ADDRESS GIVEN BY THE HONORABLE MIGUAL A. CUADERNO, SR. GOVERNOR, CENTRAL BANK OF THE PHILIPPINES AT THE PHILIPPINE SESION OF THE FAR EAST CONFERENCE OF THE FAR EAST-AMERICA COUNCIL OF COMMERCE & INDUSTRY , INC. ON THURSDAY MORNING, OCT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83-00423R001100190008-1
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 10
• Document Creation Date: November 16, 2016
• Document Release Date: October 21, 1999
• Sequence Number: 8
• Publication Date: October 8, 1953
• Content Type: SPEECH

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FAR EAST-AMERICA COUNCIL
OF
COMMERCE AND INDUSTRY, INC.
NOT FOR RELEASE
BEFORE 11:00 a.m.
THURSDAY MORNING, OCTOBER 8th
ADDRESS GIVEN BY THE HONORABLE MIGUEL A. CUADERNO, Sr.
GOVERNOR, CENTRAL BANK OF THE PHILIPPINES
AT THE PHILIPPINE SESSION OF THE FAR EAST CONFEREYCE
OF THE FAR EAST-AMERICA COUNCIL OF COJIWIERCE & INDUSTRY, IIjC.
ON THURSDAY MORNING, OCTOBER 8TH 1953
NEW YORK CITY
"UNITED STATES-PHILIPPINE ECONOMIC RELATIONS"
CPYRGHT
I an happy to participate again in your Annual Conference.
The selection of the theme for this Conference, "Foundations for Under-
standing and Economic Cooperation between the United States aid the Far
East," is indeed a happy one. It is both timely and appropriate because
the economic problems of countries in the Far East constitute the most
pressing issue today.
Basis for Economic Cooperation -
Economic cooperation between the United States and the Far East
could be achieved only if the American people would try to understand the
political and economic problems of the Far Eastern countries end if deter-
mined steps to correct them were taken.
It took centuries for some countries in the Far East to become
politically free; a few of them have yet to gain their liberty. Those
which have won political freedom are rich in natural resources but their
low level of production, especially of consumer goods, has kept their
people in a constant state of hunger and poverty. Because of the ravages
of the last World 'iar and the rapid increase in populattion their peoples
have a.living standard even below prewar.
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Freed from the dictates of their foreign rulers, these countries
are no longer satisfied with their prewar pattern of economy, vhich is
characterized by a heavy dependence upon ability to sell a few items of
raw materials, the prices of which are dictated by foreign political and
economic developments, while they have to import commodities essential to
the physiological needs of their peoples. These countries now feel that
if their newly-won political freedom is to be preserved, they must achieve
a greater degree of economic freedom. They feel deeply the fact that,
while for centuries they have kept the factories of the industrial
countries supplied with raw materials, their own peoples have remained in
a state of dire poverty.
Such one-sidedness in economic relations should no longer be
tolerated. The universal hunger for higher levels of living, and the
demand for adequate recognition of national dignity, especially by newly-
formed states, make such conditions an intolerable anachronism at present.
Most of the countries which have had to put up with such
economic distortions in the past are now undertaking the arduous task of
raising the levels of productivity and real income within their national
boundaries, so that the benefits of modern technology might be put at the
disposal of more millions of people than at present enjoy them.
When we speak of "Foundations for Understanding and Economic
Cooperation between the United States and the Far East," therefore, this
is the first point that has to be borne in mind, for most of the countries
in that area have undergone similar experiences in the past and are now
engaged in analogous efforts to diversify and develop their national
economies.
A second point that must be mentioned in connection with this
first one, however, is that such economic development is not possible
unless equitable economic relations exist between such countries and the
more technologically progressive countries of the world; this applies with
particular emphasis to the United States, whose wealth, power and produc-
tivity put it in the first rank of the great nations of today. The
under-developed countries of the world, especially the former colonies in
Asia, due to the distortions introduced into their economies by long years
of foreign domination, must import a large proportion of the consumption
needs of their teeming populations. Worse still, they must import prac-
tically all of the capital goods - tools, equipment, machinery - and a
considerable amount of the raw materials - chemicals, plastics, etc. -
needed to industrialize and lift themselves out of the economic morass in
which they find themselves at present.
