BELL TRADE ACT (Philippine Trade Act of 1946) - Independence With Strings, From U.S. Colony to U.S. Neo-Colony

"The truth of the matter is that most of the people, outside of the Filipinos, who favor this bill are fundamentally opposed to Philippine Independence. Many of them have told me so. Their whole philosophy is to keep the Philippines economically even though we lose them politically." - U.S. Senator Millard Tydings, U.S. Congressional Record on Public Hearing of the Bell Trade Act, March 1946

 ”We gave the Philippines political freedom to enter the world family of nations, but did we give them internal political liberty? More important still, did we grant them economic freedom?”  – Harold L. Ickes, longest tenured U.S. Secretary of the Interior (1933-1946)

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Hi All,

With the defeat of the Japanese in World War II, the Philippines once again became a colony of the United States.  Its economy had been thoroughly devastated by World War II.  U.S. officials had promised Filipinos during the war that their continued loyalty to the United States would be rewarded by rehabilitation funds at war's end. Payment of war damage claims by the U.S. government and an influx of capital were both desperately needed.

With that goal in mind, the U.S. Congress passed the Bell Trade Act (U.S. Public Law 371), which specified the economic conditions governing the emergence of the Republic of the Philippines from the United States in exchange for $620 million rehabilitation funds. The Bell Trade Act was passed on July 2, 1946 (two days before the granting of independence). 

The Act included controversial provisions that tied the Philippine economy to that of the United States such as: 

1. its requirement that the Philippines amend its Constitution to give U.S. citizens "parity" with native Filipinos in the right to own public utilities and corporations engaged in natural resource exploitation until July 3, 1974; indicated in Article VII of the Act.
   (The Laurel-Langley Agreement of 1955 extended these preferential arrangements to allow American "parity" in all spheres of Philippine economic activity.)
2. its requirement of unlimited free trade for eight (8) more years, after which time and for the next 20 years a gradually increasing tariff would be applied until 1974, when there would be full tariffs.
3. its requirement that the Philippines peg its currency to the U.S. dollar.
4. its requirement that the Philippines not export its products that might "come into substantial competition" with U.S.-made goods.

Philippine acceptance of the Act, formally Philippine Trade Act of 1946, was facilitated by this linkage (rehab funds will be paid only if Philippine Constitution was amended according to the Act requirements) and railroaded via the illegal ouster --by the Roxas forces-- of nationalistic opposition who were equated as either communistic or alleged electoral fraud-- that is, seven (7) Democratic Alliance members of the Philippine Congress and three (3) Nacionalistas in the Senate. (America was under the "Red-scare" of the post-WW2 times and followed by our mendicant native, so-called leaders.)

Thus, on July 4, 1946 the American flag was lowered and the Philippine flag raised. The Philippines was declared independent. But Philippine independence was not intended to be real. The former U.S. colony was simply converted into a U.S. neo-colony ( nation-states supposedly independent politically but with weak economies thus easy prey to the exploitation by stronger nation-states.)

Regarding Parity Rights: it should be remembered that American citizens and corporations were protected, from colonial times until the duration of the Philippine Commonwealth, from Filipinization (sort of Filipino First/Only) embodied in Section 1 Article 13 of the 1935 Constitution. Thus, American citizens and corporations wanted this exemption continued via Bell Trade Act.

Though Parity Rights was supposed to be officially terminated in July 3,1974, the Marcos Administration/later Dictatorship substituted for it other laws which perpetuated advantages to foreign investors, predominantly American, over Filipino enterprises with their meager capitalization. 

Among these Marcos regime laws are the Investment Incentive Act of 1967, the Export incentive Act of 1977, Presidential Decree PD-218 granting numerous tax exemptions to multinationals, PD-1034 allowing the establishment of off-shore banking units (OBUs) or branches of multinationals banks. 

