CRISIS to ^ 1 ^ 1 * THE PHILIPPINES BY CATHERINE PORTER {Issued under the auspices of The American Council ] of the Institute of Pacific Relations, Inc. I NEW YORK - ALFRED A KNOPF 1942 &&&$><$rt&$>^^
B&OKS FOR WARTIME BERLIN DIARY The Journal of a Foreign Correspondent 1934-1941 by William L. Shirer DESIGN FOR POWER by Frederick L. Schuman maps by George D. Brodsky OUR HAWAII by Erna Fergusson THE JAPANESE ENEMY: His Power and His Vulnerability by Hugh Byas JAPAN'S INDUSTRIAL STRENGTH by Kate L. Mitchell These are Borzoi Books, published by ALFRED A. KNOPF
CRISIS THE PHILIPPINES
* 4 "V*Vr *"* "'"*'-"-'- ~*y- '+' ~~ Council, Institute of ^Pacific Relations, Inc. Att rights reserved. No part of this book ; #$0jr T?e ?&jfac$^e&itilarijff fGrw without permission in writing * ftornthe pi&&sK&l';'eG2pt by a reviewer who may quote brief passages i&afjB$4ew to be printed in a magazine or newspaper. Part of Ibis book appeared in Philippine Emergency by Catherine Porter, Far Eastern Pamphlets No. 3, American Councfl of the Institute of Pacific Relations, Inc., New York, 1941. In so far as this book presents interpretations and opinions as well as statements of fact, it should not be regarded as reflecting the views of either the Institute of Pacific Relations or its American Council, but solely those of the author, Manufactured in the United States of America Published simultaneously in Canada by The Ryerson Press
<fl give to the people of the Philippine:fay solemn pledge that their freedom toill be redeemed and their independence established andprotected. The entireresources., inmenandmaterial, ofthe United States stand behind that pledge." FRANKLIN JX ROOSEVELT December28, 1941
919.14 P84c Porter Crisis in t&e Philippines. Kansas city public library r^~ kansas city, missouri Books will be issued only on presentation of library card. Please report lost cards and change of residence promptly. Card holders are responsible for all books, records, films, pictures or other library materials checked out on their cards.
CONTENTS INTRODUCTION: War Comes to the Philippines 3 i THE PHILIPPINES AND AMERICAN FAR EASTERN POLICY 7 Birth of the Commonwealth 10 "Neutralization" of the Philippines 16 ThePre-War Period , 18 ii AMERICA'S MATERIAL INTERESTS 23 m THE FILIPINO PEOPLE 35 iv THE COMMONWEALTH GOVERNMENT 45 ThePresidency 47 The Opposition 50 The Last Elections 53 Inauguration of Commonwealth Officials 56 Financial Position of the Commonwealth 56
Contents v - RESOURCES OF THE PHILIPPINES 60 The Land 60 Agricultural Products 64 Mineral Resources 70 Industrialization 72 Wages 74 Filipinos* Share 76 vi FOREIGN TRADE 79 Trade with Japan 83 Effects of the War 85 vn - ALIENS IN THE COMMONWEALTH 91 The Chinese Community 93 The Japanese 98 vra * PREPARATIONS FOR WAR 106 UnitedStates Armyin the Far East 110 Philippine Defense Plan 114 Civilian Defense 118 EC - THE BATTLE OF THE PHILIPPINES 121 Status of the Government 127 x THE BALANCE SHEET 129 Filipino Morale 134 NewOrders 139 Fifth-Column Activity 140 xi THE FUTURE 141 TABLES 146 SELECTED BIBLIOGRAPHY 154 INDEX follows page 156
CRISIS IN E I P T> I N
LUZON BORNE
WAR COMES TO THE PHILIPPINES WHENwarcameto thePhilippines, it cameas part of the biggestpattern of surprise attack that theworldhadever witnessed. While part of the Japanese Navy blasted at Pearl Harbor, Japanese land and air forces moved down the Malaypeninsula; naval and air forces struck against HongKong;sporadicair attackswerelaunchedatBorneo and the Netherlands Indies; Guam, Midway and Wake Islands were attacked; and bombers, naval units and troop ships converged on the Philippines from several points. Itwasanall-outwaragainstthe allied forces who, by successive economic measures, had been slowly "encircling" Japan touseherownphrase forsomemonths. The master stroke of perfidy was that the forces of peacehadbeen softened for this movebymonths of prolonged peace talks between Japanese Ambassadors and Americanofficials inWashington talks thathadbeenextended on two occasions at Japanese request. Now it is apparent that the peace Ambassadors, whether innocent tools or wily accomplices, had in fact been asking for timeto get set, to get ready. Tokyo gave the signal to go. Thus Japan extended her co-prosperity sphere to the Philippines. A country which she might have won by 3
4] Crisis in the Philippines peaceful conquest after 1946, a country in which her nationals had already established a reputation for being friendly, thrifty, law-abiding citizens, learned at first hand what Japan's friendly intentions signified. Another small people, asking only to live at peace with their neighbors, had been swept into the Axis maelstrom. Japan's southward drive had long been anticipated in terms ranging from cotton shirts to gunboats and dive bombers. The cotton shirts have been moving into the Philippines and other southeastern Asiatic markets for years, along with trade and cultural missions, bankers, mining engineers, businessmen, and a fine fleet of merchantships. Thesehave been the peaceful messengers of economicpenetration. Onnumerous occasions, Japanese official and unofficial pronouncements have included the Philippines in the area designated for ultimate Japanese expansion, the "co-prosperity sphere" under the "New Order." Until December7, however, there had been no direct military threat to the Philippines. Infact, there were severalreasonswhysuchadirectthreathadbeenconsidered unlikely. For one thing, the resources of the Philippines, thoughlargely unexploited andpromising, werenotsuch as to prompt Japan to fight for them. The only unique product of the islands of great commercial and strategic value is hemp. Metal ores there aregold, manganese, chromite, iron, copper but very little oil and not much coal. Andof what avail wouldbe Philippine gold to purchase rawmaterials, if Dutch and British and American owners of those raw materials refused to sell them? Of what avail would be industrial metals for ship and airplaneconstruction if thefueltorunthoseships andplanes