These import requirements must be financed by what these
countries can produce and sell abroad; in a word, by their exports.
What, however, do they find when they look around? First, they
cannot trade with Red-dominated countries, lest by so doing they crack the
unity of the free world. Secondly, when they turn to the United States,
they find that their products have to hurdle a formidable array of barriers
tariffs, quotas, restrictions, complicated procedures - which effectively
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exclude most of them from the American market. Thirdly, vh en they look
elsewhere in the world, they find that it has become extremely difficult to
engage in the triangular trade of bygone days because of the inconvertibil-
ity of some currencies. They may find that they can sell their goods in
one country but must import their requirements from another country which,
however, cannot accept the currency of the first in payment. This puts the
underdeveloped countries right back where they started.
How a re they going to solve these multifarious and complicated
problems? I am not here to give a definite and universal answer. I call
them to your attention, however, in the light of the theme of this Confer-
ence, in order that you might be encouraged to devote some more thought to
them.
They are, in my view, some of the fundamental issues which have
to be met if a real foundation for understanding and economic cooperation
between the United States and the Far East is to be had.
United States-Philippine Economic Relations
Pow the United States can take the lead in the solution of some
of these issues forms the main topic of my talk today. I refer to the case
of my country, the Philippines, with whose problems I am naturally more con-
versant than with any others.
With the grant of political independance, and considering the
close relationship which for over half a century has existed between our two
countries, it is highly to be desired that a strong foundation for understand-
ing and economic cooperation should at all times exist between them. It is in
this spirit that I shall try to discuss before you the subject of United
States-Philippine economic relations.
In 1946, because of the impending grant of independence to my
country, the Congress of the United States approved a law providing for an
econome arrangement between the United States and the Philippines. It was
perhaps believed at the time that the economic arrangement provided by this
law would enable the Philippines in time to establish an economy v~hich
would be consistent with its status as an independent country. Since then,
however, it has become apparent not only that the objective sought in that
law is difficult to achieve, but also that the economic position of the
Philippines vould be severely strained by the operation of its provisions in
the not distant future.
Therefore, in May of this year my Government started negotiations
with your Government for a reexamination of the economic relations between
our two countries. We have taken this step because of our deep concern about
the economic stability of our country, and because we sincerely feel that it
is in your interest as well as ours that the Philippines achieve an economic
pattern which is not too dependent upon the continued assistance of your
generous country. Since the final decision on our proposals would require
action by your Congress, it is important that all elements in this country
should be informed on the nature of and grounds for our proposals for revision
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CPYRGHT
of our economic relations. I hope, therefore, that you will pardon me if
I take a little of your time to explain here the circumstances which impelled
us to take such a step.
That there is need for a reexamination of our economic relations
with the United States is indicated in the following statement in the report
of the economic mission sent by former President Truman to my country in
1950, headed by Mr. Daniel W. Bell:
"The Philippine Government will find it necessary
to direct its commercial policy to meet the needs
for development and to strengthen trade relations
with other countries. The present Trade Agreement
sets the terms that will govern the trade relations
between the United States and the Philippine Re-
public for the next twenty-four years. The Act under
which the Agreement was made was passed more than
four years ago. Conditions have changed very rad-
ically since then, new problems have emerged and new
policies have become necessary to deal with them."
This Mission recommended in its report that a "study be made of
the need for modifications of the present trade agreement to take account
of new conditions and to provide for trade relations in conformity vith
international agreements on trade and exchange policy to which both countries
have subscribed."
Under the terms of the present Executive Agreement between the
United States and Philippine Government, which are in strict accordance
with the provisions of the Philippine Trade Act approved by the Congress
of the United States in 1946 (known as the Bell Trade Act), certain
Philippine products, such as raw sugar, coconut oil, cordage, pearl
buttons, etc., enter the United States market free of duty but in limited
quantities (under quotas). These rank among the principal exports of the
country. U. S. goods enter the Philippines free of duty but not subject
to quotas.
