1942: Philippine Islands

Japanese Conquests.

Organized resistance to the Japanese ended on May 6, with the surrender of 10,000 starving American and Filipino soldiers on Corregidor and the other island forts across the entrance to Manila Bay. Following the Battle of Bataan, in which that peninsula was captured April 9 by the Japanese, together with a defending army of 36,853 men, Corregidor had been besieged and under repeated bombardment for almost a month. Lieut.-Gen. Jonathan W. Wainwright was in command at the time, having succeeded Gen. Douglas MacArthur, who flew out to Australia on March 17 to assume the supreme command of the United Nations' forces in the Southwest Pacific. The four-months Battle of the Philippines was gallantly fought but was a losing contest from the start. The United States was not prepared to defend the islands. The most the defending forces could hope to do was to fight a delaying action and, for a period, immobilize a large Japanese army. The Japanese easily achieved air supremacy over the island of Luzon and swept over it rapidly before reinforcements could reach General MacArthur. A few successful attempts were made to send supplies through the Japanese blockade, so the men on Bataan Peninsula were never short of small arms and ammunition, but they lacked heavy guns and air support, and from Jan. 11 to April 9 they lived on short rations. Hunger was, therefore, a decisive factor in the final surrender.

The city of Manila was lost on Jan. 2. Adm. Thomas C. Hart performed a noteworthy feat in evacuating the naval base at Cavite and in bringing the United States Asiatic Fleet into secure waters. The large island of Mindanao fell early, due largely to advance operations by the Japanese colony at Davao, although native resistance continued down until May. Based on the harbor facilities of Davao, Japanese forces in January began their first large-scale invasion of the Netherlands Indies. Following the fall of Bataan, conquest of the rest of the archipelago began with an attack on Cebu, April 10. Cebu City, principal port of the second most important province of the Philippines, fell three days later, American-Filipino forces on the island being so small as to make effective resistance impossible. On April 16 the Japanese landed on the island of Panay, a rich sugar-producing area. Altogether, some 20,000 Filipino soldiers were killed in action before American and Filipino resistance was overcome. There is no doubt that the United States record in the Philippines and the certainty of independence contributed to the will to resist, which was in such marked contrast to the attitudes of the Malayans and Burmese towards the invader. Guerrilla bands, remnants of the United States-Filipino forces, have continued to operate in Luzon, Mindanao and some smaller islands. Japanese news broadcasts have indicated that Filipino prisoners of war are being held as hostages for their surrender. Gen. Tomoyuki Yamashita, conqueror of Malaya and Singapore, had been sent in early March to the Philippines to oppose General MacArthur. Lieut.-Gen. Masaharu Homma, who preceded him as commander, is reported to have committed suicide for his failure to conquer the islands.

Internal Affairs.

Developments under Japanese occupation are a matter of uncertainty. There are indications that civilians have passively opposed the occupying forces. On July 8 the Japanese military authorities banned all political gatherings and societies. The local currency has been replaced by Japanese military notes. The banking system is being operated by the military through the Southern Regions Development Bank. Agriculture and industry are being exploited by the National Development Corporation, a Tokyo company controlled by the military and the financial oligarchy. Schools, theaters, business houses, industries, transportation and communication facilities, have all been taken over by the Japanese, and the Japanese language has been introduced into the schools. In March it was reported that the Ishibara Company had begun exploitation of the rich iron ore deposits in southern Luzon. Evacués returned on diplomatic exchange in September, reported some 3,500 civilians, mostly Americans, interned but not badly treated at Santo Tomás University. In April the Japanese designated Jorge Vargas, former secretary to President Quezon, Mayor of Manila and chief of civil administration in the Philippines.

