IDEAS home Printed from https://ideas.repec.org/a/phs/prejrn/v61y2024i2p171-198.html

How might China-US industrial policies affect the Philippines?: a quantitative exercise

Author

Listed:
  • Ma. Joy V. Abrenica

    (University of the Philippines)

  • Anthony G. Sabarillo

    (University of the Philippines)

Abstract

The recent industrial policy competition between the two economic hegemons, US and China, prompts developing countries to consider if and how they should respond. Using a multicountry, multisector Ricardian trade model with sectoral scale economies, we simulate different scenarios when a developing country like the Philippines takes a passive and active stance. We find welfare gains for the Philippines when it responds by implementing its own industrial policy, and welfare losses from inaction. Timing, however, matters. If the Philippines moved earlier before China and US engaged in industrial policy competition, the welfare gains are larger. Although the magnitude of gains is small, the results suggest an increased demand for industrial policy when the guardrails of the international trading system are lost due to the defiance of its benefactors.

Suggested Citation

  • Ma. Joy V. Abrenica & Anthony G. Sabarillo, 2024. "How might China-US industrial policies affect the Philippines?: a quantitative exercise," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 61(2), pages 171-198, December.
    • Handle: RePEc:phs:prejrn:v:61:y:2024:i:2:p:171-198
    as

