The report of the Joint Preparatory Commission on Philippine Affairs, made public on Nov. 28, has received the written endorsement of President Roosevelt. Legislation to carry out its recommendations is now required, and Vice-President Osmena has been sent to the United States to represent the Philippine Government in the formulation of such legislation. President Quezon early in the year gave tacit assent to the suggestion of High Commissioner Paul McNutt that the economic clauses of the Independence Act be re-examined, an opinion thought to be supported by the majority of Filipino leaders.
The report does not suggest any change in the date of complete independence (1946). The principal recommendations to reduce the shock of independence to Philippine economy would terminate the preferential trade relationship between the United States and the Islands gradually over a series of years ending 1960, instead of abruptly in 1946. This would be effected by a reduction of 5 per cent a year in each of the last five years of Commonwealth status, and at the same rate until 1960, when all trade preferences in both directions would be erased. Thus, by 1946 each country instead of the full duties, would assess 25 per cent of the prevailing tariff rates on each other's products, in this way giving the Philippines fifteen more years to develop competing industries and reduce the Islands' dependence on sugar. Numerous other recommendations deal with Philippine finances, the mutual protection of the rights and interests of the citizens of both countries, and the development of the national economy of the Philippine Islands.
President Roosevelt's support, in January, of similar modifications was reported as a 'veiled warning' to Japan. High Commissioner McNutt, in a broadcast in March, pointed out that the Philippine problem had become part of a greater Oriental problem as a result of the war in China, and that it called for 'a realistic re-examination of Filipino long-range interests and our own.' Independence, he said at the time, might mean 'a mere trade of sovereignties.' President Quezon, on the other hand, on his return from a visit to Japan in July, in a broadcast to America, declared that Japanese statesmen seemed unanimously in sympathy with the idea of neutralization of the Philippines after independence, and that he had no misgivings regarding the attitude of that Power towards the Islands.
Sugar and coconut oil are the principal industries to suffer from loss of free access to the United States' market. Sugar quotas for the Philippines under the 1937 Sugar Act are: for raw sugar, 1,057,416 short tons; for refined, 80,124 tons. The London sugar pact, to stabilize sugar prices, was ratified by the Philippine National Assembly on March 2, making the Philippines the last interested country to ratify. The Islands had an unfavorable trade balance for the first nine months of 1938 of $13,500,000 — the first in seventeen years. The decrease in exports was due to the decline in prices of the Philippines' major commodities. With the United States, however, they had a favorable balance of almost $1,500,000.
The cool relations between President Quezon and the Church were given definite expression on June 3, when the President vetoed, on grounds of unconstitutionality, a bill making it compulsory for state-supported schools to provide religious instruction. The Constitution, which separates Church and State, makes such instruction optional. Fearing to split his Nacionalista party, with unhappy consequences in the November elections for the Assembly, he compromised by not resting his decision on opinion or principle. The Nacionalistas carried the elections, there being but one very surprising result, the province of Cavite, where Manuel Rojas won with the support of General Emilio Aguinaldo, the old rebel general and an opponent of the Quezon administration. Several provinces were put under constabulary rule during the elections owing to riots and campaign tension.
Certain social policies to which President Quezon has committed himself involve radical alterations in the taxation system, which would base taxation on the ability to pay and envisage a theory of government describable, in Quezon's own words, as a 'distributive state,' in which the government uses the power of taxation to force 'distribution of accumulated wealth.' His proposals to this effect include the moving of income taxes up into the higher brackets and the abolition of the sales tax, except on luxury goods. The poll tax has already been abolished.
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