The United States is set to further deepen its ties with the Philippines through a nuclear cooperation pact that will allow Manila to transit to green fuels and enhance energy security. The agreement was signed on November 17 on the sidelines of the Asia Pacific Economic Cooperation (APEC) Summit held in San Francisco, US. The negotiations for this agreement started in November 2022 and came to fruition in just one year. Philippine President Ferdinand Marcos Jr. said that his country plans to include nuclear energy as part of its energy mix by 2032.

The nuclear deal, also known as the 123 Agreement named after Section 123 of the US Atomic Energy Act, will facilitate the US companies to invest and participate in nuclear projects. The US-Philippines nuclear deal is expected to be a major contributor to the Philippines’ climate goals. The Philippines is planning to cut greenhouse gas emissions by 75% by 2030. With its peak energy demand likely to quadruple by 2040 the Philippines aims to generate major part of its energy through sustainable ways.

The nuclear agreement comes at a time when the US is resetting its approach to Southeast Asia. The US’ apparent diminishing interest in the region had in part facilitated China’s growing belligerence. Philippines has been one of the strategically important countries for the US as well as China to engage with Southeast Asia.

The Philippines has been one of the oldest defence partner of the US in the region. The two countries signed the Mutual Defense Treaty (MDT) in 1951 which established the framework for military cooperation and mutual defence. During the Philippine President Ferdinand Macros Jr.’s visit to Washington in May this year, the two countries agreed to expand the ambit of the MDT. Previously, the treaty provided for the US-Philippines cooperation towards maintaining peace and stability in the South China Sea. Now Washington and Manila have expanded the scope of their cooperation to include peace and stability of the Taiwan Strait as imperative to global peace and security.

Further in February 2023, the two countries reached an agreement whereby the US would get four more military bases in the Philippines. This agreement was as per the Enhanced Defense Cooperation Agreement (EDCA) that was signed in 2014. Washington and Manila have also agreed to resume joint patrols in the South China Sea. The US-Philippines relations are emblematic of the US’ ties with the wider Southeast Asia.

While the US has been taking steps to boost defence cooperation with the Philippines, it needs to focus on the economic aspect of their ties as well. China remains a major economic power across Southeast Asia even as Washington is attempting to counter Beijing’s constantly growing footprint.  

China is the Philippines’ largest trading partner and their bilateral trade in 2022 was $40.77 billion. The US’ total trade with the Philippines during the same period was $22.17 billion. However, the US is the top destination for the Philippines’ exports while China is the third largest destination. In case of imports, China is the Philippines’ top trading partner.

The US has not been keen on a free trade agreement with the Philippines either. The US Trade Representative Ambassador Katherine Tai, while visiting the Philippines in April this year, maintained that since its launch in 2022, the US is more focused on the Indo-Pacific Economic Framework (IPEF). Tai also said that the possibility of a bilateral trade agreement with the Philippines is remote since the US is exploring options to build resilient supply chains, something that may not be viable through a bilateral trade agreement.

While the US may need to accelerate its economic outreach to the Philippines, China could make further gains in this domain. The Philippines ratified the Regional Comprehensive Economic Partnership (RCEP) in February this year, and it offers significant opportunities for Chinese enterprises to expand exports in sector where China has comparative advantages. The RCEP is expected to boost the Philippines-China bilateral ties as China would gain access to the Philippines’ markets and would also be able to explore greater long-term investment opportunities.

With the nuclear deal, the US has taken an important step towards diversifying its relations with the Philippines. The US should further look to expand its ties and build upon the defence cooperation which forms the cornerstone of the US-Philippines relations.

Mr. Niranjan Marjani is a political analyst and researcher based in Vadodara, India.