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Philippines Economic Relations with the United States after Independence
If the inauguration of the Commonwealth of the Philippines in
November 1935 marked the high point of Philippine-United States
relations, the actual achievement of independence was in many
ways a disillusioning anticlimax. Economic relations remained the
most salient issue. The Philippine economy remained highly
dependent on United States markets--more dependent, according to
United States high commissioner Paul McNutt, than any single
state was dependent on the rest of the country. Thus a severance
of special relations at independence was unthinkable, and large
landowners, particularly those with hectarage in sugar,
campaigned for an extension to free trade. The Philippine Trade
Act, passed by the United States Congress in 1946 and commonly
known as the Bell Act, stipulated that free trade be continued
until 1954; thereafter, tariffs would be increased 5 percent
annually until full amounts were reached in 1974. Quotas were
established for Philippine products both for free trade and
tariff periods. At the same time, there would be no restrictions
on the entry of United States products to the Philippines, nor
would there be Philippine import duties. The Philippine peso (for
value of the
peso--see Glossary)
was tied at a fixed rate to the
United States dollar.
The most controversial provision of the Bell Act was the
"parity" clause that granted United States citizens equal
economic rights with Filipinos, for example, in the exploitation
of natural resources. If parity privileges of individuals or
corporations were infringed upon, the president of the United
States had the authority to revoke any aspect of the trade
agreement. Payment of war damages amounting to US$620 million, as
stipulated in the Philippine Rehabilitation Act of 1946, was made
contingent on Philippine acceptance of the parity clause.
The Bell Act was approved by the Philippine legislature on
July 2, two days before independence. The parity clause, however,
required an amendment relating to the 1935 constitution's
thirteenth article, which reserved the exploitation of natural
resources for Filipinos. This amendment could be obtained only
with the approval of three-quarters of the members of the House
and Senate and a plebiscite. The denial of seats in the House to
six members of the leftist Democratic Alliance and three
Nacionalistas on grounds of fraud and violent campaign tactics
during the April 1946 election enabled Roxas to gain legislative
approval on September 18. The definition of three-quarters became
an issue because three-quarters of the sitting members, not the
full House and Senate, had approved the amendment, but the
Supreme Court ruled in favor of the administration's interpretation .
In March 1947, a plebiscite on the amendment was held; only
40 percent of the electorate participated, but the majority of
those approved the amendment. The Bell Act, particularly the
parity clause, was seen by critics as an inexcusable surrender of
national sovereignty. The pressure of the sugar barons,
particularly those of Roxas's home region of the western Visayan
Islands, and other landowner interests, however, was
irresistible. In 1955 a revised United States-Philippine Trade
Agreement (the Laurel-Langley Agreement) was negotiated. This
treaty abolished the United States authority to control the
exchange rate of the peso, made parity privileges reciprocal,
extended the sugar quota, and extended the time period for the
reduction of other quotas and for the progressive application of
tariffs on Philippine goods exported to the United States.
Data as of June 1991
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