War Comes to the Philippines [5 were lacking? Manyhave-not nations have been seeing oil wells rather thanpots of gold at the end of their rainbows. In contrast with the Philippines, therefore, the rich, producing areas of Netherlands India and Malaya were doubtless far more attractive to the Japanese. Their oil, rubber, tin andotherminerals wouldseemto offer richer spoil. Moreover, thepresence of a tokenUnited States Army in the Philippines since the early years of American occupation had served warning that any offensive action against one of the weakest countries in the Far East wouldbeachallengeto oneofthe greatestworldpowers. Since 1934, it hadbeenaquite commonassumption that, after political and economic ties between the United States and the Philippines were severed in 1946, Japan wouldbeabletosecurebypeacefulmeansalarge degree of economic and possibly political control of the islands. It mustbe admitted in all honesty that a fewFilipinos did not look upon such an eventuality with fear or distaste. After all, they argued, the Filipinos were an Orientalpeoplelike theJapanese andtheJapanesehadlaid great stress onthis point. Filipinos hadnotbeen aware of racial discrimination against their people by the Japanese. Theyhadnot been barred from Japanese clubs, as they had been from American. There was a tradition of friendliness between the Japanese and the Filipinos, unmarred by such memories as those of the early days of American occupation. Without looking ahead to the post-1946 period, some hard-headed Filipinos had already seen the danger to the Commonwealthof theverything that has happened.
6] Crisis in the Philippines Writing in the Philippines Herald Midweek Magazine in October 1939, shortly after war broke out in Europe, Vicente Albano Pacis said, Ifwarcomes,whatofthePhilippines? Beingstill anAmerican territory, she can legitimately depend on American protection. It was former United States High Commissioner PaulV. McNuttwhosaid thatthe merefact thattheAmerican flag continues to fly over the islands will be an adequate protection of the Philippines from invasion. Possible developments in the Philippines under the American flag seem to point to the opposite result. The American flag may instead be an invitation to invasion. It is academic nowto argue that the Philippines might have been spared in the conflict if it had already gained its independence. It certainly could not have relied upon its own military strength to safeguard its neutrality. It woulddoubtless havebecomeoneof thefirst jumping-off points for Japan in her drive to the'far richer resources of Netherlands IndiaandMalaya.It mighthavebecomeanother Thailand. Anyhope of being freed from the Japanese yokewould have been dissipated at the outset. For Japan's empty promises of prosperity have been translatedintoreality in noterritorywhereshehas setherfo6t not even amongher ownpeople at home. The situation of the Philippines must be examined rather in terms of actuality. It mustbe considered in the light of the past and in the light of the present, in terms of the country's internal construction and of its relations withthe rest of the world. First and foremost, it mustbe studied as part of the problem facing the United States; for it is still animportantpart of that problem, regardless of the immediate outcomeoffighting in the Philippines.
CHAPTER I THE PHILIPPINES AND AMERICAN FAR EASTERN POLICY WHAT part the Philippines has occupied in our Far Eastern policy has not always been clear or consistent. Afterthe defeat of theSpanishfleet byAdmiralDeweyin ManilaBay( May1898), there was anupsurge of interest onthepart ofAmericans in theFarEast generally, rather than in the Philippine Islands particularly. The importance of the islands as akey to the markets of Asia was a strong talking point; but what they would ultimately mean in the country's Far Eastern policy was not generally considered, and even those who were far-sighted enough to look aheadto the broaderproblems of foreign policy came to widely different conclusions. According to A. WhitneyGriswoldin TheFarEastern Policy ofthe UnitedStates: * There was no identification of the Philippines with the Far Eastern policy of the United States prior to, or even immedi* * New York, Harcourt, Brace and Company, 193S. 7
8] Crisis in the Philippines ately after, the Battle of Manila. . . . American interests in theFarEastwerean afterthought. . . . First camethe Battle of Manila, then the predictions and rationalizations as to the value of the islands to Americaninterests in the Far East. In the years after annexation, events in other parts of the FarEasttemperedsomewhatthe enthusiasm ofthose who were in large part responsible for the Philippine venture and for the final annexation of the islands. Accordingto Mr. Griswold, at thetermination ofthe RussoJapanese war, President Theodore Roosevelt perceived "invictorious Japanamenaceto the Philippines." Within a few years (in 1907) he was writing to his secretary of war that the islands formed "our heel of Achilles. They are all that makes the present situation with Japan dangerous.'* Muchofthis uneasiness, it canbe seen, emanatedfrom the growing power of Japan in the Far East. Instances can be cited to indicate that the Philippines was an importantconsideration in certainnegotiationsbetweenthe United States and Japan (the Taft-Katsura Memorandumof 1905andthe Root-TakahiraAgreementof 1908) , the United States assenting in effect to Japan's protectorate overKoreaandafreehandforJapanin Manchuria, in return for assurances on Japan's part that she would respect the security of the Philippines. How far Japan had evolved as a morereal threat to the Philippines and to American interests in the Pacific generally was apparent in President Wilson's reaction to the award of the German Islands in the North Pacific to Japan at the end of the World War. The Marsh-alls and Carolines, lying betweenHawaii and the Philippines, underthe mandate ofapotentiallyhostilepower,emphasizedthe distance of
