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May 17, 2012 | 12:58 GMT

4 mins read

China's Banana Diplomacy With the Philippines


Philippine President Benigno Aquino III said May 14 that banana growers should seek alternatives to the Chinese market. The statement follows May 9 reports that Chinese customs agents would begin inspecting banana and pineapple shipments from the Philippines for "harmful organisms." Under the heightened scrutiny, Chinese customs agents have impounded ships carrying bananas from the Philippines, causing the cargo to spoil at the expense of Philippine growers. The tensions over China's import restrictions on Philippine fruit come as travel agencies in China and Taiwan stop Chinese tourism in the Philippines due to the Scarborough Shoal maritime dispute.

As the third-largest destination for Philippine exports, China possesses significant economic leverage over the relatively small island country. It will use this leverage to persuade the Philippines to relax its claims in the South China Sea.

China seems to be focusing on sectors large, strategic and urgent enough (fruit spoils quickly, and there are no reserves to mitigate a dip in tourism) to send Manila a message without seriously damaging the Philippine and Chinese economies. By contrast, targeting things like electronics or machine parts would harm both economies and risk a regional backlash against China.

Bananas are the Philippines' most important fruit export, providing a major source of employment on the poor and politically unstable island of Mindanao. Bananas account, however, for just about 1 percent of the Philippines' total export value. China is currently the second-largest destination of Philippine bananas after Japan, importing $75 million worth of the fruit in 2011 — 16 percent of Philippine banana exports. Thought it is a distant second behind Japan, which consumes more than half of Philippine banana exports, China is the fastest growing market for Philippine bananas. Imports more than doubled each year from 2009 to 2011. Even when Philippine exports to other countries dipped drastically after El Nino hit in 2010, exports to China leapt from $14 million to $33 million. This rapid growth and a declining or relatively steady demand in other markets like South Korea and Iran suggest that Philippine growers will not willingly give up the market in China.

Bolstering this perception, the president of the Pilipino Banana Growers and Exporters Association (PBGEA) warned that losing the Chinese market could have political, social and economic implications. He noted that up to 200,000 workers would be affected by the current situation, the first such incident since the Philippines started exporting bananas to China in 2001. The PBGEA has played an important role in developing and consolidating the country's banana growers. Consequently, it constitutes the largest unified voice in the Philippine fruit industry and the strongest potential lobby to affect national policy.

PBGEA's efforts to develop Mindanao's banana industry have paid off in recent years, with the Philippines emerging as the third-largest exporter worldwide and the largest by far in Asia. Most Philippine bananas are grown on Mindanao. The island long has been a hotbed for political and ethnic struggle, with several competing separatist groups inhabiting different parts of the island. Poor and relatively underpopulated, the island embodies the Philippines' struggle to integrate its rural, agriculture-based and heavily indigenous southern islands with the more prosperous urban north. While these tensions are not directly tied to the island's banana industry (the majority of bananas are grown in Davao del Norte, which is not occupied by separatist groups), they form part of a larger political context that Manila treats with caution.

Beijing may hope its tougher banana inspections and tourism boycott will impel the Philippine agriculture and tourism lobbies to coax Manila into toning down its rhetoric on the maritime territory dispute. Despite the relatively small value of banana exports compared to electronics or machine parts, the PBGEA plays a central role in the country's key agricultural export product. That and bananas' important Mindanao employer may give the PBGEA — and other parts of the country's agriculture sector that fear wider Chinese sanctions — a significant say in crafting Manila's response to China.

This would allow Beijing to resolve a territorial dispute without acting overly aggressive toward the Philippines, a move that could deprive third parties, including the United States, of any reason to intervene. That Manila has joined Beijing in denying any connection between banana import restrictions and the Scarborough Shoal affair helps efforts to cast the spat as a trade issue rather than a political issue, as does a Philippine Department of Agriculture delegation's visit to China to seek a resolution to the issue. (Representatives of that department have said the particular bacteria the Chinese claimed to find do not even typically affect bananas.)

In some ways, China's strategy toward the Philippines is reminiscent of its rare earth elements export ban, which was seen as directed against Japan. It may extend this strategy of using less overt ways of reinforcing its territorial claims against countries with competing claims in the South China Sea.

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