US and Japan rivalry in Philippine interwar import manufactures market. Power politics, trade cost and competitiveness

This study examines the asymmetric protectionist policies of the U.S. in the Philippine market during the interwar period, focusing on how these policies effectively marginalized European powers and the emerging Japan before the Yen devaluation in 1931. Using a new database on product and country-level imports from 1913 to 1940, the study concludes that competition was most intense in cotton textiles between the U.S. and Japan. The literature identifies a devalued Yen, lower transport costs, and cheaper prices of cotton manufactures as key Japanese advantages that counterbalanced U.S. protectionism in the Philippines. Regression analysis indicates that tariffs hindered cotton textile exports to the Philippines during the interwar years, especially affecting Japanese exports before the Great Depression. Japanese competitiveness before the 1930s relied on government-supported lower freight rates. However, after the Yen devaluation in 1931, the effectiveness of tariffs diminished, and the devaluation became the principal driver of Japanese textile exports to the Philippines. To counter this advantage, the USA and Japan agreed to an export restraint in exchange for tariff stabilization at the start of the Commonwealth period in 1935. However, this agreement failed to reduce the value of Japanese cotton textile exports to the Philippines. A significant reduction occurred only after the outbreak of the Sino-Japanese War in 1937.