    Download full text from publisher

    File URL: https://pre.econ.upd.edu.ph/index.php/pre/article/view/1065/1007
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Reda Cherif & Fuad Hasanov, 2019. "The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy," IMF Working Papers 2019/074, International Monetary Fund.
    2. Campolmi, Alessia & Fadinger, Harald & Forlati, Chiara, 2014. "Trade policy: Home market effect versus terms-of-trade externality," Journal of International Economics, Elsevier, vol. 93(1), pages 92-107.
    3. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    4. Freund, Caroline & Mattoo, Aaditya & Mulabdic, Alen & Ruta, Michele, 2024. "Is US trade policy reshaping global supply chains?," Journal of International Economics, Elsevier, vol. 152(C).
    5. Ahmad Lashkaripour & Volodymyr Lugovskyy, 2023. "Profits, Scale Economies, and the Gains from Trade and Industrial Policy," American Economic Review, American Economic Association, vol. 113(10), pages 2759-2808, October.
    6. Konstantin Kucheryavyy & Gary Lyn & Andrés Rodríguez-Clare, 2023. "Grounded by Gravity: A Well-Behaved Trade Model with Industry-Level Economies of Scale," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(2), pages 372-412, April.
    7. ., 2023. "The economic effects of financial development," Chapters, in: Financialisation, chapter 3, pages 51-71, Edward Elgar Publishing.
    8. Réka Juhász & Nathan Lane & Dani Rodrik, 2024. "The New Economics of Industrial Policy," Annual Review of Economics, Annual Reviews, vol. 16(1), pages 213-242, August.
    9. Robert Dekle & Jonathan Eaton & Samuel Kortum, 2008. "Global Rebalancing with Gravity: Measuring the Burden of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 511-540, July.
    10. ., 2023. "Financial development: concept and measurement," Chapters, in: Financialisation, chapter 2, pages 22-50, Edward Elgar Publishing.
    11. Ju, Jiandong & Ma, Hong & Wang, Zi & Zhu, Xiaodong, 2024. "Trade wars and industrial policy competitions: Understanding the US-China economic conflicts," Journal of Monetary Economics, Elsevier, vol. 141(C), pages 42-58.
    12. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    13. ., 2023. "From financial development to financialisation," Chapters, in: Financialisation, chapter 4, pages 72-98, Edward Elgar Publishing.
    14. Ralph Ossa, 2014. "Trade Wars and Trade Talks with Data," American Economic Review, American Economic Association, vol. 104(12), pages 4104-4146, December.
    15. ., 2023. "Finance, institutions and economic development," Chapters, in: Macroeconomics for Development, chapter 3, pages 30-47, Edward Elgar Publishing.
    16. Lorenzo Caliendo & Fernando Parro, 2015. "Estimates of the Trade and Welfare Effects of NAFTA," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(1), pages 1-44.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adrian R. Mendoza, 2025. "Navigating turbulent waters: The Philippines’ global value chains experience amid trade wars," UP School of Economics Discussion Papers 202501, University of the Philippines School of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bartelme, Dominick & Lan, Ting & Levchenko, Andrei A., 2024. "Specialization, market access and real income," Journal of International Economics, Elsevier, vol. 150(C).
    2. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    3. Dominick Bartelme & Arnaud Costinot & Dave Donaldson & Andrés Rodríguez-Clare, 2025. "The Textbook Case for Industrial Policy: Theory Meets Data," Journal of Political Economy, University of Chicago Press, vol. 133(5), pages 1527-1573.
    4. Borusyak, Kirill & Jaravel, Xavier, 2024. "Are trade wars class wars? The importance of trade-induced horizontal inequality," Journal of International Economics, Elsevier, vol. 150(C).
    5. Ju, Jiandong & Ma, Hong & Wang, Zi & Zhu, Xiaodong, 2024. "Trade wars and industrial policy competitions: Understanding the US-China economic conflicts," Journal of Monetary Economics, Elsevier, vol. 141(C), pages 42-58.
    6. Deng, Jianpeng & Wang, Zi, 2025. "The costs of duty exemptions in processing trade," China Economic Review, Elsevier, vol. 94(PB).
    7. Lashkaripour, Ahmad, 2021. "The cost of a global tariff war: A sufficient statistics approach," Journal of International Economics, Elsevier, vol. 131(C).
    8. Robin Sogalla & Joschka Wanner & Yuta Watabe, 2024. "New Trade Models, Same Old Emissions?," Discussion Papers of DIW Berlin 2077, DIW Berlin, German Institute for Economic Research.
    9. Farid Farrokhi & Ahmad Lashkaripour, 2025. "Can Trade Policy Mitigate Climate Change?," Econometrica, Econometric Society, vol. 93(5), pages 1561-1599, September.
    10. Baldomero-Quintana, Luis, 2025. "How infrastructure shapes comparative advantage," Journal of International Economics, Elsevier, vol. 155(C).
    11. Ralph Ossa & Stephen J. Redding, 2026. "The Economics of Tariffs," NBER Working Papers 34915, National Bureau of Economic Research, Inc.
    12. Watabe,Yuta & Sogalla,Robin & Wanner,Joschka, 2024. "New Trade Models, Same Old Emissions?," IDE Discussion Papers 926, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    13. Treb Allen & Costas Arkolakis & Yuta Takahashi, 2020. "Universal Gravity," Journal of Political Economy, University of Chicago Press, vol. 128(2), pages 393-433.
    14. Norris, Jordan J., 2025. "A many-location home market effect and a home biased geography," Journal of International Economics, Elsevier, vol. 154(C).
    15. Parro, Fernando, 2024. "Comment on trade wars and industrial policy competitions: understanding the U.S.-China economic conflicts," Journal of Monetary Economics, Elsevier, vol. 141(C), pages 59-61.
    16. Yuan Mei, 2024. "Regulatory Protection And The Role Of International Cooperation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 817-850, May.
    17. World Bank, 2024. "Pacific Economic Update, March 2024," World Bank Publications - Reports 41160, The World Bank Group.
    18. Robin Sogalla & Joschka Wanner & Yuta Watabe, 2024. "New Trade Models, Same Old Emissions?," CESifo Working Paper Series 11596, CESifo.
    19. Sogalla, Robin & Wanner, Joschka & Watabe, Yuta, 2024. "New trade models, same old emissions?," Kiel Working Papers 2267, Kiel Institute for the World Economy.
    20. Gakuru, Elias & Yang, Shaohua & Yang, Ling & Wang, Yuting & Adegboyo, Olufemi Samuel & Ndayambaje, J․D & Hussain, Chaudhary Saad Ullah, 2025. "Asymmetric nexus of green energy inclusion and green trade spillover effects on economic growth: Insights from China's experience for EAC-6," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 475-493.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:phs:prejrn:v:61:y:2024:i:2:p:171-198. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: HR Rabe (email available below). General contact details of provider: https://edirc.repec.org/data/seupdph.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.