Duterte’s pivot to China: A game theoretic analysis - Eaglewatch by Joselito Sescon Part 2

November 05, 2016
Part Two
Last week we introduced Game Theory as an objective approach in analyzing the possible shift of the Philippines’s foreign policy. Initially, we analyzed the case of both the United States and the Philippines being anti-China under a “Battle of the Sexes” (BOS) game. We generally concluded that it is strategic for the US that the Philippines stand on the international court’s decision.



We continue the analysis now considering the case that both US and the Philippines are pro-China (US pro-China stand meant letting the Philippines to chart its own independent foreign policy). Based on our outcomes table, this option lead to the US getting 1, while the Philippines gets 3, making the Philippines benefit more than the US. What benefits will the Philippines gain from a pro-China foreign-policy stance? The answers are debatable and need to be strategically analyzed from what the US and China will most likely do. China will probably make concessions, such as letting Filipinos fish in disputed areas, increase foreign direct investments (FDI) and aid to the Philippines. However, these concessions will be strategically limited, contingent upon their observation that the Philippines will have a consistent independent foreign-policy stance beyond the Duterte administration. It is to China’s interests to prove to the Filipinos that President Duterte is right. Filipinos are now allowed by Chinese coast guards to fish in Panatag Shoal. China is giving outright concessions and even announcing on how much more it will increase its foreign investments in the country through infrastructure. China can afford to gamble on these amounts, if only to win the Philippines on its side. This may lead to China’s claim on the West Philippine Sea becoming unrestricted and the Philippines has to look the other way becoming the loser in the long run.

oped02-110416What if the condition becomes that the US gets worse than 1 in a pro-China stance? In the table below, the US gets a negative 1 in a pro-China stance. This will force the US to diverge to an anti-China stand.
In this condition, the US is seen to slowly withdraw its assistance for the Philippines and discourage FDI in the short run. This is to pressure the Philippines by forcing an outcome of negative 2, so that it will go back to the anti-China stand. If China’s concessions are worth more to compensate what is to be lost from the US withdrawal of assistance, then the Philippines’s gain will still be positive. If the Philippine government consistently stick to a pro-China stand, both the US and China will need to study their financial calculations on how much China can afford to upend US aid and investment withdrawal notwithstanding souring the goodwill of relations between the two traditional allies. Is it worthy of the Philippines to take this risk? Have we done our own financial and economic spreadsheet calculations? And, in the long run, can we trust China to support the Philippine interests and align it to its own interests more than how much we can trust the US over its long-run strategy of putting international pressure on China?
One possible interpretation of the new pro-China stand of the Philippines is that it is a ploy by Duterte for the US to put more stake to the Philippines. It has been stressed by this administration that the Philippines has been a traditional ally that has long been taken for granted. An ally that comfortably assuage the US based on historical precedents and the cultural closeness of the country’s population to all matters American. Too comfortably, to the point that the US did not put a stronger stake on the country’s development more than just having access to the use of its military bases. In this BOS game, this strategic ploy means that the Philippines wanted greater benefits, probably an equal 3 with the US, if it is to keep the anti-China stance. This interpretation is already known to China, and a hint of such ploy is a welcome opportunity.
Duterte’s pivot to China policy is more than just a presidential tantrum based on his personal history and opinion of US policies and interventions around the world. There are definitely more strategic issues to consider. Our use of the BOS game as framework provided a baseline, but not enough to answer the pivot. We will consider using other Game Theory frameworks, such as the “Stag-hunt” game and the conflict scenario of the “Hawk-Dove” game in our future analysis. For now, it is enough to know that there is more to what we are hearing and seeing from recent events.

Joselito T. Sescon is a lecturer at the Department of Economics, Ateneo de Manila University. He finished his MDE and MA Economics from the University of the Philippines School of Economics.

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