Current Philippine economics Part III

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Part of The American Chamber of Commerce Journal

Title: Current Philippine economics Part III
Language: English
Year: 1937
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Fulltext: 96 THE AMERICAN CHAMBER OF COMMERCE JOURNAL June, 1937 effect of the Philippine export taxes upon the shipment of cigars to the United States. Wheat flour is another major Philippine im port, having amounted to more than 78,000 tons valued at §2,855,000 in 1935. Some wheat is at present grown in the Cagayan Valley (Luzon) and experiments are being con ducted to improve the native varieties. The Philippines also import large quantities of vegetables, fruits, and nuts, imports in 1935 having amounted to $4,142,000. Many of these can be grown in the Islands; potatoes, onions, cocoa, coffee, citrus fruits, and peanuts are now being produced in limited amounts. The Bureau of Plant Industry of the Department of Agriculture and Commerce is encouraging the production of many of these commodities and is introducing scientific methods of culti vating them. A new export crop which gives promise is dorris root, used in the manufacture of insecticides. A considerable acreage was devoted to its cultivation in 1935 and 1936. There is also the possibility of further devel opment of rubber plantations in the Philippines. Approximately 9,000 acres are now utilized in the cultivation of rubber, and trees in production now yield about 575 tons annually. Exports in 1935 totaled 415 tons valued at $82,800. Considerable quantities of rubber are consumed in the Philippines in various manufactures, especially rubber footwear. According to a survey made by the United States Departments of Commerce and Agriculture, soil and climatic conditions are suitable for the production of Para rubber on more than 1,500,000 acres located in the islands of Mindanao, Basilan, and Jolo. The development of large rubber plantations, however, has been retarded by legal limitations on the acquisition of public lands in the Philip pines and by adverse conditions in the world rubber market in recent years. Although the Islands are ordinarily selfsufficient in rice, small amounts of certain varieties are imported. Such imports are due primarily to the demand of foreign groups in the Philippines and will probably continue. Im ports of fish, meat, and eggs, however, might be reduced by stimulating insular production. The competitive position of existing agricultural ex ports, such as copra, hemp, and leaf tobacco, could be strengthened by giving more attention to improved methods of production and grading. Increased Industrialization. Certain industries operating in the Philip pines, such as those supplying soaps, wines, liquors, leather and rubber-soled shoes, perfumery and cosmetics, confectionery, sugar, and breadstuffs might be expanded to fill the major portion of insular requirements. Philippine imports of such products in 1935 totaled $2,822,000. The manufacture of furniture from native forest products, such as hardwoods and rattan, is already a growing Philippine industry and might be further expanded. The production of vitrified clay products is another industrial possibility. Experiments indicate that the clay found in different parts of the Islands can be used in the production of fire bricks, glazed bricks, tile, and sanitary fixtures. The further development of these industries would offer in creased employment to Philippine labor and would operate to replace imports. The establishment of cotton spinning and weaving mills has long been considered. Fili pino experts assert that the coarser types of cotton cloth which are consumed in the Islands could be produced there, and that, if technical knowledge and skill should increase, the finer grades of cloth might also be manufactured. They likewise believe that, the weaving of coarse fabrics and the manufacture of bags from various fibers such as jute, maguey, and abaca offer other potential industries for the Philippines. The practicability of manufacturing coarse grades of paper from abaca is receiving con sideration. Such an industry is operating suc cessfully in Japan. The development of a canning industry in the Islands has also been advocated. Many Philippine foods, such as vegetables, fruits, fish, and meat and dairy products, might be preserved for insular con sumption. The minor industries connected with the grow ing of copra and the production of coconut oil have already been discussed in the section of this report dealing with coconut products. It is possible that the production of margarine and cooking oils, for example, could be developed further as export industries supplying markets in the Orient. PART III. UNITED STATES TRADE AND INVESTMENT POSITION IN THE PHILIPPINES 1. UNITED STATES EXPORTS TO THE PHILIPPINES The Extent and Importance of the Trade. During the period 1926-35, the annual value of United States exports to the Philippines averaged $60,565,500. 1 Exports were highest in 1929, when they amounted to $85,414,000, and lowest in 1933 when they amounted to $44,645,000? In 1934 the Philippines ranked ninth as an export market for American goods, and in 1935 eleventh. United States exports were valued at $2,243,000,000 in 1935, of which amount exports to the Philippines accounted for $52,560,000, or 2.34 percent. ■ Foreign Commerce and Navigation of the United States. a The marked variation in the value of.exports between these years was due more to fluctuations in unit prices than to changes in the quantities shipped. > For currencies not having a gold parity, the law established certain arbitrary rates, based in most cases on the market rates of exchange which prevailed prior to the adoption of the low. In 1935 American goods occupied a command ing position in the import trade of the Islands, comprising 63.5 percent of total Philippine im ports. During the period 1926-35, Philippine im ports from the United States were never less than 60 percent of the total Philippine imports. More over, for much of the period the Islands occupied first or second position as an export market for a number of American commodities, including cotton piecegoods, cigarettes, galvanized iron and steel sheets, condensed and evaporated milk and cream, wheat flour, canned fish, soap, and paint. Philippine Laws Affecting Imports from Foreign Countries. Philippine imports from sources other than the United States are governed directly by two Philippine laws, (1) the Philippine Tariff Act, and (2) the Philippine Parity Law. In assessing duties under the Parity Law, all foreign currency invoices covering shipments subject to ad valorem duties are required to be converted into Philippine currency at fixed parities established by the act. Proclaimed in December 1932, the law established in most cases the gold parities which existed prior to the devaluation of the dollar, as the rates at which invoices in foreign currencies shall be converted. 3 The law, while not directly affecting imports from the United States, favors imports from countries whose currencies, in relation to market rates, are undervalued in the act, and penalizes imports Mining in the Philippines has progressed rapidly in recent years, and further development might lead to increased exports, profits, and employment. If this industry could be ex panded at a time when many major industries were forced, because of the provisions of the Independence Act, cither to reduce operations or to liquidate completely, it might prove a stabilizing factor. The success of any program for increased industrialization rests in part upon the existence or development of motive power. At present the inadequate supply and the relatively high cost of electric energy is undoubtedly a handicap to industrial expansion. The Philippines, how ever, are fortunate in having a number of poten tial sites where hydroelectric power may be generated. The development of these sites is being given careful consideration by the Na tional Economic Council. If increased industrialization in the Philippines is to be attained, well-planned direction and assistance from the Government will be required. Particular consideration must be given to the problem of obtaining adequate capital to finance the program and to the question of tariff pro tection or government subsidy. from countries whose currencies are overvalued. Should the Parity Law remain in force after Philippine independence, imports from the United States, on which ad valorem duties are imposed, may be subject to higher or to lower effective duties than those applicable to similar goods coming from other foreign countries. The present Philippine Tariff Act was adopted in 1909 and has remained in force since that date with only limited revisions. The last amendment of importance was proclaimed in February 1933. Many of the duties imposed by the act are specific and based upon weight. Because of the price fluctuations which have occurred since 1909, the ad valorem equivalents of some of these specific