July 6, 2015
The Philippines
Overview
Economics and Trade
The United States and the Republic of the Philippines
The Philippines has recorded annual economic growth
maintain close ties rooted in the period of U.S. colonial rule
exceeding 6% annually since 2010, the year Aquino took
(1898-1946), a history of extensive military cooperation,
office. U.S.-Philippines trade exceeded $18 billion in 2014.
the bilateral security alliance, and common strategic and
Major Philippine exports to the United States include
economic interests. Other pillars of the bilateral relationship
computer components, automobile parts, electric
include shared democratic values, enduring cultural
machinery, and textiles. The Philippines is one of four
affinities, and close people-to-people ties. Filipino-
countries, and the only one in Asia, selected by the U.S.
Americans number roughly 3.5 million, making them the
government to participate in the Partnership for Growth
second-largest Asian-American immigrant group (after
program (PFG). The PFG aims to accelerate and sustain
Chinese-Americans), and comprise the largest foreign-born
broad-based economic growth and help the Philippines
group in the U.S. Armed Forces. The Philippines plays an
prepare to join the Trans-Pacific Partnership (TPP) free
important role in the Obama Administration’s “strategic
trade agreement at a later date. Obstacles to joining the TPP
rebalancing” to the Asia-Pacific region.
remain, including provisions in the national Constitution
that restrict some foreign ownership of land and equity as

well as opposition by domestic interests. The Philippines is
home to the largest business process outsourcing sector in
the world, worth about $25 billion annually. Filipino
workers continue to emigrate for jobs overseas despite solid
economic growth at home. Remittances from roughly 12
million overseas Filipino workers total an estimated $26
billion annually, representing nearly 10% of GDP.
The Philippines is a member of the Association of
Southeast Asian Nations (ASEAN) and its fledgling
ASEAN Economic Community (AEC), and is a participant
in negotiations on the Regional Comprehensive Economic
Partnership (RCEP), a proposed trade agreement that
includes the ten ASEAN member states, plus China, Japan,
South Korea, India, Australia, and New Zealand. The
Philippines is to chair the 2015 Asia Pacific Economic
Cooperation (APEC) meetings.