Regarding Free Trade: to get control of Philippine trade upon expiration of the 10-year trade provisions in the Treaty of Paris (which allowed entry of Spanish goods to the islands on the same terms as the Americans), the U.S. established free trade via Payne-Aldrich Act (1909), but with imposed quotas on Philippine sugar and tobacco exports to the U.S. and none on any U.S. entering the Philippines; and Underwood-Simmons Act (1913). 

Under free trade, the Philippines sold raw agricultural materials to the U.S. and entered untaxed; American processed goods drove out other foreign competition from the Philippine market since they were cheaper, having entered the islands untaxed. 

Furthermore, free trade only between the U.S. and the Philippines discouraged and/or killed any nascent native Filipino industrialization and kept the native majority primarily agricultural, i.e. as peasants, tenant-farmers and rural.  During these times as in 1936, the Philippine market was ranked as first or second for many American export products. Thus, American citizens and corporations wanted to continue their free trade advantages via Bell Trade Act. 

In 1962, Diosdado Macapagal was supported by the U.S. to defeat President. Carlos Garcia; then Macapagal immediately dropped the latter's FILIPINO FIRST program, brought back free trade and devalued the Philippine peso for the first time (@100% devaluation, i.e. from P2 to P3.90 per $1. (Note: Among the Nacionalista Senators, then Sen. Garcia voiced the strongest criticism of the Bell Trade Act & Military Bases Agreement.)

Without going into specific examples, much talk among us native Filipinos regarding our supposed damaged culture, colonial mentality, not having industrialized, massive poverty (generational poverty), much unemployment, diaspora, etc. all are greatly attributable to our continuing history of colonization then and neo-colonization now. These unfair arrangements that our rulers have subserviently and traitorously agreed to, as to maintain their political power and its benefits/prerogatives. 

Colonization and neo-colonization are not limited to economic domination, they also result in greatly redefining, to conform to their imperial or hegemonic interests, the existing native culture, thus its social and political expressions.

These arrangements came to pass because most of us native Filipinos are in poverty, illiterate and ignorant. All these unequal arrangements that were and are disastrous to our socioeconomic and political lives were and will be continually recast [i.e. via bilateral agreements, IMF/WB, WTO.]

More currently, the CHA-CHA (or its relabeling CoRRECT) traitorous movement-- maybe even lead by resident aliens-- works to amend the 1987 Constitution to delete or further weaken its remaining nationalistic provisions to keep us natives poor and preoccupied with daily survival, unable to live life to the fullest potential; and thus perpetuate the easy robbing/plundering, by foreigners with their few native partners, of our already diminishing nonrenewable, national patrimony and national sovereignty in the generations to come. 

We native Filipinos, knowingly and unknowingly, have been caged in a vicious circle that only active and determined mass nationalism can break, as other neighboring Asian countries have successfully demonstrated. 

Those few fellow natives and their foreign partners and transnational corporations with their vested interests in these extremely profitable arrangements have and will resist such nationalism. Therefore, the need for us natives to learn and understand our continuing past in order to unite and break it.

Below is a summary of the Key Provisions in the Act.

A link to the legalistic, full version is also available.


- Bert 9/27/2012

PS. Please click to read also: 

1. THE RECTO READER: Parity Rights, Currency Dependence, Foreign Loans versus Foreign Investments, Part 2E of 6
2. [ Addendum 12.08/2012: US Military Bases & Military Assistance Agreements (1947) – How Approved (Part 1 of 2)

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BELL TRADE ACT (Summary with Key Provisions)

Article I.

U.S. exports to the Philippines and Philippine exports to the U.S. (with the exception of those Philippine exports covered in Article II) shall pay no duty until July 4, 1954. Duties on these items shall then be 5% of the regular duties from July 4 to December 31, 1954; 10% during calendar year 1955; and 5% more of the regular duty each year until 1973, when the full duty shall be paid.

Article II.