duties have undergone marked changes during the intervening years and no longer provide either the revenue or the degree of protection originally contemplated. Moreover, the application of specific duties on weight has resulted in taxing, in certain tariff classifications, low-grade goods much more heavily than high-grade goods. American goods imported into the Philip pines after independence will presumably be subject to the full Philippine tariff. An analysis of the probable effect of the Philippine tariff and other factors on specific American com modities is presented in subsequent pages. The relative importance to both the Philip pines and the United States of 30 leading com modities among the Philippine imports from the United States and the United States exports to the Philippines are shown in table 68. The table also gives the ad valorem equivalents in 1935 of Philippine duties assessed against pro ducts in the same tariff classification as those coming from the United States but actually imported from other countries. June, 1937 THE AMERICAN CHAMBER OF COMMERCE JOURNAL 97 PRINCIPAL UNITED STATES EXPORTS TO THE PHILIPPINES Cotton Piece Goods. Philippine imports of American cotton piece goods equaled S4,683,350 in 1935 or 46.6 percent of the value of total Philippine imports of this commodity. The United States was the second principal supplier, Japan occupying first place. Viewing this trade from the standpoint of the United States, the Philippines purchased 26.5 percent of total American exports of cotton cloth and ranked second to Cuba as an export market. Philippine purchases of American cotton fabrics, however, are somewhat less im portant to the United States than the statistics indicate. About 75 percent of the cotton piece goods shipped from the United States to the Philippines is consumed in that market; the remainder is utilized in the embroidery trade, which returns its finished products to distributors in the United States. The Philippine duties imposed on imports of cotton piece goods are largely specific duties based upon weight; consequently the tariff, calculated on a yardage basis, falls more heavily upon coarse, heavy fabrics than upon those which are of light construction. The ad valorem equivalents of the specific duties, when applied to the types of cotton cloth which are ordinarily imported, range from 15 to 60 percent, with the average approximating 31 percent. Prior to 1935 the Philippines were the leading market for American cotton piece goods, and the United States was the principal supplier of these goods in the Islands. The growth of United States trade with Cuba and the increased competition of Japanese cotton fabrics in the Philippines have combined to reduce the relative importance of the Islands as an outlet for Amer ican cotton goods. In an effort to stabilize conditions in the Philippine textile market, the United States and Japanese Governments entered into a “gentlemen’s agreement” by which Japan, beginning on August 1, 1935, agreed to limit imports of Japanese cotton cloth into the Philippines.4 This agreement, however, is to expire on August 1, 1937, and thereafter, unless further action is taken, unrestricted competition will be resumed. The sales of American cotton piece goods in the Philippines will undoubtedly decline after Philippine independence is realized. At that time, the competitive advantage now afforded American goods by the Philippine tariff will presumably no longer exist. Any general decline in Philippine purchasing power will be an additional factor in reducing imports. It is also likely that the embroidery trade will be greatly reduced when free trade no longer pre vails; such an eventuality would cause a sub stantial decline in Philippine imports of American cotton piece goods. Moreover, if cotton textile mills should be established in the Philippines, the demand for imported goods would be further curtailed. Other Cotton Goods. The Philippine classification “Other cotton goods” includes a wide variety of products, such as wearing apparel, laces, embroideries, hand kerchiefs, towels, pile fabrics, thread, yarn, twine, fish nets, and socks. Philippine imports of these products from the United States totaled $2,084,121 in 1935 or 39.7 percent of the value of such imports from all sources. The Philip pine demand for cotton goods, other than piece goods, is supplied principally by the United States and Japan. United States shipments of such products to the Philippines in 1935 accounted for over 7 percent of the total American exports of cotton manufactures, other than piece goods. Because of the large number of products falling under this classification, the applicable tariff rates vary widely, ranging from 15 percent ad valorem on yarns to 60 percent ad valorem on various types of laces. The average com puted duty for the entire classification in 1935 was 35.5 percent. If these duties are applied to American products after Philippine independ ence is realized, their sale in the Philippine market will probably decline materially. Mineral Oils. The United States supplied 87.2 percent of all of the mineral oils imported by the Philippines in 1935. The Netherlands Indies were the secon dary source of supply. United States exports to the Islands in 1935 totaled S4,637,000, or 2 percent of total United States exports of these products. Under the classification “Mineral oil,” the Philippine tariff includes crude oil, lubricating oil, gasoline, kerosene, and naphtha. All of these products are dutiable at 25 cents per 220.46 pounds (100 kilograms) but not less than Table 68.—The relative importance of selected commodities in the Philippine import trade and in the United States export trade; calendar year 1935 Philippine imports* United States exports1 Totnl value Total value f™"? tl]e United States Percent of total value from the United States Computed ad valorem equivalent Total value of Philip pine duty Total value Percent of to Philip- total value pine Islands to ph}'1P" pine Islands Commodity Cotton piece goods............ $10,049,621 $4,683,350 46.6 Percent 31.1 $20,035,863 $5,299,516 26.5 Other cotton goods............ 5.250,300 2,084,121 39.7 35.5 20,284,600 1.500.253 7.4 Mineral oils........................ 7,442,514 6,486,532 87.2 37.2 228,828,191 4,637,001 22.0 Iron and steel and manufacfnctures, except ma chinery........................... 6,977,074 5,286,851 75.8 17.3 121,122,890 5.576,599 4.6 Machinery and parts of... 4,111,345 3,229,189 78.5 13.7 193,185,141 3,733,125 1.9 Automobiles and parts of. 3.600,224 3,581,046 99.5 26.5 224,289,115 3,832,935 1.7 Tobacco products............... 3,750,280 3,696,087 98.6 80.8 143,025,699 3,632,262 2.5 Dairy products..................... 3,076,362 1,625.290 52.8 8.6 4,529,890 1,601,372 35.4 Wheat flour.......................... 2,855.627 1,222,345 42.8 13.5 14,926,422 1,140,765 7.6 Chemicals, drugs, dyes, and medicines........................... 2.577,318 1,724,789 66.9 29.7 83,169.385 1,817,538 2.2 Silk, rayon, and manufac tures of.............................. 2,425,700 970,566 40.0 93.3 10.571,878 715,348 36.8 Electrical machinery, ap paratus, and appliances. 2,153,668 1,857,808 86.3 16.3 76,088,429 1,578,428 2.1 Paper, unprinted................. 2,122,078 1,395,877 65.8 15.2 20,961,893 1,471,939 7.0 Fertilizers, natural and chemical............................ 1,810,096 1,146,399 63.3 3.7 14,808,980 995,755 6.7 India rubber and manufactures of........................ 1.664.242 1,464,752 88.0 39.9 22,798,598 1,453,413 6.4 Vegetables............................. 1,639,239 767,822 46.8 48.0 10,900,013 610,960 5.6 Meat produots..................... 1,576,550 940,432 59.7 17.5 40,345,815 729,930 1.8 Fish and fish products.... 1,360,835 704,552 51.8 23.4 12,875,503 758,450 5.9 Fruits and nuts................... 1,322,508 990.956 74.9 32.4 93,475,120 791,398 .8 Leather and manufactures of......................................... 1,063,691 1,011,594 95.1 35.4 21,829,230 1,193,034 5.5 Glass and glassware........... 690,785 316,702 45.8 29.8 8,274,238 281,684 3.4 Coffee, raw and prepared. 673,389 4 339,535 50.4 41.2 1,273,509 332,274 26.1 Explosives............................. 667,391 656,235 98.3 66.6 3,803,491 660,037 17.4 Perfumery, cosmetics, and toilet preparations.......... 659,537 539,144 81.7 42.7 4,623,980 552,639 12.0 Paints, pigments, and var653,592 469,261 71.8 26.2 16,343,667 525,614 3.2 Wax........................................ 520.587 158,474 30.4 11.2 7,629,468 114,135 1.5 505,477 224,020 44.3 46.7 223,608 108,718 348.6 Spirits, wines, and fermented liquors................. 435,421 65,864 15.1 56.8 360,292 80,537 22.4 Soap........................................ 364,502 351,488 96.4 20.9 2,583,716 454,323 17.6 Starch..................................... 