Maritime Tensions
Source: Central Intelligence Agency, The World Factbook, 2015.
Politics
Tensions between the Philippines and China over waters
and land features in the South China Sea have increased
since 2012, when China effectively occupied a disputed
President Benigno Aquino III’s five-year presidential term
islet called Scarborough Shoal. In 2013, the Philippines
ends in 2016, and he is barred by the Philippine
filed for arbitration under the United Nations Convention
Constitution from seeking a second term. President Aquino,
on the Law of the Sea (UNCLOS), asking a tribunal to rule
son of former President Corazon Aquino and democratic
on whether various aspects of Chinese claims and behavior
leader Benigno Aquino Jr., continues to enjoy strong
are in compliance with UNCLOS. China consistently has
approval ratings of over 55%. Government policies have
declined to take part in the case, arguing that the tribunal
placed some constraints upon corruption, long an obstacle
does not have legal standing to make such a ruling. Manila
to good governance and economic growth. Weak judicial
has protested China’s recent activity to reclaim and build on
institutions remain a problem. Jejomar Binay, Vice-
several islets and submerged reefs in the Spratly chain.
President of the Philippines and former mayor of Makati, a
city in Metro Manila, and Senator Grace Poe are front
The decades-old U.S.-Philippines Mutual Defense Treaty
runners in the run-up to the 2016 elections. Poe is the
does not explicitly obligate the United States to come to the
daughter of the late Fernando Poe, Jr., a Filipino actor who
defense of maritime areas that are disputed by the
lost to Gloria Macapagal-Arroyo in the 2004 presidential
Philippines and other nations, and it may leave room for
elections.
alternative interpretations. Article IV of the Treaty states:
“Each Party recognizes an armed attack in the Pacific Area
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The Philippines
on either of the Parties would be dangerous to its own peace
from a domestic focus to an external one, and to establish a
and safety and declares that it would act to meet the
“credible security presence and awareness in the maritime
common dangers in accordance with its constitutional
domain.” The Philippines is the largest recipient in the
processes.” Article V refers to an armed attack on the
Asia-Pacific region of U.S. Foreign Military Financing,
“metropolitan territory of either of the Parties,” the “island
which supports AFP modernization efforts. The Philippines
territories under its jurisdiction in the Pacific Ocean,” or its
plans to increase its military budget and to buy military
“armed forces, public vessels, or aircraft in the Pacific.”
ships, aircraft, helicopters, vehicles, and weapons. The
During his April 2014 visit to the Philippines, President
Aquino Administration has purchased two decommissioned
Barack Obama asserted that the Mutual Defense Treaty
U.S. Coast Guard Hamilton-class cutters, which are now
requires the two countries to help defend each other against
the largest vessels in the Philippine navy. Japan has
external armed attack, adding that “our commitment to
promised to provide ten patrol vessels to the AFP and other
defend the Philippines is ironclad.” However, he stopped
military hardware and technology.
short of confirming that the Treaty would apply to disputed
features in the South China Sea. In May 2015, U.S. Defense
Since 2002, Washington and Manila have cooperated on
Secretary Ashton Carter reaffirmed the U.S. commitment
counterterrorism operations in the southern Philippines. The
without providing specifics.
United States established the Joint Special Operations Task
Force–Philippines (JSOTF-P) as part of Operation Enduring
Security Issues and Cooperation
Freedom to help the AFP fight the Abu Sayyaf Group, an
Islamist terrorist organization based in Sulu. JSOTF-P
In 1991, the Philippine Senate voted 12-11 to revoke the
forces began to withdraw in 2014, due to several factors:
Military Bases Agreement between the Philippines and the
the weakening of the Abu Sayyaf Group; the improving
United States, a reflection of nationalist sentiment.
capabilities of Philippine military forces; and a 2014 peace
However, joint military activities continued. The Visiting
agreement between the Government of the Philippines and
Forces Agreement (VFA), which entered into force in 1999,
the Moro Islamic Liberation Front (MILF) to establish an
requires that U.S. military forces assume a non-combat role
autonomous region for Muslims in Mindanao and Sulu
and to not establish a permanent base of operations on
(Comprehensive Agreement on Bangsamoro). At its peak in
Philippine soil. The Enhanced Defense Cooperation
the mid-2000s, the Abu Sayyaf Group posed a significant
Agreement (EDCA), finalized between the two
terrorist threat. It maintained links with Jemaah Islamiyah, a
governments in April 2014, would allow for the increased
Southeast Asian Islamist terrorist organization based in
presence of U.S. military forces, ships, aircraft, and
Indonesia, and factions of the MILF, and had tenuous ties to
equipment in the Philippines on a rotational basis and
Al Qaeda. The Abu Sayyaf Group and the Bangsamoro
greater U.S. access to Philippine military bases, although no
Islamic Freedom Fighters, a MILF splinter group that does
large-scale U.S. troop realignments have been proposed.
not support the peace agreement, reportedly have expressed
The full implementation of EDCA awaits a Philippine
verbal support for the Islamic State. Although there
Supreme Court decision on whether ratification by the
reportedly are roughly 100 Filipino fighters among Islamic
Senate is required. In January 2015, the two governments
State ranks, some experts believe the number is far lower,
held the fifth Bilateral Strategic Dialogue in Manila.
and that operational ties between Islamist groups in the
Philippines and the Islamic State are unlikely.
The Philippine Armed Forces (AFP) and U.S. military
engage in regular joint military exercises and missions.
The Communist Party of the Philippines (CPP), which
“Balikatan” (Shoulder-to-Shoulder) aims to develop the
Manila long had viewed as its principal security threat, has
combat readiness of the AFP and U.S.-Philippine
waged an insurgency and committed terrorist attacks since
interoperability. Balikatan 2015 involved 11,000 military
the late 1960s. The reach of the CPP’s military arm, the
service personnel from the Philippines, the United States,
New People’s Army (NPA), has been reduced and its forces
and Australia. Other annual joint exercises include the
have declined from around 25,000 fighters in the early
Cooperation Afloat Readiness and Training (CARAT)
1980s to fewer than 4,000. The NPA continues to carry out
naval event and the Amphibious Landing Exercise
small-scale attacks largely on police and army units as well
(PHIBLEX). CARAT Philippines took place in June 2015
as economic targets. The government continues to battle the
off the coast of Palawan opposite the disputed Spratly
NPA while remaining open to peace talks.
Islands. The AFP also simultaneously held drills with the
Japanese Navy in the same area.
For more information, see CRS Report R43498, The
Republic of the Philippines and U.S. Interests—2014, and
U.S. assistance to the Philippines, totaling $196 million in
CRS Report R42930, Maritime Territorial Disputes in East
FY2014, focuses on economic growth, democratic
Asia: Issues for Congress.
participation, and peace and stability in Mindanao and the
Sulu archipelago in the southern part of the country, home
Thomas Lum, tlum@crs.loc.gov, 7-7616
of a decades-old Muslim separatist insurgency. In 2010, the
Ben Dolven, bdolven@crs.loc.gov, 7-7626
U.S. Millennium Challenge Corporation (MCC) approved a

five-year, $434 million compact with the Manila
government, which focused on tax reform, poverty
IF10250
reduction, and infrastructure. U.S. military assistance to the
Philippines aims to help the country’s military transition
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