Philippines., American Far Eastern Policy [9 the Achilles heel from the body responsible for its protection, the United States. Steadily deteriorating relations between China and Japan in the last decade served to underline even more strikingly the vulnerable position of thePhilippines. This had some effect upon recent American policy in the Far East. The second President Roosevelt, inheriting the Philippineproblemas a gift fromhis relative whograced the White House some years before him, stood firmly uponAmerica's treaty rights in the Pacific. His administration followed the policy of non-recognition of Japan's advancesin ManchuriaandNorthChina, wasmeticulous about keeping the record straight in frequent notes reaffirming America's traditional rights, and met Japan's denunciation ofnavaltreaties withthelarge naval appropriations of 1936-38. Theprevailingisolationist sentiment in the United States during the depression and postdepression period began to crystallize in the neutrality legislation of 1935 and subsequent years. Although this grewoutofthebroaderinternational situation, it acted as an effective brake on anymorepositive action in the Far Eastthatmighthavebeen contemplated. In general, it wouldseemto betrue thatAmericanconception of the role ofthe Philippines in United States Far Eastern policy has varied considerably, and that even critical developments of recent years in the far Pacific resulted in crystallizing American sentiment only very slowly. Theinitial acquisition of territory in the Far East affected Washington-Tokyo relations to some extent, as suggested above, butthelargerissues of the opendoorin China,themaintenanceof China's integrity, andthe general treaty rights of the United States in the Pacific seem
10] Crisis in the Philippines to have been far more important in determining American policy. It was not until the spring of 1940 that the vulnerability of the Philippines became an important issue. Andby that time the status of the Philippines had been altered in a waythat further complicated the problem of theUnitedStates in the FarEast. BIRTH OF THE COMMONWEALTH In November 1935 the Philippines entered a ten-year period of semi-autonomy under a commonwealth form of government, to end in July 1946 with the emergence of a completelyfree andindependentstate. This changed status was authorized by the Independence Act (Tydings-McDuffie Act) passed by the United States Congress in March 1934. Atthis point it maybeof interest to synchronize developments in the Philippine independence program with events in the outside world, some of them seemingly quite unrelated to the Far East or the Philippines at the time of their occurrence* When the United States Congress passed the Independence Act andthe Philippine Legislature accepted it in 1934, the world was already on the brink of a mammothupheaval. In the Far East, Japan was launched on her program of expansion, attempting to strengthen her position in the new state of Manchoukuo and to penetrate fartherinto North China, at the same time carrying on anintensive drive to increase hermarkets all over the world. In Europe, Germany steadily armingwas already casting analmost paralytic spell over herneighbors, who werefrantically endeavoring to arrange a series of pacts
Birth of the Commonwealfir ** C) calculatedtolockall Europetightinthearmsofbrotherly love for generations to come. The first convulsions, ominous as they appear in the afterlight, caused few if any tremors in the Philippines. The people proceeded to ratify their newconstitution in May 1935, held an election for the officers of their new government in September, and on November 15 the Commonwealth Government of the Philippines was inaugurated. For better, for worse, the Philippines was committed to a ten-year transitional period of semiautonomy, to befollowed bycomplete freedom. Inthe meantime, the rest of theworldwasmuchmore preoccupiedwithits ownaffairs thanwithwhatwashappening in an archipelago somewhat removed from its immediateview.JapanhadformallydenouncedtheFivePowerNavalTreaty ( it hadalreadychallengedtheNinePower Treaty successfully) and was later to walk out on the Naval Conference in London, after failing to secure its demands for naval parity with the United States and Great Britain. The Ethiopian campaign was already under way. The complaints of the "have-not" nations were growinglouder; thelight of conciliation being shed by the "have" nations was growing dim. ThePhilippines, however, seemed to be happily sheltered from the storms sweeping over other areas. The onlypotentialmenaceonthehorizonwasJapan, andthat country was extending itself on the Asiatic mainland to an extent that promised comparative security to the new Commonwealth,atleastfortiepresent.WhileJapanwas thus busy and watchful, she was not likely to invite trouble with a powerful country like the United States through trespassing in the Philippines.
