeing the Philippines flip sides any more than the U.S. is. In some ways, Japan would be even more concerned by it, because Japan doesn’t have the luxury of being 8,000 miles away from these developments. Japan also happens to be a major trading partner of the Philippines, Japan also happens to be a larger source of foreign direct investment in the Philippines in recent years than the United States, and like I said, Japan is actually loaning some patrol ships to the Philippines and has offered its services to help against piracy and other things like that. Japan, I would say, is not an independent player right now in this particular equation, but Japan is squarely on the side of the United States and on this broader coalition that is pushing back against some of China’s seemingly aggressive moves. The United States by itself in terms of its own economic influence in the Philippines, it’s actually comparable maybe even a little bit less than China, especially when you start taking trade into account, but when you think in terms of not just the United States, but when you think of the United States, and South Korea, and Japan and all of these countries have an interest in the current balance of power in the way it is and that all of these countries would have problems with the Philippines and would try and do things to the Philippines to make sure the Philippines doesn’t switch sides, you begin to see that even though the Philippines offers an opportunity for China, and even though Duterte seems to offer a very enticing opening for China, there are a lot of constraints that prevent the Philippines from actually changing their alliance structure or actually leaving the current alliance structure that they’re a part of.

AF – What would some of those constraints be?

JS – On the Philippines?

AF – Yes.

JS – Ultimately what we’re talking about here, we are talking about a country that does not have a relatively strong military when we are looking at some of these other countries in the region. In 2012, when some Chinese ships came to Scarborough Shoal, the Philippines couldn’t do anything about it. If the Chinese wanted to come take Scarborough Shoal tomorrow in force, the Philippines wouldn’t be able to do anything about it. It would have to depend on the United States to protect it, so that’s really the main constraint. The Philippines does not have the ability to project military power itself, and it depends on a mutual defense treaty with the United States for its defense.

AF – And China could not provide that same level of defense?

JS – Well, you have to think in terms of the fact that currently, the Chinese navy in particular is not in the same class as the United States Navy. There’s also the issue of what would China be protecting the Philippines from? China and the Philippines have conflicting territorial claims in the South China Sea, so if there’s going to be an alliance between China and the Philippines, either they have to ignore that territorial disagreement and one of them have to look the other way, or there has to be some resolution on that particular issue. So yes, China would be able to protect the Philippines against a lot of different threats, not as much as the United States, but certainly the Chinese could do some things, especially if they were hypothetically given basing rights there or something like that, but the problem is that China has designs on some Philippine territory, and the Philippines doesn’t want to give up that territory to China. So, on the one hand, sure China could defend the Philippines, but China is not so much interested in defending the Philippines as it is in taking territory that it claims for itself, and then using the Philippines to change the balance of power in the South China Sea, in the region in general, and using the Philippines in order to change its strategic position vis-à-vis the United States. What makes the United States a more attractive ally for the Philippines is the fact, and I mentioned this a little bit earlier, it’s 8,000 miles away. The United States does not have any designs on Scarborough Shoal or any other territory that the Philippines claims as its sovereign territory. What the United States wants is to keep the status quo, the United States wants the current alliance structure to stay put, it wants Philippine territorial integrity to be respected to its full extent, all of these things. So these are the things that make the United States a more natural ally, just in terms of the hard interest, than China.

AF – You’ve done a good job for us at outlining the strategic interests of the different power players and countries in that area with the South China Sea, and the strategic role of the Philippines, and you’ve also mentioned how it is important in these types of situations to not necessarily pay as much attention to what leaders say, but more about what they do. Moving forward, what are the types of things that you will be paying attention to, to have a better understanding of how this conflict of interest over the Philippines is unfolding? What are you going to be looking for? People are talking about the buildup of militaries, potential war in the South China Sea, there’s some very alarming ideas that are being thrown around, how do you see this coming to play this year in 2017?