1. Absolute quotas are placed on the amount of sugar, cordage (rope), rice, cigars, scrap tobacco, coconut oil, and buttons of pearl or shell that can enter the U.S. from the Philippines. 
2. For the cigars and buttons of pearl, the importation to the U.S. shall be duty-free until July 4, 1954 and then a decreasing percentage of the imports shall be duty-free each year until 1973,when the regular duty must be paid on the full amount imported.
3. The quotas in paragraph 1 and 2 (for all the items except rice) shall be allocated annually by the Philippine Government to manufacturers in the Philippines proportionate to their 1940 exports of the item to the U.S. or for sugar, to their 1931-33 production.
4. The allocated quotas in paragraph 3 may be transferred or sold.

Article III.

The U.S. may establish quotas on imports of other Philippine articles imported to the U.S. if the U.S. president determines that these articles substantially compete with U.S. products. Such quotas will be set at a level not less than the amount of the article imported into the U.S> from the Philippines in the previous twelve months.

Article IV.

3. No export tax shall be imposed or collected by the U.S. on articles exported to the Philippines, or by the Philippines on articles exported to the U.S.

Article V

The value of Philippine currency in relation to the U.S. dollar shall not be changed, the convertibility of the Philippine pesos into the U.S. dollar shall not be suspended, and no restrictions shall be imposed on the transfer of funds from the Philippines to the U.S. except by agreement with the U.S. President.

Article VII. 

1. The disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces and sources of potential energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if open to any person, be open to citizens of the U.S. and to all forms of business enterprise owned or controlled, directly or indirectly, by U.S. citizens, except that (for the period prior to the amendment of the Constitution of the Philippines referred to in Paragraph 2 of this Article) the Philippines shall not be required to comply with such part of the foregoing provisions of this sentence as are in conflict with such Constitution.
2. The Government of the Philippines will promptly take such steps as are necessary to secure the amendment of the Constitution of the Philippines so as to permit the taking effect as laws of the Philippines of such part of the provisions of Paragraph 1 of this Article as is in conflict with such constitution before such amendment.

Article X

2. This Agreement shall have no effect after July 4, 1974. It may be terminated by either the U.S. or the Philippines at any time, upon not less than five years' written notice. If the president of the U.S. or the President of the Philippines determines and proclaims that the other country has adopted or applied measures or practices which would operate to nullify or impair any right or obligation provided for in this agreement, the the Agreement may be terminated upon not less than six months' written notice. 

3. If the President of the United States determines that a reasonable time for the making of the Amendment to the Constitution of the Philippines referred to in Paragraph 2 of Article VII has elapsed, but that such amendment has not been made, he shall so proclaim and this Agreement shall have no effect after the date of such proclamation.

4. If the President of the United States determines and proclaims, after consultation with the President of the Philippines, that the Philippines or any of its political subdivisions or the Philippine Government is in any manner discriminating against citizens of the United States or any form of United States business enterprise, then the President of the United States shall have the right to suspend the effectiveness of the whole or any portion of this Agreement. If the President of the United States subsequently determines and proclaims, after consultation with the President of the Philippines, that the discrimination which was the basis for such suspension (a) has ceased, such suspension shall end; or (b) has not ceased after the lapse of a time determined by the President of the United States to be reasonable, then the President of the United States shall have the right to terminate this Agreement upon not less than six months' written notice.

Sources:

1. U.S. Dept. of State, Treaties and Other International Agreements of the United States of America, 1776-1949, Charles I. Bevans, Dept. of State Publication, Washington, DC; GPO, 1974; 
2. THE PHILIPPINES READER: A History of Colonialism, Neocolonialism, Dictatorship and Resistance. Edited by Daniel B. Schirmer & Stephen Rosskamm Shalom, South End Press, 1987 <-- I HIGHLY RECOMMEND!!!