12] Crisis in the Philippines The immediate concern of Commonwealth officials, then, was to set their own house in order. This task was twofold: the major part of the work had to be done on the homefront, but therewas also important work to be done in or through Washington, in an effort to secure changes in the economicprovisions of the Independence Act Foreign affairs of the Philippines were still the concern of the United States during the Commonwealth period. It was natural, therefore, that domestic affairs andrelations withWashingtonpractically filled the Philippine program. Delight in the Philippines at the approach of independence was tempered somewhat by concern over the fate of someof the leadingexports in the American market, theirprincipaloutlet. Therewasgreatdissatisfaction, too, with the limits on Philippine autonomy, which renderedFilipinoofficials helplesstoretaliate againstAmericangoodscoiningintotheirmarketandunableto arrange morefavorable trade relations with other countries. Misgivings about the future of weak independent nations, in dielightofwhatwashappeningin ChinaandinEthiopia, were only beginning to be felt. Small voices were raised asking for a reconsideration of the independence program; murmurs, at least, wereheard to the effect that if independence was coming, the quicker it came, the better. Somefavoredanindefinite postponementof the date of independence, others began to see their salvation in immediate freedom from the shackles of American capitalism, of American imperialism, Onthe international front, events were moving at accelerated tempo. During the first year of the Commonwealth Government, Spain became embroiled in civil
Birth of the Commonwealth [13 war, a war in which the old Spanish community in the Philippines (almostwholeheartedlypro-Franco) wasintensely interested. At the end of 1936 the German-Japanese Anti-Comintern Pact was formed. Early in 1937President Quezonexploded a bombshell by proposing that his country be granted independence in 1938 or 1939. Shortly afterward a Joint Preparatory Committee on Philippine Affairs was created "to study trade relations between the United States and the Philippines andto recommend a program for the adjustment of Philippine national economy/* In view of President Quezon's suggestion that the date of independence be advanced, the committee was expected to consider the effect which such a change in the date would have on a program of economic adjustment in the Philippines. The committee, madeup equally of Americans and Filipinos appointed bythe President of the United States and the President of the Philippine Commonwealthrespectively, conductedpublichearings inWashington, SanFrancisco and Manila, and investigated conditions in the Philippines at first hand. Before the Joint Committee reached Manila, undeclared war broke out in China. Although armed conflict in that area was not unexpected, the particular form which it took aroused indignation amongpeople far removedfrom the scene. Indignation was tinged with fear amongsomepeoplein thePhilippines, whoweretoowell awarethattheircountrywasonlyafewshorthoursbyair from Japanese bases. Comfortfor the present was found in the continuing responsibility of the United States for the defense of the Philippines, but it was a cold comfort forthosewhofeltthatwarbetweentheUnitedStates and
14] Crisis in the Philippines Japan was a possibility to be reckoned with, and that such awarwouldinvolve thePhilippine Commonwealth, whereasafreeindependentPhilippinenationmighthope tobespared. In the United States, too, opinion was undergoing some change. In general, the groups that had brought pressure to bearfor thepassageof the IndependenceAct remained more or less well defined: the farm group, jealous ofprotectingits ownfats andoils fromthe alleged competitionofPhilippine coconutoil; the sugarinterests, set on reserving the larger part of the American market for domestic and Cubansugar, the latter likewise representing large American interests; labor organizations dedicatedtoshuttingouttheFilipinoimmigrantfromthe American labor field. But the broader issues involved in Americanwithdrawal from the Philippines werebecoming confused. With Japan on the march, could America afford to relinquish her only foothold in the far Pacific? If the Filipinos should ask for a reconsideration of the whole independence question, and if the United States agreed to some form of dominion plan for the islands* government, wouldthis be a guarantee of peace for the Philippines and for the Pacific area, or would it be likely to involve the United States in warwith Japan at some future date? If theUnited States continued its preparations forwithdrawalonschedule, andif the progress of events seemed to threaten the Philippines with Japanese domination some time after 1946, whatwas the moral obligation ofthemothercountrytowardthe smallnationwhich it hadset onthe roadtofreedom? It was against this background of doubt and uncer-
Birth of the Commonwealth [15 tainty in both countries that the Joint Committee conducted its investigations and prepared its report. Before that report was released, many more portentous events dotted the map of the world with danger signals. In November 1937 the Brussels Conference was held, which Japan steadfastly refused to attend, and from which no positive action resulted. In the same month, Italy joined the Berlin-Tokyo Anti-Comintern Pact. In the spring of 1938, Germanymovedinto Austria. Thefall of that year sawtheconsummationof the Munichagreementandthe erection of aflimsy peace structure. Early in 1939, Japan occupied Hainan and the Spratly Islands, an initial step in her southward drive.1 The Joint Committee's report and recommendations werereleasedattheendof 1938. Inaddition to easingthe strain to which some of the major Philippine industries would have been subjected by the original terms of the Independence Act, the Committee's recommendations wentstill further byproviding for continuing trade relations between 1946 and 1960 on a schedule of gradually rising export duties or declining quotas on certain Philippine goods shipped to the United States. When the legislation growing out of the recommendationswas presentedto Congress early in 1939, the generalworld situation wassuch as to create grave doubts aboutthe wisdom of trade commitmentsbeyond1946, especially since such commitments might have been interpreted as carrying a certain degree of political responsibility. Therefore the final amendments,passedbyCongress in July andsigned 1 Renewedinterest in these islands was arousedin August 1941, when Japanesemapswenton sale inTokyobookstores, showing awhole group of islands between Spratly and the Philippines bearing new Japanese names (New York Times, Aug. 20, 1941).
16] Crisis in the Philippines by the President in August 1939, dealt only with the Commonwealth period in line with the Committee's recommendations.Traderelations afterJuly4, 1946,were to be the subject of a special economic conference between representatives of the United States and Philippine Governments, to be called not later than 1944. Although all of these deliberations, bothin Manilaand in Washington, concentrated on economic matters, they were naturally affected by the rapidly changing international situation within which they were being carried on. For all butthose directly interested in some aspect of trade between the two countries, the political implications seemed more important. Many Americans saw in Filipino requests for reconsideration of the economic provisions of the Independence Act a backtracking on their independence plea. They saw in suggestions for continuedpreferential trade betweenthePhilippines and the United States after 1946 a subtle plea for all the advantages of political independence for the Philippines, with the United States still carrying a responsibility whichmightproveevermoreburdensome. "NEUTRALIZATION" OF THE PHILIPPINES However, when the Independence Act was passed in 1934, aprovision wasthenmadewhichwas calculated to guarantee peace to the islands. Section 11 of the Act requestedthePresidentofthe UnitedStates "at the earliest practicable date to enter into negotiations with foreign powers with a view to the conclusion of a treaty for the perpetual neutralization of the Philippine Islands,
"Neutralization" of the Philippines [17 if and when Philippine independence shall have been achieved/' The fate of other treaties in years subsequent to the passage of the Act did not offer any great hope that a treaty of neutralization for the Philippines would accomplish its purpose. Conflicting unofficial statements about the possibility of concluding such a treaty of neutralization were reported from time to time from Japan. Astatement made by Foreign Minister Arita in February 1940 was hailed bythe Manilapress as afriendly gesturein this direction, when Arita reportedly said, "The Japanese Empire intends to draw closer its economic bonds with southern countries, but entertains no territorial designs. The governmentdesires to takeeffective measuresto dispel deeprooted and widespread misunderstanding abroad that Japan has territorial ambitions in southern regions. As regards a non-aggression pact, it will certainly be one,of the measures for the purpose, if only the other party is agreeable to the idea." 2 Not entirely satisfied with reports of Minister Arita's address, the Philippines Herald secured through the Japanese consulate-general transcripts fromthe Imperial Diet record and a special statement from the Japanese foreign office spokesman. In these, although the spokesmanreiterated that "Japan harbors no political or territorial ambitions concerning the Philippines," other statements therein recorded fell short of giving complete reassuranceto aPhilippine audience. "]&&&desires to live inpeace andto share in commonprosperity andwell-beingwiththePhilippines . . .Itis ofparamountnecessity 2 Contemporary Japan, published monthly by the Foreign Affairs Association ofJapan, Tokyo, April, 1940, p. 368.