On March 23, Francis B. Sayre resigned as High Commissioner to the Commonwealth since military activity had rendered his position largely unnecessary. Three days before its occupation President Quezon left Manila for Mindanao, and subsequently went to Australia and the United States. In May he set up a provisional Government of the Philippines in Washington, where it has been functioning ever since. The work of the regime is naturally very limited and is, at present focusing largely on a study of postwar problems of the Commonwealth. In short wave broadcasts from San Francisco the exiled Government urges Filipinos to continue their resistance. President Quezon signed the Atlantic Charter on behalf of the Philippines Commonwealth, and has taken a seat on the Pacific War Council. Thus, the Commonwealth has, in effect, been accepted as the equal of the other United Nations. A rewording of the Selective Service Act has also made it possible for the 80,000 Filipinos in the United States and Hawaii to enter the armed forces of the United States. In February the First Filipino Infantry Battalion was formed with a hope that the new unit might eventually help in the reconquest of the Philippine Islands.

1941: Philippine Islands

Japanese Invasion.

On Dec. 7, the Japanese let loose the War of the Pacific by their attack on Pearl Harbor, Hawaii (see also HAWAII, TERRITORY OF). This was followed almost immediately by mass raids on the Philippine Islands, particularly on Cavite and Nichols Field in the Manila district, and by parachute landings at Aparri and Vigan in Northern Luzon. Subsequent landings of large Japanese forces, with all the equipment of modern warfare, in the Lingayen Gulf area to the northwest of Manila and on Lamon Bay to the southeast of the capital, revealed a pincers strategy which finally forced Gen. Douglas MacArthur to consolidate his forces on the Bataan peninsula, west of Manila Bay. As 1941 closed, the fall of Manila seemed inevitable, in spite of the strong resistance of the outnumbered and comparatively poorly equipped United States and Philippine forces. Manila and the Cavite naval base, which had been stripped of its installations, passed into Japan's hands, without fighting, Jan. 2, 1942; but the fortified island of Corregidor, which commands the entrance to Manila Bay, although subject to repeated bombardment, held out; and the United States forces under Gen. Douglas MacArthur put up furious resistance on the Bataan peninsula.

Meanwhile, shortly before Christmas hard fighting occurred at Davao, on the southern island of Mindanao, a recognized danger point in the Philippines defense because of the concentration there of Japanese population and enterprises. On Dec. 24 Manila was declared an open city, in accordance with the 1907 Hague Convention of which Japan was a signatory. All defending troops were withdrawn, anti-aircraft batteries dismantled and ammunition destroyed. Thus undefended and, strictly speaking, 'without the character of a military objective,' the city was nevertheless heavily bombed on Dec. 27, with considerable loss of life and damage to property.

The quantitative air and naval superiority of the Japanese was demonstrated by their success in landing such large invading forces at so many points and in establishing air bases. Japan's strategy in striking first at Pearl Harbor and the United States' outposts in the Pacific, Guam, Wake and Midway Islands, thus interrupting the United States' line of communication to the Far East and reducing the chance of reinforcements reaching the Philippines, seems from a military point of view so far to have been justified by the results. The earlier opinions of experts regarding the impossibility of holding the Philippines against a sustained attack may also be borne out. The best that could be expected of the defending forces, MacArthur's 'Indomitables,' was a delaying action, which would serve the larger strategy of weakening the Japanese drive on Singapore. The creation of a supreme Allied command in the Pacific, under Gen. Sir Archibald P. Wavell, extends his authority to the Philippines. Thus the Battle of the Philippines becomes an item of the Pacific War, just as the whole Far Eastern conflict emerges as an integral part of the world struggle between the Axis powers and the Allied nations. The Philippine campaign must also be considered in the light of Japan's dream of a Greater East Asia, dominated by Japan, from which the white race will be eliminated. The attempt to reduce the fortified Manila Bay area then falls into place in the general scheme of reducing all Allied bases in the Far East.

At the close of the year, at the informal inaugural of President Quezon, who had been overwhelmingly reelected for a second term on Nov. 11, the Philippine President pledged his country 'to stand by America and to fight with her until victory is won.' President Roosevelt has, in turn, pledged to the people of the Philippines Commonwealth the eventual establishment of the independence promised for 1946.

Defense Problems.