A full text version of the Act is available online at the Chan-Robles Virtual Law Library filed as Commonwealth Act #733: http://www.chanrobles.com/commonwealthacts.701-750.html

Alejandro Lichauco on American neocolonialism in the Philippines

"Reciprocal free trade drastically limited Philippine ability to protect native manufacturing and radically stimulated a taste for American consumer goods. Money which might have gone, in a more austere culture, into capital investment, instead went into luxuries and prestige purchasing.". -  Theodore Friend, BETWEEN TWO EMPIRES: 1929-1946, YALE UNIVERSITY PRESS, 1965

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CONCLUDING OBSERVATIONS: (Extracted from " Alien Interests in the Land (1900- Present)" - Prof. Perfecto  V.  Fernandez, U.P. Claro M. Recto Professorial Chair on Constitutional Law, 1984-1986.)


Under the Constitution of the Philippines (1935 as well as 1973), one of the broad objectives postulated for the Government is "to conserve and develop the patrimony of the Nation" which is set forth in the Preamble.

From the foregoing exposition, however, the National Patrimony (in the sense of public domain) has been steadily dwindling, and may reach the vanishing point before the century ends. Stress must be given the fact that, to begin with, the National Patrimony had been greatly reduced by the beginning of this century. 

Much of the best lands had been taken over by the Church and its religious orders, and vast tracts had been deeded by the Spanish monarchs under royal grants. All these became vested rights under the Treaty of Paris, and the episode of the Friar Lands only underscore the problem of getting back choice lands once they get into alien hands.

During the long period of Spanish rule, the lands taken by the colonizers were arable and residential lands. During the much shorter period of American colonial rule, the choice of the colonizers shifted to mineral and timber lands. 

Some of the richest deposits of valuable ore were taken over by Americans and their companies, and most of what was taken have remained in their hands. Such alien acquisitions continued during the Commonwealth period, and also during most of the life of the Republic up to this time, by force of the Parity Amendment.

Under the present Constitution, the alienation of the remaining National Patrimony has taken other forms. Large tracts have been given away under management or service contracts with the Government, and even larger areas could be placed under alien hands through international agreements. 

The situation is aggravated by alien take-over of private landholdings under management contracts, and to a lesser degree, under increasing resort to growers' agreements.

There is bitter irony in the situation that has emerged, that the sovereign power of the Filipino people expressed through their fundamental law, is used to maintain alien control and enjoyment of the lands taken from the Nation.



Source: U.P Philippine Law Journal, Volume 59-1984

I highly recommend this book!!

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Hi All,

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- Bert

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"The free trade relationship, which encouraged producers to concentrate on a few export crops, meant the continuation of a dependent and predominantly agricultural economy in the Philippines." - Shirley Jenkins, American Economic Policy Towards the Philippines, STANFORD UNIVERSITY PRESS, 1954.

"Let us not ask for miracles...let us not ask that he who comes as an outsider to make his fortune and go away afterwards should interest himself in the welfare of the country. What matters to him the gratitude or the curses of a people whom he does not know, in a country where he has no associations, where he has no affections? Fame to be sweet must resound in the ears of those we love, in the atmosphere of our home or of the land that will guard our ashes; we wish that fame should hover over our tomb to warm its breath the chill of death, so that we may not be completely reduced to nothingness, that something of us may survive. Naught of this can we offer those who come to watch over our destinies."..- filosofo Tasio to Ibarra  (NOLI ME TANGERE.), quoted in Hernando J. Abaya's THE UNTOLD PHILIPPINE STORY, 1967

 “Colonies do not cease to be colonies because they are independent” – Benjamin Disraeli, British Prime Minister (1804-1881)

"We have about 50% of the world's wealth but only 6.3% of its population.... Our real task in the coming period is to devise a pattern of relationships, which will permit us to maintain this position of disparity without positive detriment to our national security. To do so, we will have to dispense with all sentimentality and daydreaming, and our attention will have to be concentrated everywhere on our immediate national objectives. We need not deceive ourselves that we can afford today the luxury of altruism and world benefaction.... We should cease to talk about vague and unreal objectives such as human rights, the raising of the living standards, and democratization. The day is not far off when we are going to have to deal in straight power concepts. The less we are then hampered by idealistic slogans, the better." - George Kennan,U.S. Secretary of State Memo, 1948