18] Crisis in the Philippines to intensify the economic relations between Japan and the countries of the South. Thus we can utilize their natural resources for our mutual advantage." These pronouncements called forth an editorial in the Herald which reminded the Filipino people that "the American policy, as enunciated first by President McKinley, later emphasized by William Howard Taft, the first civil governor of the Philippines, has been that the Philippines should be developed for the benefit of the Filipinos. . . . There was never one word said about sharing the prosperity and the natural resources of the Philippines for tike mutual benefit of the Filipinos and the Americans/ 7 3 It is not surprising, in viewof the strained relations between Tokyo and Washington and the serious situation in other parts of theFarEast, that nosteps weretaken to implementtheneutralization clause of the Independence Act, Amongother signatories envisaged in the early conception of a neutralization treaty would have been France, the Netherlands and Great Britain. Their more immediate problems, and the status in the Far East of the home governments of France and the Netherlands before the outbreak of the Pacific war, were sufficient answertoquestions aboutneutralizing the Philippines. THE PRE-WAR PERIOD The fall of the Low Countries and of France in May and June of 1940 and the desperate battle of Britain throughout the year weakened greatly their depend3 Philippines Herald, Manila, Feb. 26, 1940.
The Pre-War Period [19 encies in the FarEast. The attitude of the United States toward further Japanese aggression in the south was not clearly defined. Therefore Japan seemed to have a rare opportunity to start pulling out of the quagmire of the China Incident andto begin hermovesouthward. In the months after Japan extended her influence into Indo-China, diplomatic activity onseveralfronts became the order of the day. Having openly rejoined the Axis in September 1940, rapprochement with the Soviet Union becameanimportantobjectiveforJapan. Thiswasfinally achieved in April 1941. Still the southward drive did not gainmomentum,andthe continuedpresence ofJapanese troops on the Manchoukuo border suggested that the Japanese-Soviet pact had not consolidated Japan's position as muchas shehadhopedit would. The outbreak of the Russo-German war in June 1941 put Japan in a newly perplexing position. The question of effective aid to the Nazis had to be weighed against Japan's own self-interest. In the period of Tokyo's indecision that followed the German attack on the Soviets, theJapanesetriedto createthe impressionthattheywere preparing to move in all directions at once. The upshot was the steady "encirclement" of Japan or so the Japanesevieweditwiththe Soviet Union, Great Britain, the United States and the Netherlands Indies presenting the stiffestfrontthathadyetbeenmarshalledagainst aggressionin the FarEast. Though the southward thrust was not in the early phases directed against the Philippines, it constituted an uncomfortable reminder that the Commonwealth was perilouslynear if notwithin the area of possible conflict. It alsoconstituted athreatto vital supplies of tin andrub-
20] Crisis in the Philippines ber coming from southeast Asia to the United States. Over and above these was the threat which Japan had carried for the last ten years to the old order in the Far East, anorderto the supportofwhichbothJapanandthe United Stateswereboundbymultilateral treaties. TheUnited States, whatever its intentions might have been in 1934 with regard to retiring from the far Pacific, acquiredincreasingstature in that area. Americanofficial pronouncements showed growing concern about the maintenance of the status quo. 4 United States aid to Chinacontinued, indirect aidwas given the Netherlands Indies andBritish Pacific dominions and colonies in their defense preparations. After the Nazi attack on Russia, American aid was extendedto the Soviet Union. Passage of the lease-lend bill gave the United States the title "arsenal of the democracies/' with great import forthePacific as well as for theAtlantic. All duringthese months, American pressure was exerted against Japan, through abrogation of the commercial treaty of 1911, imposition and extension of the export licensing system, andin July through the orderfreezingJapanese assets in the United States, The eight-point declaration of principles by President RooseveltandPrimeMinisterChurchillissued onAugust 14, 1941,placed the United States even more definitely on record in accepting its responsibilities not only with regard to the war but more forcibly with regard to the kind of peace that will follow. That declaration was as welcome to friends, as ominous to potential enemies in the Far East as in other parts of the world. For it was in 4 Cf, Our Far Eastern Record, Vols. I and II. New York, American Council, Institute of Pacific Relations, 1940 and 1942.