Although the Philippine Islands had generally been regarded as a military liability, attempts had been made, in view of the growing crisis in the Far East, to increase their defenses. The Commonwealth had, in 1936, inaugurated a national defense program, and had retained Douglas MacArthur as military adviser and made him Field Marshal of the Commonwealth Army. Subsequent cuts in appropriations for munitions and equipment had indicated a slackening defense effort, however, and in his annual message to the Philippines Assembly, in February of this year, President Quezon said: 'the defense of our country remains primarily the responsibility of the United States.' The Philippine Army, active and reserve, totaled not over 150,000 men; the nucleus was the experienced Constabulary, numbering about 4,000; the reserve force was poorly equipped, and some of it insufficiently trained, although familiar with guerrilla warfare. Besides the Filipino troops, there were the crack Philippine Scouts, numbering at last reports some 6,500, and token United States Army garrisons, bringing the numerical strength of the United States Army in the Philippines, until recent months, to a total of approximately 10,000. Several thousand American soldiers were added to the defense forces of the islands during the year, however, and equipment of an unknown amount. In July, following the freezing of Japanese assets in the United States, President Roosevelt placed the armed forces of the Commonwealth under United States military and naval command for the duration of the emergency, and recalled General MacArthur to active service to take command of the American Army in the Far East. This step was interpreted as the intention of the United States to maintain its full rights in the Far East.

The Commonwealth had developed airports and landing fields, but their equipment was slight. It had, therefore, little to offer to supplement United States naval defense, and this last was almost negligible. Of the 7,000 islands, Corregidor was the only fortified island. No naval stations or fortifications existed on Mindanao, the second largest island. The naval base at Cavite and the naval station at Olongapo were quite inadequate to service a powerful fleet. The United States Asiatic Fleet consisted, at the outbreak of the War, mostly of two heavy and two light cruisers, a squadron of destroyers, about two dozen naval patrol planes, some long range bombers, a few mine layers, an aircraft carrier, and a recently reinforced submarine fleet. The United States Pacific Fleet, based on Pearl Harbor, was 5,000 miles away.

In March President Quezon appointed a Civilian Emergency Administration to coordinate the program of civilian defense. The financing of civilian protection has been a bone of contention between the Philippines President and the American High Commissioner, with Sr. Quezon taking the position that, until 1946, this was the United States' responsibility and Mr. Sayre considering it the burden of the Commonwealth. The latter view prevailed and the Commonwealth took it over, hoping that funds for the purpose could be obtained from the United States Congress from credits which have been accumulating from the processing tax on sugar ($33,000,000) and from the gold devaluation fund ($21,000,000). As a result of this indecision, air-raid precautions were lacking and the civilian population virtually unprotected, although efforts have been made to increase the essential foodstuffs and the supplies of fuel. Blame for the inadequacies of civilian protection was attributed by President Quezon, late in November, to the check on his emergency powers caused by 'imperialistic Americans' and by critics of his alleged dictatorial tendencies. The American Civil Liberties Union called this charge 'wholly unwarranted' since it, the chief critic cited, was concerned with the abrogation of civil liberties, not with the exercise of economic and military emergency powers.

Economic Condition.

Disturbed world economic conditions in 1941 caused the Philippines great business losses, due primarily to the critical lack of tonnage for the shipment of its exports and to excessive freight rates, although a Bureau of Commerce report for the first four months of the year indicate a 9 per cent increase of exports over the corresponding 1940 period. Adverse effects of the world conflict led the National Assembly, in May, to ask Congress to suspend the graduated export tax, this year amounting to 5 per cent of the normal United States tariff on the Commonwealth's major exports, which became effective Jan. 1. Economic ties with the United States were strengthened by the World War. For the first nine months of 1941, 94 per cent of the Philippines' exports were shipped to the United States (valued at $72,925,000) and 80 per cent of the Commonwealth's imports came from the United States (valued at $81,490,000). The American defense program led to increased buying of Philippine chrome, manganese and Manila hemp, which, in June, were given priorities, affecting adversely the shipment of Philippine sugar. The outbreak of war in the Pacific has now cut off sugar imports from the islands, which normally supplied 16 per cent of the United States' annual consumption. A problem, now likewise academic but earlier the cause of great anxiety to the United States, had been the leakage of war materials to Japan, and possibly Germany, via the Philippine Islands, which legally controlled their own exports. In March the Commonwealth offered to ban exports of strategic materials, including hemp, copra and coconut oil, and important ores, to all countries except the United States, a move which would have seriously affected its trade relations with Japan, since that country had been taking practically all the Philippines' iron and copper ore, had largely financed the iron industry, and, in 1940, had drawn over one-quarter of its imports of ferrous raw materials from the islands. In May the United States' export licensing system was applied to Philippine exports. This ruling was extended, in August, to prevent the reexport of vital goods to the Axis powers, especially to Japan, by requiring that all licenses for exports from the Philippines be granted in the United States. It was thus hoped that the use of the Philippines as a transshipment center for airplane parts, automobiles, tires, machinery and food, which was apparent in 1940 and the first months of 1941, might be stopped.

