BASIC economic theory is neat and straightforward: when the rest-of-the-world (ROW) account collapses, expand domestic absorption. And vice versa. In practice, expanding domestic absorption to compensate for the loss in the ROW account is never successful. The ROW account is always more powerful in stimulating economic growth than the domestic accounts of consumption, government expenditures and investment.
Japan seems to be the best illustrative example of this phenomenon. After yielding to United States pressure to revalue the yen—from ¥250 to ¥85, in the 1990s—in order to reduce its reliance on export markets for continuing industrial growth, Japan has remained in the economic doldrums, notwithstanding massive efforts to expand domestic absorption.
China appears to be something else, but its end will be the same. China resisted US pressure to revalue the yuan and redirect development efforts to the domestic sectors for far too long until its external sector blew up, making it necessary for China to devalue the yuan and begrudgingly redirect its industrial policy to the development of its internal markets. Better late than never for China, but the road ahead will be rocky.
That is why a recent statement coming from the Department of Trade and Industry forecasting that Philippine exports can increase to $100 billion per year in the next two or three years, plus a recent statement attributed to the president of the Philippine Exporters Association, Sergio Ortiz-Luis, that Philippine exporters are ready to respond to the challenge of global markets are worth all the support that we can give them. The recent statement from the diplomatic representative of the European Union in the Philippines encouraging us to take advantage of special preferences given to Philippine export products in the euro market should give reinforcement to our stand.
This call to export expansion may sound odd to those overwhelmed by the image of a shrinking world economy incapable of absorbing exports. Wrong. Even if it appears dying, a diverse global system will always have stimulative impulses somewhere.
The fact of the matter is that our exports are the lowest among members of the Association of Southeast Asian Nations, except Lao PDR and Myanmar, on a per capita basis, as witness:
Exports per capita, 2013
Singapore $76,448
Indonesia 734
Brunei 28,190
Cambodia 611
Malaysia 7,662
Philippines 543
Thailand 3,351
Lao PDR 390
Vietnam 1,479
Myanmar 185
Injecting a bit of realism to our self-congratulatory tendency will awaken us to the fact that raising our exports to $100 billion in three years will not even bring us to the level of Vietnam today. Let’s not take too much pride in outstripping Laos and Myanmar. These two countries rejoined the community of nations only recently.
Exports remain the best way for sustaining the development of our economy, creating jobs for millions of our countrymen and countrywomen, and introducing stability to our society. Let’s energetically explore export markets to achieve the goals of prosperity for the Filipino people.
Image credits: Jimbo Albano