CO129-445 - Public Offices - 1917 — Page 628

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subsequently took refuge in another port in the Philippines. There are now interned in Philippine ports 24 German vessels of a total net tonnage of 54,448 tons, and of these 17 are laid up at Manila.

Financial Facilities.-Ample financial facilities for trading are provided by the local branches of the Hong Kong and Chartered Banks. The International Banking Corporation act as the financial agents of the United States Government and do a fairly large exchange business. Much of the inter-island finance is transacted by the Bank of the Philippine Islands. Most of the larger merchant houses employ their own resources and receive from time to time, when required, clean advances against the credit of the house. The smaller firms, however, open documentary credits and pass their drafts through the banks in the usual way.

Since the establishment of the Federal Reserve Bank in the United States the adoption of more vigorous methods in that country to foster the export trade, and more particularly since the outbreak of the war, a tendency has been apparent for American business to be financed through New York instead of through London as heretofore. This is little more than a tendency at present, so far as the Atlantic ports are concerned, but, should the war be prolonged, there is some danger that the practice may become generally established.

Currency. Some stability is given to Philippines trade by the fact that it is on a gold basis. The unit of value is the theoretical gold peso, representing gold value exactly equal to 50 cents United States currency, or a nominal ld. This parity is maintained by the sale by the Government in the Philippines of drafts on its redemption fund in New York, and the sale in New York by the agent of the Philippine Government of drafts on the redemption fund in Manila. The Govern- ment's rates of exchange are fixed, and fluctuate only within the limits set by the specie points.

Oficial Representation. The British representatives are usually drawn from the British Consular Service in Japan, and comprise a Consul-General, Vice-Consul, and Pro-Consul at Manila, and Vice-Consuls at Iloilo and Cebu. The head of one of the largest. British houses in Manila writes à propos the Consular Service as follows:-

"The duties of British Consular Officials abroad should be made to embrace not only the diplomatic requirements of the service, but also the acquisition and dissemination of information regarding commerce, shipping, manufactures, and machinery likely to be of interest to British traders and manufacturers. The information they procure should be transmitted promptly to be of use."

In this statement I entirely concur,

Chamber of Commerce. The Manila Chamber of Commerce is nominally an international body, but is to all intents and purposes British, as the British members largely preponderate. The head of one of the leading Manila houses does not recommend the inauguration of a purely British Chamber, but if it is decided to reform and revivify the official commercial representation, I consider that such a step would be highly desirable and would bring Manila into line with the other important entrepôts in the Far East. The attitude of the British merchant is intensely individualistic and, quite apart from the other benefits of collective action, any institution which will lead him to consider national mercantile interests as a whole will be of service.

Probable German Activity after the War. The business of the German houses in the Philippines has been seriously restricted during the war on account of the closing of their bome market, and also by the action of H.M. Government in preventing goods reaching them through British ports or in British vessels. As the Philippine Islands, however, are under American control, it is difficult to see how any restrictive official measures can be taken against German activity after the conclusion of peace. The extension of the black list " for a limited period after the war does not appear to me to be either practical or advisable in a foreign country where neutral interests would be involved. It is therefore to be anticipated that after the war these firms will be able to resume their business in American and Continental goods as formerly. Their activity can, however, be restricted in two ways:-

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(a) By the restriction of the financial facilities formerly accorded to them by

the British exchange banks; and

(6) By the withdrawal of those British agencies which were formerly in

German hands.

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On both these questions a definite pronouncement of policy should be made sooner or later by H.M. Government, as they apply all over the world, and can only be satisfactorily settled by a uniform policy.

The Future of Philippines Trade.-The future of British trade with the islands depends entirely upon the future attitude of the United States with regard to their political status. With the advent of the Democratic Party to power in the States, and the appointment of a Democratic Governor-General in 1913, modifications of the existing United States policy towards the islands were at once put into operation, tending towards the placing of more and more power in the hands of the Filipinos with a view to independence at an early late. Immediate steps were taken to place natives in many of the highest and most responsible positions, and they were even allowed a majority in the Philippine Commission, the Upper House of the Legis- lature, thus giving native legislative control in both houses.

The resulting uncertainty as to whether the United States contemplated the abandonment of all control over the islands in the near future produced a widespread feeling of uneasiness and distrust in local commercial circles which prevailed during the whole of 1913 and 1914, and greatly restricted business. Considerable opposition to this policy was raised among United States manufacturers to whom the Philippines trade was becoming more and more valuable. It is noteworthy that, with the exception of ('hilian nitrate, the islands do or can produce all those products which the United States now purchases in South America.

The present position is one of uncertainty. If the United States retain control of the islands they are not likely seriously to modify their tariff, and consequently British manufactures will find a comparatively stagnant market. On the other hand, should complete independence be granted, the preference in favour of the United States would be withdrawn, and British trade would obtain a considerable share of the business now being transacted in New York.

It is generally felt, however, that the natives are not sufficiently advanced to govern their own country, and that independence would result in anarchy and weakness. In such an event, the suzerainty of the United States being withdrawn, the islands would fall an easy prey to Japan, which has long cast envious eyes on the country as a valuable outlet for her surplus population, and a strong point d'appui" in Southern Asia.

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On the whole, it would appear to be in the interests of Great Britain that the United States should retain firm control over the Philippines. Japan is becoming our greatest rival, both political and commercial, throughout the Far East, and Japanese sovereignty over the islands, which must almost inevitably result from the withdrawal of American support, would seriously alter the balance of power, and would be far more detrimental to our mercantile interests in the long run than would the present conditions, even taking the tariff into account. British merchants are able to control a considerable share of the local trade under existing conditions. Were Japan to occupy the country, their position would be most seriously undermined.

SUMMARY OF CONCLUSIONS.

1. The foreign trade of the Philippine Islands has expanded rapidly since the American occupation in 1898, but in consequence of the Tariff Act of 1909, whereby American goods are admitted free and a heavy tariff is imposed on foreign products, the United States trade now amounts to approximately 50 per cent. of the total, and the British share has relatively declined, antil, in manufactured goods, it occupies a very secondary position. Increasing competition is also being experienced from Germany and Japan.

2. In the produce export trade, and particularly in respect of the heavy annual shipments of hemp and sugar, local British merchant houses transact the bulk of the business, and also hold a very strong position in the general shipping, insurance, and mercantile business not only of Manila, but also of Iloilo and Cebu.

3. German competition has been most severely felt in the import trade of the islands, and is of comparatively recent growth. Not only have the imports of German goods increased, notably as regards soft goods, sundries, chemicals and hardware, but the local activity of recently-established German houses has met with a certain degree of success, mainly on account of :-

(a) Longer credit facilities granted to Chinese and native dealers;

(6) The permitting of deferred payments on large installations of machinery

and plant;

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