See also JAPAN: War in the Pacific; UNITED STATES; WORLD WAR II.

1940: Philippine Islands

Political Problems.

With the half-way mark in the ten-year period of transition to independence reached Nov. 15, opinion in the Philippines Commonwealth is divided on the question of re-examining the Independence Act. President Quezon is unalterably opposed to the continuation of the present Commonwealth arrangement after 1946, and in a speech commemorating its fifth anniversary, asserted that its accomplishments to date demonstrated the ability of the Filipinos to manage their country's affairs alone. In a statement before the Assembly he asserted that the only arrangement he would consider is one which would give the Philippines full control over immigration, imports, exports, currency and related financial subjects, as well as the right to conclude commercial treaties with other nations, without United States supervision or control. On the other hand, Vice-President Sergio Osmeña has proposed a Philippines-American partnership after independence, 'on a basis of equality,' presumably some form of dominion status. Manuel Roxas, Finance Secretary, has asked for a ten-year extension of trade privileges after 1946 and continued naval and military protection by the United States. Fear of Japanese aggression, the possibility of a conflict between the United States and Japan, the still-unsolved problems for Philippines economy which the shift to independence will bring, as well as internal politics, all account for this divided attitude. Senator Tydings, chairman of the Territories Committee and part author of the Independence Act, regards the matter closed. Likewise Francis B. Sayre, in an interview after four months as High Commissioner, expressed his belief in the United States' departure from the islands in 1946, partly on the ground of the American taxpayers' unwillingness to support the necessary costs of defense. Moreover, the groups in Congress which pressed for passage of the Tydings-McDuffie Act are as strong as, if not stronger than, in 1934. Mr. Sayre is opposed to permanent tariff preferences for the Philippines, but not to a temporary arrangement to prevent 'drastic economic dislocation.'

President Roosevelt has given his approval to amendments to the Philippines Constitution which were endorsed by a national vote. These restore a bicameral legislature and replace the six-year presidential term, without re-election, with a four-year term and eligibility for one re-election.

Internal Affairs.

The National Assembly on Aug. 10, by a vote of 62-1, conferred wide emergency powers on President Quezon, designed to meet the economic emergency resulting from the war in Europe, which has virtually stopped Philippines trade with that continent and, besides increasing unemployment, has caused a substantial reduction of public revenues. The President will now have power to prohibit lockouts and strikes and to control wages, hours, profits, rents and prices, the distribution of labor, transportation, including shipping, and food supplies. This concentration of power, combined with utterances made by President Quezon regarding additional restrictions on civil rights and his characterization of the two-party system as a 'fetish,' evoked a vigorous protest from the Manila Civil Liberties Union against these 'alarming trends towards totalitarianism.'

A new immigration bill, applying annual quotas to every nationality, was approved by the National Assembly May 2, by a vote of 67-1. Official protest against the measure has been voiced in Japan. The figure fixed is a relatively small proportion of the Japanese who have entered the Philippines, especially the rich island of Mindanao, during the last few years, net Japanese immigration in the first three years of the Commonwealth having been over 1,300 yearly. Secretary Hull refused Japan's request to the United States to try to secure modification of the limitation. Recently Ex-Foreign Minister Arita expressed a willingness to conclude a non-aggression pact with the Philippines and his approval of a pact 'neutralizing' the islands. Geographic propinquity and the complementary character of the economy of the two countries suggest a re-orientation of Philippines-Japanese relations.

Questions of Defense.