'Tdhile this trade arrangement between our two countries has
encouraged the growth of industries receiving preferential treatment in
the U. S . market, it has rendered it very difficult for my country to
establish industries for the production of consumer goods, thus compelling
the country to remain a heavy importer of such goods. From 1946 to 1948,
inclusive, total imports amounted to ,2,784,600,000, as against total
exports of ,1,293,000,000, or a total trade deficit of 1,491,600,000.
Of course, that was a period in which wartime shortages and the require-
ments of rehabilitation and reconstruction had to be met. But in 1949,
when the import requirements of the country could be considered as most
nearly normal, total imports still exceeded total exports by
,665,300,000, while the total deficit in the balance of trade for the years
1950 to 1952, inclusive, was 291,200,000, notwithstanding import and
exchange controls and the high receipts from exports due to the war in
Korea. In 1952 alone, the balance of trade was against the Philippines
by J~137,500,000, which did not include freight and other shipping charges
amounting to a net of around /104,000,000. Had it not been for U. S.
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Government expenditures in the Philippines during that year of
;;149,200,000 for veterans pensions, NSA aid, and U. S. military and civil
establishments, the international reserves of the country would have been
seriously depleted. The heavy deficits in the balance of trade prior to
1952 and had been met with the heavy inflow of windfall dollars largely
in the form of G. I. spending and war damage payments. The persistence
of deficits in our balance of trade shows among other things that much
of our export income is dissipated in the purchase of consumer imports,
instead of being channeled into investment as required by the circum-
stances of our time.
If the Philippines is to be economically viable, it has to
develop an economy which is not too dependent upon the country's
ability to sell in foreign markets nor upon uncertain dollar windfalls
from your country to provide itself with most of the commodities which
it needs. Such a type of economy is too vulnerable to foreign economic
and political vicissitudes.
Aside from the unstabilizing feature of the economy which
is the product of the present trade relations between our two countries,
it has serious social implications which we cannot afford to ignore.
The low income of the Philippine agrarian population which is being
aggravated by the annual increase in population in the agricultural
sector poses a problem which calls for immediate solution. The influence
of demand and price on the primary export crops of the Philippines renders
income from this source very unstable. This is all the more painful
because the prices of agricultural commodities are inherently more unstable
than those of industrial goods. At a time when the prices of export
products are declining faster than the prices of imported goods, the
income of the agricultural sector is greatly reduced. The surplus popu-
lation in the agricultural sector has to be employed elsewhere, or the
country will be faced with the problem of too many people living on land
that cannot provide them with. an adequate standard of living. This is
one of the most difficult problems of a country whose economy is largely
agricultural. Industrial development is the only solution to this
problem, but in my country the attainment of this objective is made
difficult by the competing duty-free goods from your country.
Aside from the stultifying effects of the present trade ar-
rangement on the development in our country of a more balanced economy;
aside from the difficulties which the said arrangement creates in the
maintenance of a stable economy, my country is yet to face problems more
serious in their implications to its economic and political stability.
Beginning July 4, 1954, under the provisions of the U. S. - Philippine
Executive Agreement, sugar, cordage and other Philippine articles enter-
ing the United States will be subject to duty, starting from 5% of the
U. S. duty and increasing by 5% every year, while the duty-free quotas on
cigars, scrap and filler tobacco, coconut oil and pearl buttons will be
reduced annually by 5% of the original absolute and duty-free quota. On
the other hand, a gradually increasing duty of 5% a year of the Philippine
duty will also be imposed on goods coming from the United States beginning
July 4, 1954, but said imports will continue as at present, without any
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quantitative limitations. Because of the gradually increasing duties
and because of the increase in production cost following the imposition of
duty on the supplies and materials which are imported from the United
StateF, the Philippines will soon be unable to sell its products profit-
ably in the United States market. Since the Philippines will continue
to be in need of heavily importing essential goods for the people's
well-being, we cannot see how we could pay for such imports if our
country's ability to'sell its products in your country is curtailed. It
should not be difficult to visualize the serious economic and social im-
plications of such. a situation.
Before turning to what we propose to do about this, let us
examine a few more features of the present Executive Agreement.