326,777 279,002 85.4 42.0 1,400,244 300,769 21.5 1 The discrepancies between statistics on Philippine imports from the United States and on United States exports to the Philippines aie due principally to the following: (1) Variations in classifications and recording methods; (2) time interval while goods are in transit causing variation in recorded statistics because of year-end shipments; (3) United States Army and Navy supplies arc not included in United States exports, but are included in Philippine im ports; and (4) Philippine imports from the United States do not include imports from Hawaii or Guam. 1 Large quantities of fuel oil are used by the United States Army and Navy stationed in the Philippines. 3 A marked variation in classification accounts for the wide discrepancy in statistics. « Philippine imports from Hawaii are included in this instance since Hawaii is an important supplier of coffee. Source: Annual Report, Insular Collector of Customs; and Foreign Commerce and Navigation of theUnitedStates. 10 percent ad valorem. The computed average duty on oils of foreign origin was 37 percent in 1935. The application of an equivalent duty to imports of American oil and gasoline after independence would operate to reduce the pro fitableness, if not the extent, of United States participation in the Philippine market. The withdrawal, after independence, of the United States Army and Navy stationed in the Philip pines would also operate to reduce the consump tion of mineral oil in the Islands, and the decline in Philippine purchasing power which is likely to occur after the imposition of the export taxes will still further operate to reduce that consump tion. There is also the possibility that if oil should be discovered in any considerable quan tity in the Islands, American sales might be further restricted. The Philippine consumption of mineral oil might also be reduced in conse quence of the development of hydroelectric energy and the use of alcohol, distilled from molasses, for motor fuel. 4The annual limitation on Philippine imports of Japa nese cotton fabrics stipulated in the voluntary agree ment was 45,000,000 square meters. It was further provided that excess shipments or undershipments not amounting to more than 10 percent of thisamount, would be permitted for the first year, the resulting debit or credit to be included in the quota for the following year. 98 THE AMERICAN CHAMBER OF COMMERCE JOURNAL June, 1937 Iron and Steel and Manufacturers. In 1935 Philippine imports of iron and steel and their products, except machinery, totaled 86,977,000; of this amount the United States supplied 85,287,000, or 76 percent. Foreign countries which participated in the iron and steel trade of the Philippines in that year were Germany, the United Kingdom, Belgium, and Japan. United States exports to the Philippines in 1935 constituted nearly 5 percent of total American exports of these products; the Philip pines were the leading export market for Amer ican galvanized iron and steel sheets and were relatively important for other types of iron and steel products. Specific rates of duty imposed by the Philip pine tariff on iron and steel products range from 35 cents to 82.65 per 220.46 pounds (100 kilo grams); other rates assessed on an ad valorem basis vary from 10 to 25 percent. The average duty collected on products imported from foreign countries was 17.3 percent in 1935. When the Philippines become independent, American iron and steel products will no longer be entitled to duty-free entry. Under these circumstances in creased foreign competition will probably tend to reduce American participation in the Philip pine market. Machinery and Parts. Total Philippine imports of machinery in 1935 were valued at 84,111,000; of this amount 83,229,000, or 78.5 percent, was supplied by the United States. The Philippines purchased about 2 percent of total American exports of machinery in 1935. Philippine imports from sources other than the United States came largely from Germany, Sweden, and the United King dom.. The duties imposed by the Philippine tariff on machinery range from 15 to 35 percent. The average rate assessed against products from foreign countries in 1935 was 13.7 percent? In the trade in stationary and marine engines, dutiable at 15 percent, the American product has encountered strong competition from engines imported from Sweden. If Philippine duties become applicable to American products, foreign competition may be expected to reduce the parti cipation of American machinery in the Philippine market. Automobiles and Parts. Automobiles and trucks from the United States supplied 99.5 percent of Philippine imports of these products in 1935; total imports were valued at 83,600,000 in that year. American exports to the Philippines amounted to about 2 percent of total American exports of auto mobiles in that year. The Philippine tariff imposes ad valorem duties of 15 percent on trucks, 20 percent on auto mobiles, and 25 percent on parts. Owing to the application of the Parity Act, the effective rates assessed against products of foreign origin in 1935 averaged 26.5 percent.’ It does not seem probable that competition from countries other than the United States will be greatly increased after independence if these duties are applied to American machines. However, the resulting increase in cost and the probable decline in Philippine purchasing power may combine to reduce the quantity of cars and trucks which will be sold in the Philippines at that time. Tobacco and Tobacco Products. Philippine imports of tobacco and tobacco products in 1935 totaled 83,750,000; of this amount the United States supplied 98.6 percent, or $3,696,000. The Philippines purchased about 2.5 percent of total American tobacco exports in 1935, and were the principal export market for American cigarettes. In 1935, the export trade of the United States in cigarettes totaled 87,262,000, of which $3,086,000, or 42.5 percent, represented shipments to the Philippines. The Islands also import substantial quantities of American leaf tobacco and chewing and smoking tobacco. The present Philippine tariff establish certain minimum specific rates for tobacco and tobacco products but provides that, except for such minimums, imports “shall be subject to the same rates of duty impo.ed from time to time on like tobacco imported into the United States.” The duties assessed against Philip pine imports of tobacco and tobacco products from foreign countries in 1935 averaged 80.8 percent. The following tabulation, compiled from 1935 import data, indicates the approx imate ad valorem equivalents of the Philippine duties which were applicable to foreign tobaccos of the principal types imported into the Philip pines from the United States. (The imports from the United States were not subject to duties, however, and there were practically no imports of any tobacco products from other countries.) Table 69.—Tobacco and products of: Philippine duties applicable to principal types of imparts, showing ad valorem equivalents based on unit values of nondutiable imports from the United Tobacco and products of— Duty Cigarettes ................................ Wrapper tobacco i....................... Chewing tobacco I....................... Smoking tobacco »....................... (4.5042 per pound and 25 percent..................... $2,925 per pound..................................................... $0,567 per pound..................................................... $0.567 per pound.................................................... ■ The computation is based on 400 cigarettes (standai »Philippine imports of American leaf tobacco consist of cigars destined for export to the United States. It would be $2.27^ per pound, giving an ad valorem cquiv >Thc rate imposed by the Philippine tariff is States tariff on like tobacco is $0.55 per pound. Source: Philippine Tariff Act of 1909, as amended; Annual Report, Insular Collector of Customs. If Philippine tariff rates remain unaltered, American tobacco products will, after inde pendence, probably become subject to the specific duties shown above. On the basis of existing prices, the equivalent ad valorem duty on American cigarettes would then be in excess of 775 percent. Such a duty would practically preclude the importation of American cigarettes into the Philippines. Under these circumstances cigarette manufacturers in the Islands would probably supply most of their home market. American cigarette producers, however, might establish factories in the Islands should lower duties continue to prevail on partially manu factured tobacco. But, in view of the sub stantial Philippine duty on cured and ground tobacco, even this might not prove wholly feasible.7 After independence, American wrapper tobacco imported into the Islands will be subject to a duty which, on the basis of present unit values and tariff rates, would approximate 435 per cent. Philippine imports of American wrapper tobacco, however, are likely to decline sharply even before they become subject to any Phil ippine duty. Imported wrapper tobacco is used largely in the manufacture of Philippine cigars destined for the American market. These cigars will be subject to the export taxes pro vided for in the Independence Act. If, as now 6eems probable, the application of export taxes reduces shipments of Philippine cigars to the United States, Philippine imports of American wrapper tobacco will undergo a corresponding decline. The application of Philippine duties Table 70.