Proximity of the Philippines to the Netherlands Indies and the island of Borneo and Japan's association with the Axis powers give sharp significance to the question of Philippines defense. President Quezon has asserted the Islands' present inability to repel foreign aggression. Instead of an intensification of Commonwealth defense measures, however, there has been a drastic retrenchment in the defense program, including the yearly training of 20,000 rather than 40,000 men. Gen. Douglas MacArthur, military adviser since 1934, on the other hand maintains that, at the expiration of the Commonwealth period, the Islands will be able to defend themselves with their own native army. It is generally believed by military and naval experts that they could not be held against a sustained Japanese assault of any proportions. Close cooperation between the United States troops stationed in the Philippines, estimated at about 10,000 men (including the Philippines Scouts), and the Philippines Army of about 150,000, has been promised by Secretary of War Stimson as long as the Islands are under the United States. Reinforcement of aviation units and of the Asiatic fleet has brought Philippines defenses to a high point. As at present defended, however, the Islands provide no satisfactory base for major operations by the United States fleet, and expert opinion in the United States considers the cost of making them impregnable in the neighborhood of a billion dollars. To make them even reasonably defensible would call for a garrison of 100,000 men, supported by at least 500 aircraft and a substantial naval force.

The Strategic Materials Act, which permits the President of the United States to restrict shipments of essential materials and has effected an embargo on oil and scrap iron exports to Japan, does not apply to the Philippine Islands which, as a source of over a million tons of high-grade iron ore annually for Japan, are of vital importance to that country's heavy industries and war machine. Philippines copper, chromite and manganese are other base metals which are available to Japanese industry. Increased defense needs of the United States may create sufficient demand for Philippines ores to deflect some of this trade from Japan.

1939: Philippine Islands

Political Problems.

The Philippines problem, thought settled by the Independence Act of 1934, has been revived by the unstable conditions in the Far East. Even more than its aggression in China, Japan's advance in the South Pacific, with the seizure this past year of Hainan Island and the Spratly Islands, has raised fears, both in this country and in the Philippines, as to the fate of these insular possessions of the United States after complete independence is consummated in 1946. The 'realistic re-examination' proposal of the former American High Commissioner, Paul McNutt, is indicative of one section of opinion, both American and Filipino. The Official attitude of the United States, as voiced by the new High Commissioner, Francis B. Sayre, who was appointed in July, is that the initiative for reconsideration must come from the Government of the Commonwealth. President Quezon's public utterances imply that he would view re-examination with favor, and it is commonly thought that Mr. McNutt reflected the views of Quezon and his Nacionalista party. On the other hand, as a point of practical politics, President Quezon cannot openly oppose independence, for such an about-face would be considered a 'betrayal' and would be made political capital of by the opposition party of General Aguinaldo and by the more left-wing groups, the Sakdalistas and the newly-formed Ganap party, led by Benigno Ramos, former leader of the Sakdal party, which stands for immediate independence and is considered pro-Japanese.

This question of reconsideration may become a partisan issue in the presidential elections of 1941. Certain constitutional amendments, one of which would provide President Quezon with a chance to run again, were considered at a convention of the Nacionalista party in July and are the subject of continued debate in the Islands. These would substitute a bi-cameral legislature for the present unicameral legislative body, and a four-year presidential term, with eligibility for one reelection, for the existing six-year term without such eligibility. It is believed that if this change is made, Manuel Quezon will be receptive to reelection.

Question of Independence.

The barriers to independence are two-fold. The economic plight of the Philippines, once they lie outside the United States' tariff wall, is a matter of concern to many groups of Americans and to Filipinos who appreciate the effect independence will have on the standard of living. To cushion the economic shock of losing the advantage of a duty-free American market, a bill was signed by President Roosevelt on Aug. 7, providing for a system of gradually decreasing duty-free quotas in place of the export taxes that were to have gone into effect in 1940, and disastrously, on four major Philippine products; cigars, scrap tobacco, coconut oil, and pearl buttons. These industries, which operate at present with small profit margins, account for about 40 per cent of Philippine exports to the United States and support a large majority of the population in and around Manila. Copra and abaca (manila hemp) were assured a place on the free list at least until 1946. A wider interpretation was given to the uses to which refunds from the coconut oil excise tax may be put by the Commonwealth Government. (President Roosevelt had, earlier in the year, by a threatened veto checked proposed legislation which would have increased this tax from 3 to 5 cents a pound.)