Freedom to Administer Currency
Experience in the past few years indicates the imperative
necessity of eliminating the provisions of the Executive Agreement which
limit the power of the Philippine Government to control and administer the
Philippine currency. The requirement that the Philippine Government
should get the consent of the President of the United States before it can
change the par value of the peso or restrict transactions in foreign
exchange could be productive of serious consequences to the international
position of the Philippine currency. On questions of exchange and mone-
tary matters, prompt and decisive action may be necessary; any delay
arising from consultation, considering that there is already a similar
commitment with the International Monetary Fund, may have serious conse-
quences for the stability of our currency.
The followin comments in the report of the United States
Economic Survey Mission Bell Mission) of 1950 on this point are self-
explanatory:
"One provision of the present Trade Agreement re-
quires that no change in the par value of the peso
shall be made by the Philippine Government without the
approval of the President of the United States. Such
a provision is not necessary to safeguard the interests
of the United States. As a member of the International
Monetary Fund, the Philippine Government cannot change
the par value of the peso until it has consulted with
the Fund, and for any change in excess of 10 per cent of
the present par value, unless it has the concurrence of
the Fund. This provision for considering any proposal
for a change in the par value of the peso by an international
organization provides adequate protection for the interests
of the United States in the stability of the Philippine
currency.
"In practice, the present provision does not offer
assurance against the imposition of an undesirable ex-
change policy. The need for exchange control or for a
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change in the par value of the peso may result from
domestic policies. The President of the United States
has no responsibility for the fiscal, credit and in-
vestment policies that may necessitate such action.
For this reason, he ought not to be burdened with the
responsibility of giving formal approval for exchange
controls or changes in exchange rates if they should
be needed. By the time such approval is requested,
the situation has become critical, and it could not be
withheld un.thout doing irreparable damage to the
country."
Other Provisions of the Executive Agreem nt
There are also other provisions in the Executive Agreement which
should be reexamined because of the inequality of the privileges provided
by them to citizens of both countries in the field of public utilities,
ownership of land, and exploitation of natural resources. It would pro-
mote better understanding between our two peoples if such inequalities
were removed.
Concrete Proposals
Stated concretely, the Philippine proposals for revision of
this Executive Agreement are as follows:
1. That the present trade provisions of the Execu-
t iv e Agreement be replaced by others providing for a
limited and reciprocal free trade between the Philip-
pines and the United States whereby full duties will
be imposed on all imports, both ways, except for those
commodities that, by agreement of the two governments,
are to be included in the duty-free lists and up to
such volume and/or amount as may be agreed upon.
2. That the provision of the present Executive
Agreement requiring the Philippine Government to obtain
the consent of the President of the United States be-
fore it can change the par value of the peso or restrict
transaction in foreign exchange be eliminated, and that
the right of the Republic of the Philippines to control
and administer its currency, subject only to its commit-
ment to the International Monetary Fund, be recognized.
3. That the provision in the present Executive Agree-
ment governing immigration, and the rights and privileges
extended to citizens in the field of public utilities,
land cwnership, and exploitation of natural resources be
made reciprocal as between citizens of both countries.
In submitting these proposals, it is the view of my Government
that we should aim to secure a trade agreement that would be sufficiently
stable in its main features to permit long-range planning and at the same
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time sufficiently flexible to meet changing conditions and the demands
of a rapidly growing economy.
A schedule has been submitted to your Government of the commod-
ities vh ich the Philippine Government proposes for duty-free entry into
the United States as well as of those from the United States to which my
Government would accord duty-free entry into the Philippines. These
lists were submttted with the understanding that they are tentative in
character, representing what my Government considers a basis or a start-
ing point for negotiation between the two countries; also, that my
Government would welcome, in the course of negotiations, any proposal
from your Government for a revision of such schedules if it vo uld provide
mutual benefits for both countries.