The Pre-War Period [21 direct oppositionto the knownprinciples andaims of the Axis powers. It promised freedom, security and a better life, as opposed to slavery and impoverishment, for the great masses of people who were being drawn into this war. Manymonthsbeforetheoutbreakofwarin thePacific, therefore, the stiffening of the democratic front throughouttheFarEasthadalreadybroughtthePhilippines into the camp of powers opposing the spread of aggression and the establishment of "neworders." In recognition of this fact, Domei on February 17, 1941, quoted the JapaneseViceForeignMinisteras saying: "Japanis interested in the Philippines as a friendly neighbor and therefore desires that the islands will not endanger Japan in the future" 5 Issues had become very broad and involved before the Japanese attack on Pearl Harbor and Luzon. The question no longer was whether the United States, if occasion arose, would fight to defend the Philippines an issue which might have found the American people divided if notpreponderantly opposed to such a crusade. It wasapparent, manymonths prior to December, that if war spread in the Pacific the United States wasboundto be involved, and that the Philippines also would be involved automatically. If there was any doubtin Japanese official minds about anti-Axis solidarity, her forces made doublysure ofcementingthatmoralsolidaritybymoving actually againstall the "encircling" powers at once. Nowtheissue is joined, andit is definedin termswhich are familiar on both sides of the world, which include many peoples and many diverse forms of government 5 New Yorfc Herdd Tribune, Feb. 18, 1941.
22] Crisis in the Philippines tinder the banner of democracy. It is apparent that UnitedStates interests donotbegin orendwith the Philippines. China, Singapore, British India, the Netherlands Indies, AustraliaandNewZealand, andSoviet Russiaare all parts ofthe democraticfront. It is open to question whether, under other circumstances, the Filipinos would have supported the great empires that held their Malay brothers in subjection for so long. Buttheyrecognizedthatwarmakes strange bedfellows. The involvement of Soviet Russia in the European conflict on the side of the democracies doubtless proved a tonic for Philippine morale. Without knowing how strong or widespread Communist sympathy had beenin theislands, it is possible to state that aquite articulateminority of Filipinos hadseen amuchmorenatural community of interest between the Soviets and the Malays thanbetween the Malays and their imperialist overlords, the British and Dutch. Those Filipinos who in the past argued for a system of collective security, and one that would include the Soviet Union, found their path madeeasier byHitler's treachery.
3^&5s9si>3sr^>^ CHAPTER II AMERICA'S MATERIAL INTERESTS ALTHOUGH the United States was brought into the conflict in the Far East by Japan's treacherous attack on American territories, it is clear on the record that America's moral support and material resources had already been thrown on the side of the anti-Axis powers. Moreover, the United States had certain material interests in the FarEast. It was fighting not only to protect those interests but also for the right to pursue those interests. It needed certain products thatthe FarEasthadbeen glad to sell. It wasfightingfor the right to continueto acquire those goods a right which it insisted should not be denied any country. TheUnitedStates hadalso obtainedcertainprivileges, especially in the Philippines. It had, however, prepared to abandon those privileges and to grant to a conquered country completeindependence. It is hardly conceivable that it would have fought to retain what it was already relinquishingfreely. If die questionhadbeenmerely one 23
24] Crisis in the Philippines of dollars and cents, it wouldnot have fired one shot for what the Philippines represented to the United States and to the American people. IfweexamineUnitedStates interests in the Philippines from the material point of view, wediscover that Americans and their government spent and invested comparatively little in their only Far Eastern territory. It is not difficult to accountfor this. The United States did not go into the islands on a permanent basis, but merely to establish a government designed, so it was proclaimed, for "the happiness, peace andprosperity of thepeople of the Philippine Islands." Nospecial incentive wasofferedto Americans to invest in the country's development, beyond the natural advantages accruing to the citizens* of the sovereign state. The penalty which American citizens paid in double taxes, while other nationals were taxed only in the Philippines andnotbytheir homegovernments, outweighed to someextentanyothernaturaladvantageswhichAmericans mighthavebeen expectedto enjoy. Theknowledge that the United States intended to withdraw at an early date from the islands heightened for Americans the risk of embarkingonlong-term business ventures. Both United States Government expenditures and American private investment in the Philippines were made within the limitations of this unique policy. This explains the comparatively meager outlay of something over a billion dollars made by the United States on account of the Philippines in the last four decades. 1 It ex1 Included in the grand total is the sum of $20 million which the United States paid Spain under the terms of the Treaty of Paris ( 1898), Article HI, ceding the Philippine Islands to the United States.
Americas Material Interests [25 plains the small American investment of $200 million in the Islands, and the relatively small volume of trade betweenthe twocountries since 1899. Ofthe total expenditure, byfar the greatest part, $800 million,wasfor the army. 2 Proportionately, theverylarge share of $186,321,000 (whichincludes an $8 million item for the navy) was reckoned as the cost of pacification of the islands betweenMay1898 andJuneSO, 1902. Naval expenses were quite insignificant, something over $100 million. This was only a small part of the total outlayfortheAsiaticfleet, whosepresencein FarEastern waters over the years could hardly have been attributed in largemeasureto defense of the Philippines. Towardthecost of civil governmentin the Philippines, the point has been stressed many times that the United States' contribution was almost negligible. In 1903, an appropriation of$3millionwasmadefor relief, following a great cholera epidemic; andin the sameyearanitemof some $350,000 was appropriated for the taking of the first census. Practically all other civil expenditures were met from the Insular Treasury. Expenses of the former BureauofInsularAffairs andof theHighCommissioner's office under the Commonwealth, paid by the United States Government,totalled nearly $4million. ( It should be noted that the salary and expenses of the Governor General of the Philippine Islands, in pre-Commonwealth days, werepaid bythe Insular Government.) TheU. S. CoastandGeodetic Surveyspentnearly $6.5 million, plus small amounts expended by the Commonwealth Government which maintained a similar bureau 2 These estimates do not include defense expenditures of the U. S* Government in the Philippines in 1940 and 1941.