These amendments to the Independence Act must be ratified by the National Assembly and possibly be submitted to plebiscite. They represent a compromise measure, the original Tydings bill, embodying the main recommendations of the Joint Preparatory Commission on Philippine Affairs, which were sent to the United States Congress on Jan. 24, having been tabled. Although the bill as passed provides a breathing spell, and also advances the date to 1944, or earlier, for an economic conference to study the future economic relations between the United States and the Philippines, it does not touch the problem of economic security after 1946 and leaves the fundamental problem of the sugar industry and other basic problems unsolved. Philippine economy has been built upon heavy dependence on the American market, 85 per cent of its exports going to the United States and 60 per cent of its imports being derived from this country. Furthermore, the diversification of agriculture and industrial development essential to a sound economy have been hindered by American demands for a few tropical products, such as sugar, coconut oil, copra and manila hemp. Thus, the American people are morally obliged to prevent economic disaster in the Islands after 1946. Moreover, with independence the loss of the American market would be likely to increase agrarian discontent, which has already taken violent form in parts of the archipelago.

Fear of Japan constitutes the second great barrier to independence. The extensive defense program developed since 1935 under the direction of General Douglas McArthur, though a severe drain on the Insular Treasury, calling annually for 20 per cent of the Islands' income, has been undertaken to meet the situation in 1946, when the Philippines will no longer have the protection of the United States Navy. Gen. McArthur has asserted that 'when the Philippine defense plan has reached fruition it will represent a defensive strength that would cause even the strongest and most ruthless nation in the world to hesitate about attacking the Islands.' But in his suggestion of Nov. 1 that President Roosevelt open negotiations for the neutralization of the Philippines, as authorized under the Independence Act, President Quezon admitted the essential vulnerability of an independent Philippines, if they should be the victim of aggression, 'even though we should arm every male citizen.' Japan's aggression in China and, more recently, the European War have increased this skepticism. Moreover, the international situation has raised queries regarding America's future policy in the Far East, and it is from this perspective that revision of the Independence Act is considered in some American circles. War in Europe has made the American public mineral-conscious, too, and the base-metal industries or reserves in the Philippines increase the unwillingness of certain elements in the United States to relinquish to Japan, a closer and, therefore, more logical market, Philippine chromium, manganese, iron and copper.

Industry and Finance.

President Quezon's 'social justice' program intended to improve the conditions of the laboring classes and to correct some of the feudal abuses rooted in the old Spanish system of landlords, found further statutory expression this year in an eight-hour labor law, a minimum daily wage of one peso, and a law providing compulsory arbitration between land-owner and tenant. Although worthy in aim, the experience of the last few years does not hold out great promise for the ameliorative effects of this and similar legislation passed since this program got under way.

According to statistics published by the Department of Labor, the present average daily income of all workers in the Islands is 60 centavos. During the first half of 1939, 97 strikes and labor disputes, involving 13,529 workers, were registered, 60 of them settled in favor of the laborers, 5 in favor of employers, and the balance submitted to the Court of Industrial Relations. The Quezon Government favors strong labor organization and collective bargaining, but opposes strikes on the ground that the machinery is available, in the Department of Labor and this court, to make them unnecessary. For a number of years labor has been irreconcilably split into warring factions, but on June 5, representatives of about 30 factions signed a pact, bringing them together under a labor commission composed of Government officials and labor and employer representatives.

To aid in financing a long-range economic program and to make agricultural credits available on easier terms, the National Assembly this year voted to establish a new agricultural and industrial bank, whose P 150,000,000 capital is to be set aside annually out of the coconut oil excise tax refunds, and a reserve bank, modeled after the United States Reserve System. The rate of interest on crop loans has been reduced from 6 to 5 per cent, beginning with the 1939-40 crop. A new tax code was approved by the Assembly on May 13, overhauling the Islands' internal revenue system and designed to add $4,500,000 to revenues during the 1939-40 fiscal year.

1938: Philippine Islands

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.