The Need for Immediate Action
In view of the proximity of the date when. the progressive
imposition of tariff duties sn d declining quotas on our principal exports
will take effect, my Government is anxious to have our proposals consid-
ered at an early date. An inter-department committee of your Government
has been appointed for the purpose of examining the proposals for revision
submitted by my Government and other aspects of the economic relations
between our two countries. We have been informed, however, that the
activities and recommendations of this committee will be closely corre-
lated with the activities and recommendations of the 17-man Commission
established under a recent Act of your Congress which extended the
Reciprocal Trade Agreement Act for one year, and whose terms of reference
as outlined by the President are as follows:
"This Commission naturally should work within the
framework of our foreign policy and our global de-
fense plans x x x the commission should study all
existing legislation and the regulations and admin-
istrative procedures stemming from it which bear
directly on our foreign economic relations. This
review should seek to determine how these laws can
be modified or improved so as to achieve the highest
possible levels of international trade without sub-
jecting parts of the economy to sudden or serious
strai ns ."
Considering the vast amount of work which this Commission is
called upon to undertake and the fact that the Commission is given time
only until r,larch of next year to submit its report and recommendations,
my Government fears that if the consideration and final action by your
Government are made to depend upon such report and recommendations there
would not be enough time for your Congress to act on our proposales before
July 4, 1954.
As I have already stated, when the additional restrictions on
Philippine exports to the United States as provided in the present Exec-
utive Agreement take effect next year, to be exact less than nine (9)
months from now, the Philippines will face problems fraught with serious
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implications to its economic and political stability.
Trade Reciprocity
Our proposals seeking a more reciprocal trade relation vi th
your country are in line with the reciprocal trade program which your
Government adopted with respect to several other countries. It is a
program which was advocated many years ago by your late President
William McKinley when in his last speech before his death he said that -
"A system which provides a mutual exchange of com-
modities is manifestly essential to the continued
and healthful growth of our export trade. We must not
repose in fancied security that we can forever sell
everything and buy nothing."
Of course, the reciprocal trade program of your Government is now being
examined by the Commission established by a recent Act of your Congress
extending the Trade Agreements Act for one year only.
While I do not presume to say that a more liberal view on your
part with respect to your country's foreign trade policy is in the inter-
est of your economy, I am persuaded to believe that the maintenance of
full employment and of the present standard of living in your country
requires a steady demand for your products abroad. A recent report
from your Agriculture Department, according to the issue of the Christian
Science Monitor of September 21, 1953, indicates that U. S. exports of
farm products during the year ended July first were eb out 30% less than
those of the preceding year and 20% below the average of the past five
years. This sharp decline in the value of your agricultural exports,
according to this report, "has been a major factor in reducing the status
of American agriculture during the past twelve months." In the opinion
of Secretary Benson your "declining export situation points up sharply"
your "need of more effective farm programs and for foreign trade policies
that will not only assure the U. S. farmer good markets at home, but which
also widen his markets abroad." A continuous demand for the products of
your industrial plants in foreign countries is also necessary, I believe,
if the high level of employment here is to be maintained.
Such a continuous demand, however, is hard to envision unless
the other countries of the world have the capacity to pay, and they can
get this in only two ways: by selling more to you, or by continuing to
receive hand-outs. Surely the latter alternative is inconsistent with
the dignity of free nations and with what seems to be a growing sentiment
here at this time. This leaves only the former alternative; and I wish
to point out here that such an alternative is of interest not only to
the underdeveloped countries but also to the American economy. Any
assistance given these countries - whether by more equitable trade rela-
tions or some other means - to bolster their economies and raise them to
higher production and income levels will have as a natural by-product an
increase in the demand for American goods.
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Considerable sectors of the American economy have an interest
in the maintenance and expansion of overseas demand for their putput.
In 1952, for instance, the United States exported 48% of its wheat crop,
37% of its cotton, 23% of its tobacco, 23% of its tractor output and
11% of its machine tool production, to name but a few instances.
Now, as income and consiunption rise in those countries due to
the development of their economies, their demand for goods, among them
American goods, will rise and a greater volume of trade than ever will
be the result. Obviously, such an eventuality will be of reciprocal
benefit to all parties concerned.
May I be permitted to say, therefore, that the reciprocal trade
arrangement proposed by the Philippine Government will be mutually bene-
ficial to both our countries. And may I further say in closing that a
fair consideration of the Philippine position in this respect will go a
long way toward the attainment of a better understanding and closer co-
operation between the United States and the other countries of the Far
East.
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