26] Crisis in the Philippines cooperating with that of the United States. Expenses tinder public health were over one million dollars. The U. S, Department of Agriculture spent a few hundred thousand dollars spread over the years, plus $16 million in benefit payments to Philippine sugarcane planters madebytheA.A.A. in the period 1934-36. Returns on customs charges and services, and internal revenue duties on Philippine goods collected in the United States, were made to the Philippine Treasury; they averagedroughly $500,000 annually. Theonly other large item in recent years has been the refund by the U. S. Treasury of the excise tax on coconut oil produced from Philippine copra, which in trust funds and actual payments totalled about $120 million bythe end of June 1941. Interms oftotalinvestments, bothdirect andportfolio, the American share in the Philippines, estimated by the United States Tariff Commissionat $200million in 1935, represented a little over one-fourth of American investments in the FarEast, or slightly over 1% of total foreign investments of the United States. Ofthis total, some $36 million consisted of investments in bonds issued by various Philippine political entities, private companies, and religious organizations; theremainder, directinvestments in industries. Of the portfolio investments, $31 million were in Philippine government bonds; nearly $2 million in bonds of the Manila Railroad; $2.7 million in notes of religious institutions; and the remainder in corporate bonds issued bysugarcentrals. Aspecial report byGeorgeWanders 3 shortly after the outbreak of war in the Philippines gave a total of $46 s NewYorfc Herald Tribune, Dec. 29, 1941.
Americas Material Interests [27 million as the outstanding bond issues of the Philippine Government, of which $1 million represented provincial andmunicipalbonds.TheConstitution of thePhilippines providedthat wherebonds wereissuedbythe Philippine Islands under authority of an Act of Congress of the United States, the Government of the Philippines would makeadequateprovision forthenecessaryfunds for paymentof interest andprincipal, andsuch obligations were to be a first lien on all taxes collected. Further safeguard was provided in the terms of the Independence Act, by which export taxes collected on goods shipped to the United States in the last five years of the Commonwealth weretobeappliedtoretirement of thepublic debt. In Washington are special Philippine funds which more than cover the bond issue. They include $100 million in currency reserves "to assure the maintenance of the peso at its legal ratio [2 to 1] to the United States dollar"; $24 million in the gold devaluation fund 4 ; $15 million in sinking funds, etc.; and other funds accumulated from sugar, coconut oil and other taxes in all, a total estimated by Mr, Wanders at $175 million. Therefore events since Pearl Harbor have not affected the soundness of these securities. American capital in 1938 controlled slightly less than 1035 of thePhilippines' bankingresources, represented by a Manila branch of a NewYork bank with resources of qver $11.8 million, and a local bank and trust company, with resources of $5.3 million, controlled by capital of resident American citizens. Theanalysis of direct American investments made by 4 Cf. Joint Preparatory Committee on Philippine Affairs, Report of May20, 1938, Vol. I, pp. 120-21.
28] Crisis in the Philippines the Tariff Commission in 1935gave the American net investment in Philippine industries as $163.5 million, with total fixed assets placed at $111.2 million, on the basis of depreciatedbookvalueinmostcases. Thenetinvestment waslarger byreason ofincludinginventory andaccounts receivable; also, byincludingunderminingtheappraised value oforereserves ( $37.9million) controlledbycapital stock in the value of $7.4 million owned by Americans. The main items in the net investment, besides mining, were (in millions of dollars): public utilities, $31.85; sugar centrals, controlling interest, $20.4; plantations^ $19.7; general merchandising, $15; truck and bus and other transportation, $6; lumber, $6; coconut products, $5.5; and lesser investments in general manufactures, engineering, embroidery, andso on. Ayearlater anestimateofdirectAmericaninvestments made by the American Trade Commissioner in Manila gavetheAmericanshare of total investments in 172 business enterprises (apart frommining) as $86.6 million, of which $33.3 represented land and buildings and $53.3 machinery, equipment, and so on. This, and later figures published in die Bulletin of Philippine Statistics, gave a high figure for American investments in public utilities, $52 million. The latter included investment in the Philippine Railway, whichwas omittedfromthe Tariff Commissiontotals becausethe outstanding bonds of $8.5million were of veryuncertain value. Discrepancies in these estimates are accounted for partly by the fact that the larger sums include investments of Americans resident in the Philippines. For instance,Americancapitalcomprisedovertwo-thirdsofthe
Americas Material Interests [29 total invested in bus transportation, and the greater part of this was contributed by American residents. Investments byresidents, of course, representnot an outflow of capital from the United States but an accumulation of earnings in the Philippines, invested and reinvested in local industries. If the private property of these residents werelikewise included, the total wouldbe larger. As for possibilities of recovery on direct investments, the American Trade Commissioner in 1936 considered it probable that investments in sugar would have been regained, with a good return on the investment, before 1946. It seemed that the fixed investment in coconut oil plants could hardly be written off, but the possibility of transferring machineryto the United States would reducelosses somewhat. Investmentsin coconut, hempaad rubber lands, estimated at some $4 million, could hardly be liquidated. A pineapple plantation in Mindanao, valued at $1 million in land, machinery and growing crops, expectedto liquidate in 1946 as a matter ofpolicy. Howmuch of the Philippine embroidery business could continue was considered doubtful; $3 million of the $4 millioninvestmentinthis wasAmerican.Afewyears ago, plans werebeingconsideredformovingsomeoftheshop machineryto China, wherelowerwages were thoughtto promise a future for the business, but no developments of this kindwereeverreported. Theprospects for mining wefestill considered good,andtherich dividends already returned by the large American-controlled mines suggested thatfewtears wouldbe shed over original investments. Reserves, in all but a few cases, promised comparatively longlife for the mines. Oneshadowthat hung
