UNIVERSITY OF SANTO TOMAS

COLLEGE OF COMMERCE - MARKETING MANAGEMENT

First Semester, A.Y. 2022-2023

READINGS IN THE PHILIPPINE HISTORY

Cruz, Patricia Mariz D.V. 2M2

2021148026 September 24, 2022

Philippine Trade During the American Period

The American period marks a distinct turning point in the Philippines' political and
economic history. President William McKinley of the United States established the first Philippine
Commission, known as the Schurman Commission, on January 20, 1899. It is stated in this
Commission that “Domestic and foreign trade and commerce, agriculture, and other industrial
pursuits tending toward the general development of the country in the interests of the inhabitants,
shall be the objects of constant solicitude and fostering care.”1 Evidently, the American
administration was designed to have an economic impact in the country. The American policy was
directly responsible for the growth of the Philippine economy during their colonization. Thus, it
signifies the beginning of major economic changes in the country.

Following its acquisition from Spain in 1898, the Philippine economy began to evolve in
sync with the American economy. When the US entered the Philippines, most Americans had no
idea where and what the Philippines were, let alone how the local economy was doing. However,
the first Philippine Commission's economic structure was particularly appealing to them. The
Commissioners were focused on increasing the quantity and efficiency of output, and they were
eager to redirect Philippine trade toward America.2 Hence, the United States established free trade
policy between its own economic market and its new colony, the Philippines. The core principle
of the American economy is the free trade policy. The country was instantly integrated into the

1
The Kahimyang Project (n.d.). Today in Philippine History, January 20, 1899, the Schurman Commission was Created. The Kahimyang Project.
Retrieved from https://kahimyang.com/kauswagan/articles/892/today-in-philippine-history-january-20-1899-the-schurman-commission-was-
created
2
Owen, N. (1971). Philippine Economic Development and American Policy: A Reappraisal. JSTOR. Retrieved from
https://www.jstor.org/stable/pdf/10.3998/mpub.11903511.11.pdf?refreqid=excelsior%3Ab4195d8e5e31827f2fcac41d19d78382&ab_segments=&
origin=&acceptTC=1
 UNIVERSITY OF SANTO TOMAS
COLLEGE OF COMMERCE - MARKETING MANAGEMENT
First Semester, A.Y. 2022-2023

READINGS IN THE PHILIPPINE HISTORY

American economy, benefiting its own economic interests. The economy of the Philippines was
primarily agricultural. The four major crops, sugar, abaca, tobacco, and coconuts, accounted for
nearly 90% of the export value. Additionally, the four major crops, along with rice and corn,
covered nearly 90% of the country’s cultivated lands.2

One of the key economic policies pushed during the American period was the
establishment of strong trade relations between the United States and the Philippines. By 1909, the
free trade policy had been implemented more extensively.3 There are various laws passed under
the free trade policy. One of these policies is the Payne-Aldrich Tariff Act which was passed by
the U.S. Congress in August 1909. The law permitted the importation of American goods into the
Philippines without tariffs or quotas. It granted all Philippine products, except rice, sugar, and
tobacco, free entry into the United States.4 American manufacturers favored free trade, seeking to
guarantee both cheap raw materials and markets for finished products in the Philippines. However,
concerns about competition from low-cost items manufactured in the Philippines prompted the
imposition of quantitative limitations on sugar and tobacco products, although the quotas set were
liberal enough to encourage continued expansion of the export industry.3 Accordingly, in 1913,
the Underwood-Simmons Act was passed. This strengthened free-trade relations between the
Philippines and the United States by eliminating quotas on Philippine exports to the United States.
However, the law was still advantageous to the United States because some products not included
on the list may be freely traded. These items were made in the Philippines, but at least 20% of the
raw materials were imported.5 The primary effect of these acts was to increase the islands' reliance
on American markets. From 1914 and 1920, the proportion of Philippine exports to the United
States increased from 50 to 70 percent.4

3
Sicat, G. (2020). Trade and Economic Development, 1898-1941. Philstar Global. Retrieved from
https://www.philstar.com/business/2020/02/12/1992291/trade-and-economic-development-1898-1941
4
U.S. Library of Congress (n.d.). Economic and Social Developments. Country Studies. Retrieved from
http://countrystudies.us/philippines/19.htm#:~:text=In%20August%201909%2C%20Congress%20passed,established%20for%20sugar%20and%
20tobacco.
5
Marie, J. (2014). Philippines’ Economy During the American Period. Prezi. Retrieved from https://prezi.com/gwoau6xkkiwd/philippines-
economy-during-the-american-period/
 UNIVERSITY OF SANTO TOMAS
COLLEGE OF COMMERCE - MARKETING MANAGEMENT
First Semester, A.Y. 2022-2023

READINGS IN THE PHILIPPINE HISTORY

Sugar, coconut, and abaca products became the country's key agricultural products,
resulting in significant export increases. Subsidiaries of these items enhanced the gains in the
sectors, even if they had succeeded in enlarging their market positions in relatively raw forms.
These products have experienced rapid market gains, with a reliance on sales in the U.S. market.3
In 1899, American commodities accounted for only 7% of Philippine imports, but by 1934, that
ratio had risen to 66%. Farm machinery, tobacco, meat, dairy products, and cotton textiles were
among the items on the list. In 1899, the Philippines sold 26% of its total exports to the United
States, and 84% in 1934. The majority of these exports consisted of hemp, sugar, tobacco, and
coconut goods.6 Farm areas dedicated to these commercial crops spread across the country over
time, creating pockets of agricultural productivity for the export industry.