—Dairy products imported into the Philippines, showing principal suppliers and rates of duty applicable to imports from foreign countries in 1935 Product Rank of principal supplying countries 1. United States; 2. The Netherlands; 3. Japan. . .. 1. The Netherlands; 2. United States; 3. Japan.... 1. Australis; 2. United States; 3. New Zealand........ Milk, evaporated................................... Milk, condensed..................................... Hutter, frozen and canned................. Cheese........................................ Milk powder and tablets........ Buttermilk and natural milk iThe effective rates of duty were lower than the listed ad valorem rates (notably the Netherlands and Switzerland) were undervalued by the Parity Source; Philippine Tariff Act of 1909 as because the currencies Act in this year. amended; Annual Report, Insular Collector of Customs. to imports of American chewing and smoking tobacco will also operate to reduce their importa tion into the Philippines. Dairy Products. Total imports of dairy products into the Philippines amounted to $3,076,000 in 1935; of this amount the United States supplied 81,625,000, or 52.8 percent. In the same year the Philippines purchased over 35 percent of all American exports of dairy products. The Islands constitute the largest American export market for condensed and evaporated milk and cream, having taken nearly 50 percent of total American exports of these products in 1935. The principal countries supplying dairy pro ducts to the Philippines in 1935 and the rates of duty imposed by the Philippine tariff on products from foreign countries appear on table 70. The ad valorem duty on dairy products im ported from foreign countries in 1935 averaged 8.6 percent.8 It will be noted from the tabulation that the United States was the leading supplier for only those commodities which were subject to the highest rates of duty; i. e., those products for which the competitive advantage or pro tection was greatest. If, after independence, American dairy products become subject to the preesnt Philippine duties, it appears likely Philippine imports of these products will prob ably decline. Wheat Flour. In 1935 Philippine imports of wheat flour totaled 82,855,600, of which the United States supplied 81,222,300, or nearly 43 percent. On the basis of value, the United States was the leading source of supply. In quantity, however, imports from Australia exceeded those from the SThe currencies of Germany and the United Kingdom, two leading suppliers of machinery, were undervalued in 1 1935 by the Philippine Parity Act. In the cnse of goods ' which entered from these countries, ad valorem duties • were levied agninst the invoice values converted at rates ‘ below the market rates; the rates of duty, therefore, * were low when compared with the rates which would have • • The computed duty exceeds the nd valorem rates quoted in the tariff act because of the operation of the Parity Act on imports of automotive parts from Japan. For purposes of duty assessment, invoices in yen are converted into dollars nt the former parity, $0.4985. 7The present Philippine duty on tobacco, other than - leaf tobacco, cigars, cigarettes, and cheroots, is 2.5 pesos . per kilo, or $0,567 per pound. 8The Parity Act made the computed duty lower than it would have been if conversions bad been made at market rates. . . .2.72 cents per pound (10.2 percent) ...15 percent. . 1. The Netherlands; 2. United States; 3. Australia.. 1. United States............................................................ . 1. Switzerland; 2. United States; 3. Norway........ . . .20 percent. . .. 10 percent. countries June, 1937 THE AMERICAN CHAMBER OF COMMERCE JOURNAL 99 United States. Canada ranked third on a quan tity basis. The Islands have long been an important export market for American wheat flour. In 1935 the Philippines accounted for 7.6 percent of the total value of American exports of this product, being exceeded in importance only by Cuba. The present Philippine duty on wheat flour is 47 cents per 220.46 pounds (100 kilograms). The average ad valorem duty was computed to be 13.5 percent in 1935. Because the duty is specific, the equivalent ad valorem rate varies inversely with changes in price. Exports of American wheat flour to the Philippines have been promoted at various times in recent years by Government export subsidies. What the status of the market for American wheat flour in the Philippines will be after independence cannot now be determined. Other United States Exports to the Phil ippines. In addition to the commodities already dis cussed, the United States exports a wide variety of miscellaneous products to the Philippines. (See table 68.) Grouped in broad classifications, nearly all of. these American products supply substantial fractions of the total imports into the Philippines of such goods. In a number of broad classifications of exports which were not discussed above, exports from the United States to the Philippines exceed 10 percent of the total to all countries. Among such com modities, as shown in table 68, are the following: Fish and fish products; explosives, perfumery, cosmetics, and toilet preperations; paints, pig ments, and varnishes; soaps; coffee, raw and prepared; starch; cocoa; and spirits, wines and fermented liquors. General Factors Likely to Affect Future United States Exports to the Phil ippines. The data presented in the preceding tables in this chapter show a correlation between the share of the Philippine market supplied by American products and the degree of protection afforded such products by the Philippine tariff. The most conspicuous exceptions to this general ization are cotton, silk, and rayon textiles. Imports of these products from Japan, although subject to duties amounting to the equivalent of from 20 to 100 percent ad valorem, have attained a commanding position in the Philip pine market. In the case of certain American products, automobiles for example, the freetrade relationship with the Philippines is not primarily responsible for their proportionately large sales in the Philippine market; such pro ducts are able to compete successfully in markets where they are accorded no preferential tariff privileges. In other instances American goods benefited materially from the free-trade relationship which has existed between the two countries. The protection afforded many American products by the Philippine tariff has been responsible for the relatively large part of total Philippine imports which they have supplied in each case; the loss of that protection would undoubtedly cause a decline in American exports to the Philippines. In the case of dairy products, for example, American participation in the Philip pine market has been greatest for the products protected by the highest tariff rates. If Philippine exports to the United States, constituting at present over 80 percent of the total export trade of the Islands, is sharply curtailed in consequence of the provisions of the Independence Act, total Philippine imports will perforce be reduced. The decline in imports from the United States, moreover, might be greater than the decline in imports generally, inasmuch as the Filipino people, in view of their reduced purchasing power, might find it ad vantageous to transfer their purchases from the United States to other suppliers. Moreover, V the Philippines should fashion an economy which would be self-sufficient in the maximum degree, total Philippine imports would decline because of the reduced need for foreign products. Such loss as the United States may sustain in its exports to the Philippines will in some degree be offset by its gains in exports to other markets. If the United States, for example, does not purchase sugar and other products from the Philippines after independence is realized, it will undoubtedly secure these pro ducts from other sources. These purchases, if made abroad, would create new purchasing power in the supplying countries. As a result, American exports to these markets would increase. Moreover, to the extent that other suppliers should furnish the United States with the required commodities on more favorable terms than they could be obtained in the Phil ippines, the United States would be the bene ficiary. The Philippines as a Distributing Center. At one time it was anticipated that Manila or some other port in the Philippines might become a distributing center for American goods in the Far East. Trade of this character, how ever, never attained more than minor importance except for a few years during and immediately following the World War. The increased trade during the 1917-21 period arose largely out of the abnormal shipping conditions which prevailed at the time. The greatest value of American goods re exported from the Philippines to foreign Asiatic points in any year since American occupation of the Islands was $3,350,600 for 1919. This constituted 4.4 percent of the total Philippine imports from the United States for the year and the highest fraction for any year on record. Previous to 1915 and subsequent to 1922, as shown in table 71, the greatest value was $424,506 in 1935 and the highest percentage was 0.8, also for 1935.’ Table 71.—Annual value of merchandise im ported into the Philippines from continental United States, and fraction thereof reexported to aHl Asiatic points, 1910-351 ninth in 1934. 1. During the period 1926-35, the annual American exports to the Philippines averaged $60,565,500. In 1935 they amounted to $52,560 000 or to 2 34 percent of the total value of 78,183,029 02,139,083 51.297,750 43,540,407 54,375.678 54,366,500 235,926 161,726 115,114 202,566 377.939 424,506 .3 .3 1 Including China, British East Indies, Netherlands Indies. French East Indies, Hongkong, Japan, Japanese China, Chosen, Portuguese East Indies, and all other Asiatic ports in China. 1 Reexports of United States goods not separately reported. Source: Annual Reports, Insular Collector of Customs. An entrepot trade has not been developed in the Philippines, principally because of their geographic location. The distance from the United States to Manila is greater than that from the United States to many of the principal fareastern ports. Manila is 6,221 nautical miles, via direct route, from San Francisco, whereas Shanghai is but 5,387 miles. Yokohama is 4,536 miles from San Francisco by direct route and Hongkong is only 85 miles farther from San Francisco than is Manila. Insofar as American trade with countries beyond Hongkong is concerned—the Netherlands Indies, the Malay States, or British India—the Philippines would probably be at a considerable disadvantage in comparison with Hongkong because of the superior shipping facilities which the latter could supply. Hongkong is situated on practically all of the principal shipping routes between the Far East and Europe. American Branch Factories and Offices. Should American goods no longer have a pre ferential position in the Philippine market after independence, American branch factories in a few industries might be established to produce goods solely for the insular market. Such a development would depend in part upon the height of the customs duties and upon the extent of the Philippine market. America-owned firms in the Islands have established few branch offices elsewhere in the Far East. American business in this area has been conducted either directly from the United States or through branch offices and factories located outside of the Philippines. A number of branch factories of American ownership in the Philippines have been established to produce articles for export to the United States. With only one or two exceptions, they manufacture products from raw materials obtained in the Islands.10 The embroidery companies, how ever, import cotton goods and buttons from the United States and return the completed gar ments to the United States. SUMMARY (1) In of 100 THE AMERICAN CHAMBER OF COMMERCE JOURNAL June, 1937 to Philippine tariffs; (2) because there will prob ably be a marked general reduction in Philip pine purchasing power on a basis of the present provisions of the Independence Act; and (3) because, accompanying the general decline in purchasing power, the Philippines may find it more advantageous to transfer some of their purchases to suppliers other than the United States. Moreover, if the Philippines should attempt to attain the maximum degree of econo mic self-sufficiency, imports from the United States might be further curtailed. 3. The anticipated decline in American ex ports to the Philippines will be partially offset by gains in American exports to other areas. If the United States ceases to purchase certain commodities from the Philippines, it will, no doubt,purchaseatleastsome of these commodities elsewhere. The additional purchasing power thus created for the new supplying countries will result in increased American exports to them or other countries. Moreover, if the goods obtained from other suppliers are secured at lower import prices than those at which Philip pine products could be obtained, the United States would be the beneficiary. 4. During the period of American occupation, the Philippines have never been used as an entrepot in any appreciable degree for the marketing of American goods in the Orient. Various branch offices, factories, and distributing centers have been established by American firms in other oriental contries, but none have been established in the Islands except to serve the Philippine or United States market. From the standpoint of geographic location, transportation facilities and tariff considerations, the Philip pines have offered little inducement for the devel opment of an entrepot trade. Since the United States has not up to the present time developed an entrepdt trade in the Philippines, it seems un likely that its ability to do so will be improved in consequence of Philippine independence. 2. AMERICAN PARTICIPATION IN THE PHILIPPINE CARRYING TRADE The Philippines have no merchant marine engaged in international trade and, therefore, the foreign commerce of the country is carried by vessels of foreign or United States registry. As a result, the charges for these services constitute an “invisible” import which must be paid for in the same way as imports of merchandise. Share of United States Vessels in the Total Carrying Trade of the Philip pines. Prominent among the countries whose steam ship lines were engaged in Philippine carrying trade during the period 1926-35 were the United States, theUnited Kingdom, Japan, and Norway; their relative importance is indicated in table 72. In Philippine trade, American vessels occupied first place based on the value of cargo carried from 1926 to 1935. The American vessels, during this period, carried from 29.2 per cent to 49.4 percent of the total value of Philippine trade. For the 5 years 1926-30, the American participation remained uniformly above 40 percent. This share was reduced to 29 percent in 1933 but rose to over 37 percent in 1935, when ships of American registry carried 34 percent of the total value of Philippine imports and 40.5 percent of the value of Philippine exports. The sharp rise in the share carried by American vessels in 1935 as compared with 1934, however, was not due to an absolute increase in volume; it occurred because of a decline in the tonnage carried by foreign line. The total trade of the Islands for that year was materially reduced by the unusual restrictions placed upon exports of sugar to the United States. Foreign steamship lines general ly carry the major portion of Philippine sugar shipments and, therefore, experienced a marked decline in tonnage. Table 72.—Total Philippine carrying trade classified by nationality of carrying vessels, 1926-35 Y Total value of carried American British vessels 1926. 1927 1928 1929 1930 1931 1932 1933 1934 1935 Thousands of dollars 256,183 47.5 271,426 49.4 289,711 45.5 311,607 44.8 256,260 44.1 203,151 39.1 174,733 33.7 173,133 29.2 194,011 31.8 179,770 37.4 Source: Annual Reports, Insular Collector of Customs. Share of United States-Philippine Trade Carried by American Vessels. American vessels carried 47.2 percent of the total trade between the United States and the Philippines in 1935. Of the total imports into the United States from the Philippines in that year, the American merchant marine carried 48.2 percent in contrast with 29.3 percent in the preceding year. As previously pointed out, the actual tonnage handled by American vessels declined during the 2-year period, but the ton nage carried by foreign lines declined by an even greater degree. Although American vessels in 1935 carried a reduced in-bound tonnage from the Philippines, they moved an increased out-bound tonnage to the Philippines in 1935 as compared with 1934. Their share of out-bound tonnage rose from 35.3 percent in 1934 to 45.7 percent in 1935; the per centage handled by foreign lines declined cor respondingly (see table 73). [In cargo tong of 2,240 pounds) Table 73.—United States-Philippine carrying trade showing tonnage carried by American and by foreign vessels, fiscal years ending June 30, 1934 and 19351 Year Total Foreign United vessels States Ratio of tonnage carried in United States vessels^ to UNITED STATES IMPORTS 1934 .......... 1935 t .... . 1,905,931 1,348,102 557,829 978.416 507,021 471,395 Percent 29.3 48.2 UNITED STATES EXPORTS 1934 .......... 1935 .......... 587,157 379,710 207,447 572,103 310,906 261,197 35.3 45.7 TOTAL UNITED STATES IMPORTS AND EXPORTS 1934 .......... 1935 .......... 