The article is an academic attempt to analyze the political and economic outcomes of the foreign policy shift of the Duterte administration toward China. Academic in the sense that the frames of analyses are based on game theory and is fully independent of the author’s personal political and economic views and opinion.
There are several versions of the definition of game theory. Citing from the Stanford Encyclopedia of Philosophy, “Game theory is the study of the ways in which interacting choices of economic agents produce outcomes with respect to the preferences of those agents, where the outcomes in question might have been intended by none of the agents.” In layman terms, it studies the interactions among people grouped together voluntarily or involuntarily to achieve differing or common results. The application of game theory spans the disciplines of economics, political science, sociology and anthropology, biology, computer science and sociobiology, among others. In this article, I will apply it in development economics and political science.
Game theory in development economics shows how social norms and institutions can shape the “rules of the game” or the process of how society work together. To simplify, consider the most common type of game, called coordination games. There are two significant games, “battle of the sexes” (BOS) and the “stag-hunt game” (SHG). BOS has this curious title because of its common representation depicting a couple deciding where to go on a date, wherein one activity is favored by the man and the other by the woman. The game assumes that the couple loves each other so much, so that they prefer to be together even if one of them had to endure engaging the favorite activity of his or her partner. We then adopt this game to United States—Philippines foreign policy stance on China.
There are two possible extreme results, either both parties are anti-China or pro-China. We provided a possible result matrix (arbitrarily assigned numbers), which form the incentives for both players. The nature of the game is that if one player (the US or the Philippines) sticks to one strategy, it is better for the other party to do the same, or else, she gets a negative 2 while the other gets 0. For example, if both are pro-China the US gets 1 while the Philippines gets 3, and vice versa if both are anti-China. In short, differing choices of results lead to one losing more than the other. Applying this to the present, we ask the following questions, (1) Are the incentives as represented by the BOS game represent the real political and economic outcomes? And, (2) If it is true, can the Philippines strategically make a credible threat to stick to a pro-China strategy to bring the US to at least to let the Philippines independently chart its own pro-China foreign policy stance?
In the case of both parties being anti-China, which, more or less, represents the past policy stance of previous administrations before President Duterte, the US gets 3 while the Philippines gets 1. To provide a base of analysis, we narrowing down the basis of the policy stance in regard to the West Philippines Sea (WPS) issue. We may agree that the US has greater benefits (3) having great economic and political interests that the WPS sea lanes remain free for international navigation. Having an ally like the Philippines to stand on the Permanent Court of Arbitration decision on July 12, 2016, under the United Nations Convention on the Law of the Sea ruling that China’s claim of historic rights is invalid, is strategically beneficial to the US interests. In the case of the Philippines, does the gain of 1 as represented in the game above reflects the true nature of the bargain? Does the Philippines gain little to stand firm against China based on the international Permanent Court of Arbitration? So far, we have lost the rich fishing ground around Scarborough Shoal, where China’s coast guards are driving away Filipino fishermen. The US did little (as far as the author’s information and knowledge on the shoal’s issue) to stop China from occupying the shoal, probably also calculating the political risks of directly intervening in the dispute. Why did not the US put a stake or put itself at some risk by showing direct support to the Philippines in the disputed shoal? Does the US have more stake to maintain peaceful coexistence with China in the disputed WPS and, thus, it can afford to let the Philippines lost the shoal?
We may opine that the US strategic position is to let China win a little in the short run, but it will put consistent international pressure for China until it withdraws its aggressive occupation of the shoal and the disputed islands in the long run. With the international court’s decision hovering at China’s aggressive behavior, the US should find an optimistic outcome in the future. Thus, it is strategic for the US that the Philippines stand on the international court’s decision.
To be continued
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.