In 1934, the Great Depression, when the stock market crashed and the collapse of the world
trade and money supply, affected the free trade policy and the economy of the Philippines. It
caused several trade barriers, such as quotas, export taxes, and processing taxes, to be imposed to
hold off the growth of some significant Philippine exports to the United States. Hence, the
Underwood-Simmons Act only remained until 1934. Further advances would continue to boost
Philippine exports, but with certain constraints. Some of these barriers took the form of tariffs
charged on export products. However, like with the processing tax collected on coconut oil
imported into the United States, the funds were held in escrow for the Philippine government's
credit and future use. While the measure damaged Philippine exports, the money was to be returned
for future Philippine use.3

6
Encyclopedia.com (n.d.). United States Colonial Rule In The Philippines. Ecyclopedia.com. Retrieved from
https://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/united-states-colonial-rule-philippines
 UNIVERSITY OF SANTO TOMAS
COLLEGE OF COMMERCE - MARKETING MANAGEMENT
First Semester, A.Y. 2022-2023

READINGS IN THE PHILIPPINE HISTORY

The term "development" is commonly used to describe a certain stage of advancement or

growth. Clearly, the free trade policy has greatly impacted the development of the economy of the
Philippines. The free trade policy was most favorable to Americans since they can guarantee a
cheap price for raw materials and finished goods from the Philippines. However, it also benefitted
the Philippines. The improvement of a country's economic and social conditions is referred to as
“development”. The Philippine economy progressed following an export-led path, headed by
major agricultural goods in which the country had gained a competitive edge. There is the
establishment and expansion of trade businesses that have evolved into renowned institutions.
Because of the increased demand for exports, the effect of these market developments was to
encourage land usage for economic enterprises. This resulted in more Filipino farmers to work in
productive agricultural operations as well as in the accompanying processing businesses for these
goods prior to export. Moreover, during this period, there is a continuous increase in the world’s
population which resulted in the expansion of the Philippines’ national output, increasing export
volume even as the population increased. It also enhanced the communication system, allowing
for more efficient trade in and out of the country. As seen from the effects of the free trade policy,
it gave a competitive advantage for the Philippine suppliers to sell to the U.S. market. The
Philippines' global and domestic commerce increased significantly as a result of its free trade
relationship with the United States. The Philippines likewise had a positive trade balance with the
United States.

Free trade further developed the economy of the Philippines. However, due to free trade,
Filipinos became heavily dependent on American goods. When the post-World War I economic
boom, expanded the country’s production and exports. Accordingly, Filipino nationalists were
concerned about the Philippines' economic and political dependence on the United States. Also,
the overspecialization of the Philippine economy around primary products, overreliance on U.S.
markets, and the political enlistment of American businesses in the Philippines' indefinite colonial
retention.6 Free trade encouraged American investment, and American firms began to dominate
 UNIVERSITY OF SANTO TOMAS
COLLEGE OF COMMERCE - MARKETING MANAGEMENT
First Semester, A.Y. 2022-2023

READINGS IN THE PHILIPPINE HISTORY

Philippine industries, mills, and refineries. Furthermore, during the Great Depression, U.S.
agricultural producers, particularly those producing sugar and oils, favored independence from the
Philippines as a protectionist strategy to exclude competition for Philippine products. The
Commonwealth Status, a 10-year transition phase in preparation for the independence of the
Philippines from the United States, resulted in rising tariffs and the removal of Philippine goods
from US markets on which Philippine producers had become reliant. While the free trade policy
enhanced the economy of the Philippines, there are no precise means of determining whether or if
economic developments have made Filipinos "better off." Production and, most certainly, average
income had grown, but so had tenantry and population pressure. Thus, despite the benefits of the
economic developments in the country, the free trade policy during the period was not good for
Filipinos.
 UNIVERSITY OF SANTO TOMAS
COLLEGE OF COMMERCE - MARKETING MANAGEMENT
First Semester, A.Y. 2022-2023

READINGS IN THE PHILIPPINE HISTORY

Bibliography
Encyclopedia.com (n.d.). United States Colonial Rule in The Philippines.
Ecyclopedia.com. Retrieved from https://www.encyclopedia.com/history/encyclopedias-
almanacs-transcripts-and-maps/united-states-colonial-rule-philippines

Marie, J. (2014). Philippines’ Economy During the American Period. Prezi.

Retrieved from https://prezi.com/gwoau6xkkiwd/philippines-economy-during-the-
american-period/

Owen, N. (1971). Philippine Economic Development and American Policy: A

Reappraisal. JSTOR. Retrieved from
https://www.jstor.org/stable/pdf/10.3998/mpub.11903511.11.pdf?refreqid=excelsior%3A
b4195d8e5e31827f2fcac41d19d78382&ab_segments=&origin=&acceptTC=1

Sicat, G. (2020). Trade and Economic Development, 1898-1941. Philstar Global.

Retrieved from https://www.philstar.com/business/2020/02/12/1992291/trade-and-
economic-development-1898-1941

U.S. Library of Congress (n.d.). Economic and Social Developments. Country

Studies. Retrieved from
http://countrystudies.us/philippines/19.htm#:~:text=In%20August%201909%2C%20Con
gress%20passed,established%20for%20sugar%20and%20tobacco.

The Kahimyang Project (n.d.). Today in Philippine History, January 20, 1899, the
Schurman Commission was Created. The Kahimyang Project. Retrieved from
https://kahimyang.com/kauswagan/articles/892/today-in-philippine-history-january-20-
1899-the-schurman-commission-was-created