2,493,088 1,727,812 765,276 1,550,519 817,927 732,592 30.7 47.2 1 Includes lines with regular service, lines with irregular service, and tankers. s Decline in tonnage of total imports was due to un usual restriction on sugar imports in 1935. Source: U. S. Shipping Board Bureau, Division of Shipping Research, U. S. Department of Commerce. Tonnage of Commodities in United StatesPhilippine Trade and the Principal United States Ports Involved. Approximately 90 percent of the cargo tonnage imported into the United States from the Phil ippines is provided by three products, sugar, copra, and coconut oil, of which sugar is the most important (see table 74.) Based on tonnage, sugar was the leading product, even in 1935, when unusual restrictions limited shipments to the United States to 465,000 long tons. In creased shipments were resumed in 1936. Under the duty-free limitation imposed by the InPercent of value carried by— Japanese Norwegian All other vessels vessels vessels 29.3 30.8 32.1 28.1 24.6 26.4 28.3 26.7 26.1 25.1 dependence Act, it appears probable that 850,000 long tons of sugar will be shipped to the United States annually during the Commonwealth period. Consequently, at least for that period, sugar will probably continue to supply a larger tonnage than any other commodity. The major portion of the in-bound cargo from the Philippines enters through North Atlantic ports, principally New York and Philadelphia. Shipments to these ports consist largely of raw sugar, coconut products, and abaca. Cargoes from the Philippines shipped to Gulf ports enter primarily at New Orleans. Coconut oil, copra, and sugar are the principal products received. In the Pacific coast district, which ranks next in importance to the North Atlantic ports on the basis of import tonnage, San Francisco and Los Angeles are the principal ports of entry and copra is the leading import product. Other commo dities important in Pacific coast trade because of the tonnage involved are cabinet woods, copra meal, coconut oil, abaca, and cordage. Ship ments entered at five ports, New York, Philadel phia, New Orleans, San Francisco, and Los Angeles, account for over 90 percent of the import tonnage received from the Philippines. The tonnage moved from the United States to the Islands is composed of a wide variety of products, but the two following broad classifi cations comprise approximately 65 percent of the total: Petroleum and petroleum products, and iron and steel and their manufactures. Out bound cargo is handled largely (over 75 percent) through three ports, Los Angeles, San Francisco, and New York, named in the order of their importance. Shipments from Los Angeles con sist primarily of petroleum and petroleum pro ducts. Shipments from the other ports are less specialized. Table 74 shows the tonnage of the principal products which enter into United States-Philippine trade and table 75 shows the principal American ports which participated in that trade. Table 74.—Cargo tonnage in United States trade with the Philippines classified according to principal commodities for 1934 and 1935. [In cargo tons of 2,240 poundsj In-bound cargo from the ________Philippines_______________ 1934............ 1935 Sugar and molasses____________ 1,379,450 464,612 Copra......................................................... 178,603 238,775 June, 1937 THE AMERICAN CHAMBER OF COMMERCE JOURNAL 101 for 1934 and 19351 Carrying Trade to Individual ican Lines. The tonnage carried between the United States and the Philippines accounts for a sub stantial fraction of the total tonnage carried by the American lines which serve the Philippines. The relative importance of the United StatesPhilippine trade to the total trade carried to and from the United States by eight principal American lines calling regularly at Philippine ports for the fispal years ending June 30, 1934 and 1935, was as follows:1 • The Philippine tonnage lost by these American lines in 1935 was partially offset by the increased tonnage carried by American tankers and line with irregular Cargo tons of 2,240 pounds 1934 1935 Total tonnage carried to and from the United States... Total tonnage carried bet ween United States and Philippines*......................... Percent of United States-Philippine tonnage to total. . . 2,075,549 653,246 31 5 2,036,735 550,676 27.0 Source: United States Shipping Board Bureau, Divi sion of Shipping Research, United States Department of Commerce. to Table 76.—Share which Phi'ippine-United States freight traffic represents in relation to total freight carried to and from the United States, by 8 principal American lines regu'ar’y serving the Philippines, fiscal years ending June 30, 1934, and 1935' 1 Tonnage both received and discharged outside of the United States are not included, data not being available. It is estimated that such traffic accounts for 20% or less of the total traffic actually carried by the individual lines. Source: United States Shipping Board Bureau, Division of Shipping Research, United States Department of The Independence Act and the American Carrying Trade. After Philippine independence is realized, it appears probable that, if the present United States duties remain in effect, no large quantities of sugar, coconut oil, cigars, embroidery, or pearl buttons will be shipped to the United States from the Philippines. Other commodities, such as desiccated coconut, hats, cordage, canned pineapples, and cutch will probably be affected, though less seriously. Exports of copra, abaca, and cabinet woods, if they remain on the United States free list, are not likely to decline and will probably increase.2 Although a decline in the exports of sugar would fall most heavily upon foreign shipping concerns now carrying the major portion of that further. When American goods no longer enter the Philippines free of duty, the volume of cargo from the United States will undoubtedly decline, inasmuch as American goods will then be more costly to consumers in the Philippines. Such developments naturally would reduce the avail ability of cargo for American vessels. A decline in United States shipping trade with the Philippines, as has been explained, does not imply a corresponding reduction in the United States total shipping trade. If after Philippine independence, the United States does not pur chase certain products from the Islands, it is lThe statistics do not include foreign tonnage received at foreign ports and discharged in any country other than the United States. Dntn for such traffic are not available. It is estimated, however, that this traffic accounts for 20 percent or less of the total traffic carried by the individual lines. sSee sections dealing with Philippine export commodi ties and the readjustment uf Philippine economy. 102 THE AMERICAN CHAMBER OF COMMERCE JOURNAL June, 1937 probable that it will purchase them in some other foreign markets. In this way the volume of American shipping will be largely sustained; moreover, the new suppliers, possessing increased credits through new sales, will be able to increase their purchases abroad, with the result that United States shipments to other countries will partially replace shipments to the Philippines. To summarize, the economic provisions of the Independence Act will doubtless operate t* re duce the freight traffic between the United States and the Philippines. The net decline in the total carrying trade of the American merchant marine, however, will probably not be so marked as the decline in its carrying trade between the United States and the Philippines. Whatever reduction does occur will be felt more seriously by some lines than others, because of the kind cf cargo carried, the proportion of Philippine trade to the total trade of each line, and the varying ability of the different companies to develop alternate traffic. 3. AMERICAN INVESTMENTS IN THE PHILIPPINES Total American investments in the Philippines in 1935 have been estimated at approximately 1200,000,000. Of this amount nearly 20 percent consists of investments in bonds issued by various Philippine political entities, private companies, and religious organizations; the remainder represents direct investments in a wide variety of industries operating in the Islands. Investment in Government and Other Bonds. Philippine bonds held by citizens of the United States consist chiefly of obligations issued by the Insular Government. In the past the interest on these bonds has been paid regularly and the required sinking-fund reserves have been set aside. The inauguration of the Commonwealth Government has not impaired the future servicing of these obligations; in fact their position may have been improved since a provision of the Inde pendence Act stipulates that the export taxes shall be applied to the reduction of the indebted ness of the Philippine Government. These tax receipts, together with the regular sinking-fund deposits may be sufficient to retire the bonded debt even before the Philippines become in dependent. But if the bonds are not retired completely, it is likely that those then outstand ing will remain relatively stable in value, since the independent Government will no doubt attempt to maintain a sound credit standing in the United States. Table 77 shows the net in debtedness of the Philippine Commonwealth Government as of December 31,1935; it also show the total par value of bonds outstanding and the distribution in the ownership of such bonds. Table 77.