On Nov. 15, 1935, the Commonwealth government was inaugurated. A transition of 10 years during the Commonwealth period involved a path of changing policies requiring economic adjustment as provided by the Tydings-McDuffie act.
The final price of political separation was the loss of trade privileges that propelled the export-driven growth achieved during the period of colonial economic development. Free trade and preferential access to the American market had to end in time.
A prelude to understanding the issues affecting the transition and the road to full independence requires appreciation of the full picture of the economy. That picture in 1936 is reviewed.
The export-driven economy. In 1936, when the country had experienced its first year of the Philippine Commonwealth, the country’s total exports was $136.4 million and imports $101.2 million, so that total trade was $237.6 million.
The country’s population was around 15.5 million, so that for every Filipino, there was a per head total trade amounting to $15, and exports per head at $9.
The numbers appear low in today’s dollar values, but in 1936, the US dollar and its coins could buy many things since the price of most necessities were low . The peso was fixed at two pesos to a US dollar. The peso was strong.
As a result, the standard of living was relatively good. Exports income enabled the purchase of a wide range of imports. The strong peso made possible the consumption of items from the US and cheaper necessities from other countries.
1936 was a good year from a trade viewpoint. The worst years of the Great Depression – 1930 to 1934 – were just over. The US economy that was beginning to recover brought upliftment to the level of Philippines exports income.
In 1929, total Philippine exports had peaked at $164 million and imports at $147 million. The years immediately following 1929 represented the worst of the depression years. World trade fell, which also meant a bad drop for Philippine exports. By 1936, exports and imports had recovered, although still short of the peak levels observed in 1929. Signs of trade recovery for the Philippines followed the recovery of the US economy, the principal source of market impetus.
The big picture. In 1936, 79.4 percent of the export revenues of $136.4 million were destined to the United States.
However, the big picture was that two groups of exports – products from sugar and from coconuts – accounted for 67.9 percent of all export earnings and that 82 percent of these were bought by the American market.
Add the export products made from abaca and tobacco agriculture and 84.5 percent of all exports in 1936 were accounted for. The share of the American market for these exports rose to 90.7 percent.
Although all the products were agriculturally based, they all involved some degree of processing. Some amount of increasing industrialization of the processing was involved as production groups expanded in their classification.
The export profile extended. Sugar exports ($62.9 million) accounted for 44 percent of total exports, but all of it went to the United States.
Coconut products amounted to $33.9 million. Coconut oil exports ($13.79 million) and dessicated coconut ($4.4 million) were shipped almost in their entirety to the US. Only copra exports ($15 million) and copra meal and cake ($1.8 million), the crudest product among the coconut products, which accounted for 10.9 percent and 1.3 percent respectively, of total exports had a slightly more diverse market direction: 65 percent of copra exports and slightly less in percent for copra meal were sold to the US.
Abaca exports ($17.1 million) had a more diverse market, with the US buying only 31.2 percent of the product. Cordage (a more advanced manufactured version) was a major manufacturing material important to the age of shipping. Abaca exports had a worldwide market, especially among maritime countries in Europe and Japan.
Tobacco products ($5.3 million) constituted another group of traditional exports of the country, accounting for 3.7 percent of total exports. About 49 percent of tobacco exports went to the US. Cigar exports were highly thought of during this period. W. Somerset Maugham, the English writer, thought highly of his Manila cigars in his memoirs. Leaf tobacco was another major export.
There were home-based industries that required labor-intensive piecework activity. The most active among these was that based on embroideries, a forerunner of the garment export trade among developing countries. Exports of embroideries ($4.2 million) accounted for three percent of total exports. Exports of hats ($0.59 million) based on buntal and other coarse fiber kept many household industries of Bulacan and Tayabas (now Quezon province) employed. The pearl button exports ($0.21 million) totally were shipped to the US. Canned pineapple exports ($0.5 million) sold to the US as exports were supplied by the agricultural plantation in northern Mindanao.
Natural resources exports were not yet a big factor, but they showed up in the export statistics. Timber and lumber exports ($3.1 million) accounted for 2.2 percent of total exports. Philippine mahogany had a growing lumber market in the US. Nearly 40 percent of exports of timber and lumber went to the US, with Japan buying also substantially. Forest resources also helped to provide gums and resins ($0.34 million), while shoreline forests yielded cutch ($0.32 million).
Mining exports in 1936 had been negligible, despite the known wealth in mineral resources then. There were exports of chrome and iron ore, but these were not significant.
Trade gloom and adjustment on the horizon. There was an impending picture of gloom on the horizon as full independence neared.
The future independent Philippines would cease to enjoy the benefits of free access to the American economy for its major export industries – the industries on which past prosperity was based. A new, but limited period of preferential trade arrangement would take its place, but even then, that period faced a declining trend of preference until it would end after some defined years!
(To be continued)
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