JS – This again gets into our methodology at Geopolitical Futures, which is that we build a model of how we think the world is working, we have a forecast about what we think is going to happen, and then what we’re constantly doing is trying to see if our forecast is wrong. So we spend most of the year attacking our forecast trying to show that it’s wrong. So, what I’m constantly looking for is signs that this model or this forecast is off. It is important not to overreact to any particular thing, but the reason we’re talking about the Philippines today is that the minster of commerce in China abruptly canceled a visit to the Philippines, because the Philippine foreign minister criticized China very publically, at a recent ASEAN conference on Tuesday. And it wasn’t the criticism that was telling, what was different about it was that it was in public, it was at this ASEAN conference, the foreign minister invoked all of the countries that were part of ASEAN as all agreeing that Chinese moves were overly aggressive, and China thought that it had an arrangement that it had negotiated with Duterte that such disagreements would be handled bilaterally and at a more quiet level. So one of the things we were looking at this morning was why did the Philippines decide to shift its position like this, it wasn’t that the foreign minister just woke up this morning and had a bad night’s sleep and decided he was going to say these things. So we’re trying to understand why exactly would the Philippines want to do this. If you look at the very tactical level, we can say that, well the United States released information via unnamed sources to the press that China had increased or had finished a bunch of military buildings and military installations on some of the islands, in the Spratly Island chain in the South China Sea, so perhaps the United States gave advanced warning of intelligence to the Philippines, maybe there is more to that intelligence that wasn’t released to the press that is particularly concerning to the Philippines. If you go a level deeper than that, it gets into some of the interests we’ve talked about. The United States has been relatively not vocal about what the Philippines has been doing. They’ve seen Duterte’s statements, I know that when Obama was president he canceled a meeting with Duterte because of some very not nice things Duterte said about Obama, but generally speaking the U.S. has been steady, it hasn’t overreacted to any of the statements coming out of Manila, and has slowly pushed forward with all of the military and economic cooperation that exists between the two countries. So you might infer from that there was something the United States was seeing or the new administration has made some kind of deal with the Philippines, where they thought it was going too far, they didn’t like some of what they were seeing, and they exerted some of the pressure behind the scenes on the Philippines that they could. I don’t know that for sure, but if we are just making inferences from what is in front of us, I think it is a high possibility. And then on the deepest level, and this is the model and this is the forecast, the forecast is just that China is going to try very hard to change its relationship with the Philippines and to try to build an alliance with the Philippines. And ultimately based on all the constraints that we see, and based on all the different levers that all of the different parties have over each other, I just think that there’s too much constraining the Philippines to make that kind of shift. It’s just too dependent on the United States, and too dependent on the United States alliance structure, and then besides that, has these serious disagreements with China over territory with what one claims and the other also claims. So, what we are watching for is signs that either we are wrong, we are watching for any signs of cooperation between the Philippines and China that challenges this particular model, and on the other hand, we’re looking for things that confirm the model. This past week, we’ve seen a couple major incidents and a couple major statements coming out that seem to confirm some of the things that we’re looking for, but you can’t make a conclusion one way or another just from one thing. So as we go forward, and this is not just going to be a one-year thing, China is going to be growing and is investing a lot in its military capabilities and it’s going to keep thumping its chest in the South China Sea, and for as long as China has those interests, this is going to be an issue, and the Philippines is going to present an opportunity for China. So we’ll be constantly looking at this, and we’ll be constantly looking at whether the model that I’ve talked about here is correct, or whether we’re missing something and whether we need to think about some of the constraints and the actors differently.

AF – Well, we look forward to seeing any updates that you may have on this topic, and appreciate you enlightening us with the Philippines, which again, it’s always very informative to hear about how smaller countries that aren’t always in the headlines, or that don’t always have all of the power can actually play a critical role in how geopolitics unfold, especially between two countries as powerful and influential as the United States and China.

JS – Absolutely.

AF – Thank you very much for speaking with us today Jacob.

JS – Thanks for having me.

AF – It’s our pleasure, and thank you to everyone who listened and we look forward sharing some more of our geopolitical conversations and thoughts with you in our future podcasts.