—Bonded indebtedness of the Philip pine Commonwealth, Dec. 31, 1935 Bonds issued: Issued by Insular Gov ernment..................... $57,264,850.00 Issued by provincial and municipal gov ernments................... e 9,008,850.00 Total bonds issued............................... $66,273,700.00 Deduct: Uncanceled bonds held in sinking fund $10,845,736.25 Collateral trust bonds included in bonds issued!....................... 6,698,850.00 Total...................................................... 17,544,586.25 Bonded debt outstanding........................48,729,113.75 Deduct: Cash held in sinking fund.......... 994,992,05 Net bonded debt of the Philippine Commonwealth................................ 47,724,121.70 Bonds held by the Commonwealth Gov ernment in Philippine pension and other funds, except sinking fund.......... $10,005,763.75 Table 77.—Bonded indebtedness of the Philippine Commonwealth, Dec. 31, 1935 (continued.) Bonds held by banks in the Philippines.. . 7,654.000.00 Bonds held by private investors (prima rily Americans)........................................... 31,069,350.00 Total bonded debt outstanding.......... 48,729,113.75 Source: Annual reports and other documents, Bureau of Insular Adairs, U. S. War Department. Other Philippine bonds held by American citizens include obligations issued by the Manila Railroad, certain sugar centrals, and religious organizations. The bonds of the Manila Rail road are guaranteed both as to interest and prin cipal by the Philippine Government. In Jan uary 1936 the Philippine Government purchased from certain foreign investors a large block of Manila Railroad bonds at a substantial discount.1 It is possible that in the near future a purchase offer will be made to other bondholders. The sugar centrals have a small amount of bonded 1 Bonds issued by provincial and municipal govern ments, held as security by the Commonwealth Govern ment for issues of insular colleteral trust bonds. Table 78.—American investments in Philip pine bonds and certificates of indebtedness, Dec. 31, 19351 PhilippincGovcrnment bonds.« insular, pro vincial, and municipal............................... $31,069,350 Bonds of the Manila Railroad!..................... 1,902,000 Notes of religious institutions4..................... 2,741,000 Corporate bonds issued by sugar centrals 6 600,000 Total ........................................................... $36,312,350 1 Bonds of the Philippine Railroad totaling $8,549,000 par value arc not included owing to the uncertain value of these securities. 2Compiled from statistics made available by the Bureau of Insular Affairs, Uni tod States War Department. > Bonds of the Manila Railroad, totaling $10,585,000 are guaranteed as to interest and principal by the Philip pine Government. In January 1936 certain European investors sold Manila Railroad bonds with a par value of $8,170,000 to the Philippine Government at a subs tantial discount; the total of these bonds now held by the Philippine Government equals (par value) $8,683,000. The figure given above ($1,902,000) represents the total par value of Manila Railroad bonds now in the hands of the public. Source: Bureau pf Insular Affairs, U. S. War Department. <One note issue, totaling $186,000 was due in 1932 and has not been redeemed. Interest is in arrears on the remainder. Source: Finance Division. Bureau of Foreign and Domestic Commerce, U. S. Department of Comt From a compilation made by J. Bartlett Richards, American Trade Commissioner in Manila. Table 79.—American investments in Type of industry Sugar centrals (controlling interest). Sugar centrals (minor interest........ Coconut pruducts................................ General manufactures....................... Embroidery......................................... Plantations.......................................... Public utilities.................................... Truck and bus transportation........ Other transportation!....................... Lumber................................................. Engineering.......................................... Exporting............................................. Oil merchandising............................. General merchandising..................... Hotels.................................................... Banking.......... Miscellaneous. Minings!........ Total...................................................................... 189 111,237,000 163,499,500 ■ Depreciated book value, except in oases of minor interests in sugar centrals and in mining. 2Where the total net investment is shown to be larger than theinvestment in fixed assets, thedifference is represented by current assets such as inventory, and accounts receivable. For a few industries .the total investment is less than the investment in fixed assets because of bonded or mortgage debt. In 6 cases, total investment figures were not avail able; consequently the total fixed assets figures were used. It is probable, therefore, that the total investment is un derstaffed by the figures given in the table. • Fixed assets for “Other transportation" include $7,000,000, oovering the depreciated book value of the assets of the Philippine Railroad. Bonds totaling $8,549,000 are outstanding against these assets. The bonds will be due on July 1, 1937. No sinking fund has been accumulated, and the railroad has never completely earned its interest charges which are guaranteed by the Philippine Government. Interest payments made by the Government, constituting a second lien against the property, amounted to $0,095,927 on Dec. 31, 1935. The entire investment therefore has been excluded from total investments. *The figure listed under total ffifixed assets for “Mining" represents the capital stock owned by Americans. The figure under total investments is the appraised value of the ore reserves which this stook controls. Source: Statistics on fixed assets are from a compilation by J. Barlett Richards, American Trade Commissioner in Manila. Statistics on total investments are from a special report by Trade Commissioner Richards and from the Phil ippine Statistical Review, vol. 2, no 4. p. 310. debt outstanding. These securities are in an exceptionally strong position because of the profitable operations of the sugar companies in recent years. There can be little doubt con cerning the ability of the industry to liquidate this indebtedness on or before the date of maturity. The notes issued by religious institutions, how ever, are in a less favorable position. One issue, totaling 8186,000, was due in 1932 and has not yet been redeemed; moreover, the interest pay ments are in arrears on the remaining issues. With this single exception, the Philippine “port folio” investments of Americans appear relatively secure. Table 78 shows American investments in Philippine bonds as of December 31,1935. Investments in Industry, Agriculture, and Commerce. The value of investments held by citizens of the United States in Philippine industries on June 30, 1935, approximated $163,500,000. (See table 79.) Of this amount, nearly $111,250,000 represented the book value of invest ments in land, and the book value of other fixed assets less depreciation. Current assets, such as receivables, advances, and inventories account ed for the remainder. American commercial investments are represented in all of the prin cipal Philippine industries and thus are widely diversified. Mining, w’hich accounted for 23.2 percent of total American investments (other than in bonds) in 1935 is probably the most important. Other prominent industries from the standpoint of invested American capital in 1935 are public utilities which represented 19.5 percent of the total; the sugar industry, 12.5 percent; plantations, 12.2 percent; and merchandising concerns, 10.8 percent. These 5 industries thus accounted for 78 percent of the American capital directly employed in Philip pine industries in 1935; the remaining 22 percent was invested in a large number of varied en terprises. Table 79 shows the amount of AmeriThe par value of the bonds purchased totaled $8,170,000. Philippine industries, June 30, 1935 Number Land concerns buildings Machinery equipment Total fixed $4,225,000 1,112,500* 1,000,000 37.500 5,356,66b 275,000 7,293,000 745.000 995,000 57.500 1,713,000 2,700,000 1,031,500 1.385.OQ0 1,416,000 $11,125,000 $15,350,000 2,000,000 2,312,500 1,200,000 1,075,000 42.500 20,500,666 600.000 4,725,000 1,562.000 1,470,000 45,000 950,000 750,000 150.000 35,000 555.500 2,075,000 80,000 21,745,000 31,850,000 875,000 12,018,000 2,307,000 2.465,000 102,500 2,663,000 3,450,000 1.181.500 1,420,000 1.971.500 7,371,000 Total $20,425,000 2,000,00 5,545,000 4,600,000 3.000,000 19.745,000 31,850.000 972.500 5.018,000 6,000,000 3.850.000 317.500 2,663,000 15,000.000 1.181.500 1,420,000 1.971.500 37,940,500 June, 1937 THE AMERICAN CHAMBER OF COMMERCE JOURNAL 103 ican capital invested in various Philippine in dustries on June 30, 1935.5 The diversification of American investments in Philippine industries is even greater than appears from table 79. For example, the six