30] Crisis in the Philippines over this promising industry was the fear of increasing taxes, as other big revenue producers such as sugar dwindledin importance. Public utilities in which American capital predominated were: three radio, one cable, one telephone, one gas andthree electric andpowercompanies. In addition, there were investments of $14 to $15 million in firms, some half-dozen each dealing in retail goods, auto agencies, machinery, tire and movie distribution. Liquidation of these enterprises offered no particular difficulties. Oneortwofirms werepreparingto withdrawbefore 1946. It was believed that the large American steam laundryandthe American-ownednewspaperwouldcontinue to operate as long as possible. There was an investment of $1 million or more in hotels and real estate, the greater part in Manila. Improvements in the largest Americanhotel in Manila, andthe erection of one of the finest office buildings and department stores in the Far East by an American in 1939, were signs that all Americanenterprise wasnotpreparingto leave. Withnocomplete details availablefor late years, however, it is asafe guess that therehadbeen somereduction in the total of American investments, as some American business was withdrawing slowly from the islands and new private United States investments would hardly make up for such withdrawals. Aslight measure of the decrease of American investment was given in figures for annual investments in the City of Manila. TheAmerican share had fallen steadily from nearly $4 million in 1935to less than $100,000 in the first half of 1939. Animportantpointis that all of theseAmericaninvestments, small though they were in comparison with total
Americas Material Interests [31 American investments abroad, were of vital importance in Philippine economy. A1932 estimate of the Bureau of Insular Affairs gave the American investment figure as about half of the total capital investment in the Philippines, exclusive of investments by governmental agencies. In 1935, in three of the leading industries, American capital represented 10.5% of the total in the sugar industry, 6.2% in coconuts, and 4.8% in abaca, the majorpart of American interest beingin mills, refineries, etc., andonly a small part in land, whereFilipino investment naturally predominated. In 1937, $4.2 million of thetotal $6millioninvestedin bustransportationwasthe investment of United States citizens; Americans controlled in 1938 nearly 44% of public service enterprises, including transportation, electric plants, ice plants, telephones, water systems, and gas; their investment represented 42% of the total in the sawmillindustry; and their stocks controlled about 60% of the total gold reserve of the islands. Between 1899 and 1940 inclusive, the United States sold to the Philippines goods valued at over $1.8 billion andbought fromthat source goods valued at $2.4billion. Thevisiblebalanceoftradewasthereforegreatlyinfavor ofthe islands, butsomeofthis wasreturnedtotheUnited States in the form of service items, shipping and insurance, interest anddividends oninvested capital andpaymentofloans. Shipments of goldandsilver to theUnited States, amountingto wellover$230million bythe end of 1940, helped to keep the balance of trade favorable to the Philippines. What the United States has waived in duty on Philippine goods since 1909, whenfree trade was instituted
32] Crisis in the Philippines (except for a few minor restrictions removed in 1913), wouldpresent afigure to makepoliticians lose sleep. For instance, if duty had been charged in 1930, four of the principal imports from the Philippines, coconut and tobacco products, sugar and cordage, would have paid over$100million in duty. Toyingwith computations like theseis hardlyrealistic, however,sincewithoutfreetrade theamountandnatureof the commercebetweenthe two countries wouldhave been quite different. For instance, the United States would probably have purchased little Philippine sugar in recent years, and the islands would have been able to purchase far less from the United States. Other American interests in the Philippines, though small in the aggregate, were of immense importance to the individuals concerned. Ofthe 8,639 Americans listed in the Philippines in the 1939 census, the majority were dependentupon earnings rather than dividends for their livelihood. In 1936, there were over 1,000 American employees in enterprises largely controlled by American capita^ drawing an aggregate annual salary of over $4 million. In 1938 there werenearly 300Americanmissionaries. (The value of land and buildings of Protestant churches in the Philippines was estimated at about one million dollars.) About800 of the Americans wereveterans under the jurisdiction of the United States Veterans Administration. Among Americans dependent on Philippine and sources other than American for their livelihood were a number of higher-bracket technical advisers to various departments of the Commonwealth Government, and lesser employees in a variety of enterprises. There were
Americas Material Interests [33 61 retired American teachers, receiving annual pensions averaging over $1,000from the CommonwealthGovernment. In the public school system were 88 American teachers, their salaries averaging at least $100 monthly. There were professional men, doctors, dentists, engineers, lawyers, in most of the larger towns and cities. Someof the doctors came outin real missionary spirit, as did some of the teachers, butmost of themcameto make a living, with a little adventure thrown in. The position of Americans in the Philippines during the Commonwealth and thereafter was protected. They enjoyedunderthe Commonwealthrights whichwere deniedto other nationals as a result of constitutional provisions andnewlegislation aimedatreservingthe country's natural resources and domestic trade for the Filipino people. The Independence Act and the Constitution of the Philippines provided that, pending the final and complete withdrawal of the sovereignty of the United States over the Philippines, citizens and corporations of the United States should enjoy in the Commonwealthall civil rights of the citizens and corporations respectively thereof. The Constitution further provided that, when the Philippines should have been proclaimed independent, the propertyrights ofthe United States andthe Philippines shouldbepromptly adjusted and settled, andall existing property rights of citizens or corporations of the United States should be acknowledged, respected, and safeguarded to the same extent as property rights ofcitizens of the Philippines. Most Americans, in spite of complaints about provisions of the Independence Act whichhit their special interests, andabouttheirunfair doubletaxation, admitthat
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