Comparative Amounts and Proportions of Philippine-United States Trade Reciprocally Favored Through Duty-Free Trade Relations.

It is recognized that it would be difficult and impracticable to measure the full scope of comparative United States-Philippine tariff benefits by mathematical standards; even a partial measurement is difficult because practically there are no tariff barriers between them. Nevertheless, certain definite trends may be ascertained by finding the amount of trade exempted from duty on each side, and establishing the periods when duty-exempt trade values were greater on one side than on the other.

From the beginning of duty-free trade between the Philippines and the United States in 1909 until the end of 1929, imports into the United States from the Philippines, valued at about $797,341,000, were given tariff preferences, the remaining $560,592,000 being on the general free lists of the United States tariffs regardless of origin. During the same 20%-year period imports into the Philippines from the United States and its possessions, valued at about $1,044,059,000, were given Philippine tariff preferences. But this amount included large importations into the Philippines, from July 1, 1910, to the end of 1929, for or for account of the United States Government, of which the exact amount can not be ascertained but which are estimated at not less than $50,000,000 for the Army alone. If this estimated amount of United States Government purchases is eliminated from the Philippine figures, it appears that from the beginning of mutual free trade to the end of 1929 the value of American goods receiving tariff preferences in the Philippines exceeded by not over $196,718,000, the value of Philippine products receiving tariff preferences in the United States under the reciprocal duty-free trade status.

In every year from the beginning of reciprocal duty-free trade relations in 1909 to and including 1921, Pippine importations of tariff-favored goods from the United States and its preselila Ex ceeded by considerable margine the values of similany favored Pilip pine products imported into the United States. Wale wa vodnej continued in 1922. the margin in favor of American trace exen on from duty in the islands was recused to a reativey 62. by de in man year, if importations into the Pallippines for woman d'ra United States Government service are decluste banag IL YA

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United States Government purchases for its services in the islands were deducted from Philippine imports.

A comparison of this reciprocally tariff-favored trade during typical years under operation of the United States tariff acts of 1909 and 1922 (Philippine tariff rates meanwhile having remained practically unchanged) reflects the increased tariff favors accorded by the United States to Philippine products. During the three fiscal years 1911-1913 the annual average value of American products exempt. from duties in the Philippines because of their origin was about $21,605,000; this amount was increased to an average of $75,566,000 during the three calendar years 1926-1928, and to $92,587,000 in 1929. On the other hand, during the same periods, the annual average value of Philippine products exempt from duties in the United States because of their origin increased from $9,364,000 during 1911-1913, under operation of the act of 1909, to an annual average of $81,466,000 in 1926-1928, and to $97,920,000 in 1929, under the tariff act of 1922. Comparing the amounts of trade reciprocally exempted from duties under the mutual free-trade relationship the United States had the advantage by considerable margins in every year to and including 1921. In 1922 and 1926, the differences were not important, if allowance is made in those years for Philippine imports for use of the United States services in the islands. But in 1923, 1924, 1925, 1927, 1928, and 1929, the advantage in the amount of trade reciprocally exempted from customs duties turned definitely to the Philippines by margins of varying importance: In 1923, $1,496,000; in 1924, $9,571,000; in 1925, $4,347,000; in 1927, $14,641,000; in 1928, $4,512,000; and in 1929, to $5,333,000. To these amounts should be added the value of Philippine importations for use of the United States services in the islands.

The proportion of United States products enjoying tariff preferences in the Philippines under duty-free trade relations has never been less than 97 per cent, while the proportion of Philippine trade so favored in the United States has ranged from as low as 22.5 per cent (during the World War year 1917-18) to a maximum of 77.8 in 1929.

In comparing the amounts and proportions of United States and Philippine trade reciprocally exempted from duties, it should be noted that practically all Philippine products shipped to the United States which were not accorded tariff preferences because of their Philippine origin would have been entitled to free entry under the general free lists of the United States tariffs as applied to similar products of any origin.

The annual amounts and proportions of Philippine-United States trade reciprocally exempted from import duties from 1909 to 1929 are shown in Table 5.

Comparative Amounts of Duties Waived under Mutual Free Trade.

As in respect to duty-exempt trade values, the amounts of duties mutually waived are not conclusive as to the tariff benefits conferred and received through the duty-free trade relationship between the United States and the Philippines. But an examination of these amounts, particularly of their trend during later periods when the trade involved was more fully developed, affords some indication of the comparative advantages to each side through the duty-exempt trade relationship.

See p. 17.

In comparing the respective tariff advantages enjoyed by American and Philippine products under reciprocal duty-free trade, the amounts of duty waived on either side must not, of course, be regarded as effecting in all cases a corresponding addition to the export price. For much of the trade, these mutual tariff preferences may have no effect whatever on export prices, particularly in the case of American goods shipped to the Philippines, where they usually compete with foreign goods under much lower levels of tariff preference than that enjoyed by Philippine goods in the more highly protected markets of the United States. In other cases, however, the producers do get a much higher price than they could in the absence of the tariff preference.