industries listed under coconut products consist of three companies making desiccated coconut, two producing coconut oil, and one manufactur ing such products as soap, vegetable lard, and margarine. The 14 concerns engaged in general manufacturing produce a wide variety of pro ducts, among which the more important are cigars, rope, pearl buttons, cutch, and canned pineapples. The plantations are devoted primarily to the growing of coconuts, abaca, and rubber. The public utility classification includes three radio companies, one cable company, one telephone company, one gas company, and three electric light and power companies. Investments in transportation are represented by truck and bus companies, railroads, steamship lines, and air plane companies. The 49 concerns engaged in merchandising also cover a wide range of com mercial activity; 7 are engaged in retail mer chandising, 6 in distributing automobiles and tires, 6 in selling machinery, 5 in distributing motion pictures. Other products handled by thfr merchandising group are cotton textiles, hardware, drugs, jewelry, foods of all kinds, and wearing apparel. In the miscellaneous group, the nine American companies include a steam laundry, a newspaper, a magazine, an advertising company, a customs warehouse and brokerage company, a loan company, and a hospital. Amer ican capital in the mining industry is invested primarily in gold mines. Investments in iron and chromium mines are comparatively small. American capital is either a dominant or important factor in 189 different concerns which include corporations, partnerships, and indi vidually-owned enterprises. These concerns em Duel to the Death Attests Filipino’s Sanctity of Home JALA-JALA (Sick’eml Sick’em), Laguna de Bay, P. I., Nov. 12.—The unwritten law worked out to classic precision off this romantic shore recently. It was under a full moon. It was a duel with bolos, blades as firm as those of Hector and Ajax on the fields of Troy; and it was a trial of simple courage provoked by a bucolic HelenTo give the lady no offense, or anxiety, the combat was in an open boat, the typical banca of the Philippines, on the rippled surface of Laguna de Bay. Next morning the banca drifted back to shore with the dead duel ists in it, and a. younger brother of one of them, about 20 years old, fatally wounded. If all con cerned were not plain fisher folk, Euripides might write another drama. Homer might sing again. Laguna de Bay is a lake 340 square miles in area. The men rowed out to the center of it for their duel. Determined to Die Each was determined, each steady at the oar. They had been lifelong friends. But one had violated the sanctity of the other’s home; his ployed over 1,000 United States citizens to whom they paid an aggregate annual salary of more than 54,000,000 in 1 935, as shown in the table below. Table 89.—Americans employed in Philippine industries controlled by American capital, June 30, 1935 Industry 1 Sugar centrals............. Coconut products .... General manufactures. Embroidery.................. Plantations................... Public utilities............................ Truck nnd bus transportation. Other transportation.................. Lumber.......................................... Engineering.................... Exporting....................... Oil merchandising........ General merchandising. Hotels............................... Banking.......... Mining............ Miscellaneous. Number of Annual Ameri- nggrecans gate em- salary ployed 69 J325.000 45 233,000 33 137,500 12 75,000 20 50,000 109 416,500 37 100,000 62 216,500 28 97,000 37 185,000 13 60,000 54 268,000 260 1,150,000 20 42,000 11 50,500 174 530,500 42 115,000 Total.......................................... 1,026 4,051,500 1 Representing 189 concerns in which the invested capital is predominantly American. Source: From a statistical compilation by J. Bartlett Richards, American Trado Commissioner in Manila. The American investments in the Philippines are so extensive and diversified that they are likely to be materially affected by the future welfare of the Islands. The status of these investments, therefore, will depend largely on what the economic effects of the Independence Act will be on Philippine agriculture, industry, and commerce. 2Thc totnl industrial investment of Americans, while not purporting to be absolutely accurate, is compiled from the most recent and authoritative data available. It is based upon (1) statistics prepared by Mr. Richards, American Trade Commissioner in Manila, from an ex tensive questionnaire submitted to Philippine industries: (2) published reports in the Philippine Statistical Review; anil (3) trade estimates. one recourse under village law, strict but un written, was self-defense in fair combat. Unless this law is observed the Philippine village cannot be preserved. For all the houses of a village are built of bamboo and thatch, offering no security, since they can’t be locked against anyone resolved to get into them. Therefore it is custom that gives safety to a man’s household during his absence. At such times, even a cousin may not go into his house—much less a family friend. It is enough in customary law for wife or daughter to say to a visitor at the gate, "My husband (or father) is not at home.” What troubled Santiago Villafranca was that he knew his young wife, Rosario, had not made this explanation and followed the village code when his friend Melecio Dimalanta had called at his home while he was out on the lake tending his fish traps. Public Quarrel Picked This had happened a few weeks ago, and on returning home from his traps, with his bancaload of fish, Santiago found Melecio in his hut with Reed Sells More Claims For about thirty-five years, J. R. Reed dubbed along at Paracale as a merchant, a country mer chant in competition with Chinese, Syrians, everybody—thus achieving one of the most unique careers of any American in the Islands, since ordinarily the going had to be hard. Dur ing that time, however, he laid hand on many a mining claim in the district, and has been chas ing in on this prudence since interest in the dis trict revived with the success of San Mauricio, United Paracale, and the hectic activity of Coco Grove. Reed had early choice, and has done well in the business of disposing of his claims. The latest sale is to Paracale-N’ational Gold Mining Co., authorized capital Pl,000,000 in ten-cen tavo shares, the subscription list for original subscribers having been definitely closed. The claims lie on the Pasilacday river, jurisdictions of Paracale and Mambulao, adjacent to the Tumbaga property of Consolidated Mines and to the claims of the Universal Mining and Ex ploration company. Reed gets P550.000 in shares of the company for the claims, his shares remaining in escrow until Judge Nepumoceno releases them. Marsman & Co. have assumed a contract as technical managers of mining activ ities on the property. Permission to offer shares to the public has been obtained. The incorporators of this project are C. Roesholm, B. S. Ohnick, P. S. Crovat, Manuel M. Crudo, Delfin Gallardo, M. H. O’Malley, M. R. Fernandez—of whom the first five mentioned are the directors. Fortune prosper this venture. The press release from Marsman’s says the en gineers’ report that the vein structures warrant his wife. Santiago could accept do explanations of this, since, even if he forgave and overlooked the offense, the villagers, with their own homes to protect would not. This simple fact made the duel inevitable. But from the first Santiago shielded his wife as much as he could. There were delicate turns of the situation. These roused his gallantry. Since there was the possibility that none of the villagers knew of his disgrace, he said nothing about it; he made some pretext on which to pick a public quarrel at the market place with Melecio, and he heated up this quarrel to the point where Melecio had to accept his challenge to the bolo fight in order to save his face. Then, as ex plained, he set the scene of the duel far out on the lake and the hour at midnight. No Doubt of Fairness There is no doubt that the match was even, the rules bloody but fair; and the utmost fencing skill was exhibited by both men, since no swift blow was fatal but each duelist hacked the other slowly to pieces as he managed to get in a chance thrust here and there. The third man, Melecio’s brother, who had come along in another banca, was nonchalantly cut down as an interloper. Melecio himself may have done this, as if to say, “Leave this quarrel to me, for to me it pertaineth.” The p lice and coroner acted quickly, and there was so little to do after all. Santiago died in the knowledge that, so far as his own discretion could go, his home would go on free of scandal and his children would never learn why it was their father and his good friend Melecio killed each other. He obeyed basic village law in the islands, but gave it a nobler turn than villagers usually do; that is, he refused to kill his wife or even to blame her, and laid all fault at Melecio’s feet.