A conspicuous example of an effective tariff preference reflected in increased prices to exporters is afforded by Philippine sugar, which is sold in the American market at prices closely approximating those received by Cuban exporters for the same grades, plus the American duty. Since the price of sugar in the American market is determined by the dutiable imports from Cuba-because the largest part of our necessary supply is derived from that country-shippers of dutyfree sugar from the Philippines and other sources enjoy a price advantage substantially equal to the duty on Cuban sugar, less any disadvantage in costs of transportation as compared with Cuban sugar.

The total amount of import duties nominally waived on the American side as a result of duty-free entry of Philippine products into the United States, from the beginning of free trade in 1909 to the end of 1929, was about $512,157,000. This compares with a total of $240,616,000 waived in the Philippines on American products entering the islands free of duty during the same period. The Philippine total would be somewhat less if deduction were made for duties waived upon shipments for account of the United States Government in the Philippines, which were not commercial importations purchased by the Philippine population.

Though useful as indicating the respective trade advantages, the gross figures given above are unduly magnified by the inclusion therein on both sides of relatively large importations of tobacco products. Large numbers of certain grades of Philippine cigars are imported duty-free into the United States and large numbers of American cigarettes are imported duty-free into the Philippines, but dutiable importations of these articles from foreign countries are small, because the rates of duty on both sides are very high and practically identical. But notwithstanding the high duties on foreign tobacco productsthe duties on such products being very high in practically all countries United States market prices of Philippine cigars and Philippine market prices of American cigarettes are in fact lower than the duties on the foreign articles. It is therefore clear that the amount of duties actually waived on either side is smaller than the hypothetical amount arrived at by applying to these large duty-free importations of cigars and cigarettes the high rates of duty actually collected only on very small importations from foreign countries. Moreover, it is clear that these large mutual tariff preferences on cigars and cigarettes have not resulted in corresponding higher prices on either side, and that the high duties on these articles when imported from foreign countries could never have been collected on anything like the large quantities

actually shipped under mutual free trade in both directions. Tobacco shipments should therefore be omitted from the above comparison showing total duties nominally waived on both sides.

After subtracting from the above totals the duties nominally waived on tobacco and tobacco products, the total of duties waived by the United States is reduced to about $255,237,000, and the Philippine total to about $174,025,000, computing both amounts from the beginning of free trade in 1909 until the end of 1929.

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6

With the elimination of all tobacco from consideration on both sides, the remaining nominal tariff concession by the Philippines was generally greater than that of the United States from the beginning of free trade in 1909 to the end of 1920. Beginning with 1921, however, the nominal tariff concessions by the United States (even with all tobacco eliminated) were invariably greater than on the Philippine side. Moreover, the amounts of nominal Philippine concessions in every year (except the fiscal year 1910) would be materially reduced after eliminating the duties computed upon United States Government purchases, which can not be separated from the figures covering Philippine commercial imports.

The apparent amount of the United States waiver of duties upon shipments of Philippine sugar alone, from the beginning of limited duty-free trade in 1909 to the end of 1930, was about $190,000,000, computed at the special preferential rate of duty upon Cuban sugar during the same period. This waiver of sugar duties alone-about $190,000,000-was greater than the corresponding concession of about $174,025,000 in the Philippines on all American goods together, except tobacco and tobacco products, from the beginning of reciprocal dutyfree trade in 1909 to the end of 1929.8 In 1930 the American concession to Philippine sugar, measured in duties waived, was about $29,363,000; in 1929 it was $25,086,000; and the annual average during the five years 1924-1928 was about $16,361,000, these amounts being computed at the preferential rate on Cuban sugar.

The foregoing comparison shows that, measured by the amounts of duties nominally remitted on both sides, without excluding tobacco products, the amounts waived in the Philippines on shipments from the United States since the beginning of duty-free trade have generally been much less than the amounts waived by the United States on Philippine products, the average ratio in favor of the islands having been more than two to one. If tobacco products are excluded on both sides, this advantage in favor of the islands still holds true for the years 1922 to 1929, inclusive, the remaining total of duties waived by the United States during this period amounting to about $201,417,000, as compared with $87,696,000 waived by the Philippines.

The amounts of duties reciprocally waived by the United States and the Philippines to the end of 1929, by virtue of the existing duty-free trade relations, are conveniently summarized in Table 6, by years, annual averages, and accumulated totals.

Except in the fiscal year 1910, for which year United States Government purchases are not included in Philippine import statistics.

7 Except in the fiscal year 1912, when United States importations of Philippine sugar were unusually heavy.

8 If statistics were available for estimating the duties waived during 1930 in the Philippines on American products, it would probably be shown that the duties thus waived during 1909-1930, excluding those on tobacco and tobacco products, were about equal in amount to the $190,000,000 waived during the same period by the United States on Philippine sugar alone, computed at the preferential rate applicable to Cuban sugar.