The document provides a history of Philippine trade from the 9th century onwards. It discusses trade relationships with China, Arab traders establishing an alternative trade route through Southeast Asia, and trade with various Southeast Asian kingdoms. It then covers the arrival of European powers like Portugal, Spain, and the establishment of the Manila-Acapulco galleon trade between the Philippines and Mexico in the 16th century. Chinese traders also played a prominent role in Philippine trade, settling in Manila.

1. PHILIPPINE TRADE
A Brief History
Records show that trade relations with China and the Philippines started in the 9th century, largely
influenced by a new route to mainland China via the South China Sea. When Arab traders were barred to
enter Central China, they established this alternative route passing the Strait of Malacca, to Borneo, Sulu
and to Taiwan, from where they smuggled their goods to Fookien (now Fujian) province unto Shanghai
and even reaching the northern China territories. This trade route was the precursor of the world famous
spice route that triggered interests among European nations, particularly the Dutch, Portuguese, Spaniards
and even the British to gain control of the spice trade.`1
During the Sung Dynasty (960-1127 B.C.E.), China traded with many Philippine islands, notably,
the numerous Chinese porcelain artifacts in Calatagan, Batangas pre-dated Spanish arrival in the
Philippines.2 During the Ming period (1368-1644), China expanded foothold in the islands by
establishing coastal colonies in the western seaboards of Luzon from Ilocos to Mindoro, and eventually
reaching northern Palawan.3 By mid-12th century to 14th century, Siam (Thailand), Cambodia (Funan &
Chenla), Annam (central Vietnam), Champa (south-central Vietnam) and Tonkin (northern Vietnam) also
began to trade with the Philippines, particularly their porcelain (chinaware) for Philippine native wares.
At this time, Indo-China trade accounted almost 50 percent with the southern Philippine islands. This
heated competition between China and Indo-China declined with the advent of Javanese or Madjapahit
period (1377-1478).4
When the Ming emperor, Yung Lo (1402-1424) came to power, China sent a large fleet consisting
of sixty ships to the Philippines with Admiral Cheng Ho as the naval commander. They raided the coastal
town of Lingayen, Pangasinan then proceeded to Manila Bay, Batangas, Mindoro and eventually reached
Sulu. These took place between 1405 to 1417, and Emperor Yung Lo even maintained sovereignty over
Luzon, with Lingayen as its base. He then appointed Ko-ch'a-lao as “governor”. However, this was short-
lived because Emperor Yung Lo died in 1424.5
Islam meanwhile arrived in southern Philippines. Brought by the Arabian scholar, Mudum ,
sometime in 1380, he successfully converted to Islam the natives, however, it was Raja Baginda from
Sumatra who was later credited for the widespread establishment of Islam in Sulu. Abu Bakr, from
Palembang, Sumatra also arrived in Sulu in 1450, subsequently married Paramisuli, daughter of Raja
Baginda. After the death of Raja Baginda, Abu Bakr succeeded in establishing the Sultanate of Sulu.6
Records also show that between 900 and 1200 A.D., Sulu traded heavily with the Orang Dampuans or
men from Champa (central Vietnam). The Orang Dampuans were not politically motivated, however,
jealousy from the native Buranuns largely triggered by the wealth accumulated by the Orang Dampuans
aroused suspicion from the local populace, thus in no time, they massacred the hapless foreigners. The
Orang Dampuans retaliated, leveled the villages of Buranuns, and sailed back to their country.7
Sulu prospered, its wealth thus attracted another group, this time from Banjarmasin, from the
southeastern part of Borneo. Sulu's famous pearls drew the interest of Banjarmasin merchants. A trade
relation was established. The men of Banjar brought their beautiful princess to Sulu and offered her to
marry the local ruler. In due time, Sulu came under the influence of Banjarmasin, thus leaving the
Buranuns retreating to the mountains for safety. The wily Banjar men were able to transform Sulu into a
commercial hub, where transient ships from China, Cambodia, Annam, Java, and Sumatra laid anchor at
her ports.The Sultanate of Sulu came from this lineage.8
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With the spread of Islam in southern Philippines particularly Sulu and parts of Mindanao, trade
with Borneo, Sumatra, Java, Melaka (western Malay peninsula) formerly a base for pirates who preyed on
shipping passing through the Strait of Malacca, eventually became the center of the Mataram empire,
which superseded the Hindu Majapahit empire- an empire that owe its power to rice production and
commerce. Mataram empire reestablished a united Muslim empire over central and eastern Java. Ibn
Batuta, a famous Arab traveler and Islamic preacher, noted in his travelogue that he traveled to Pasai in
1345, and converted a local chieftain, a descendant of Malik al-Salih, to Islam, thus, Islam started to
spread its wings in this region. Earlier, a Hindu kingdom stamped its influence over a wide area of Java
and Sumatra, it established the Srivijaya empire, that brought along Buddhism that rivaled the Hindu
Majapahit influence. Srivijaya (600-1200), was principally into commerce, and at the height of its power,
controlled the Malay and Indonesian seas with its powerful fleets.9
The Strait of Malacca (also Melaka), is the narrow seaway between the northeastern part of the
Indonesian island of Sumatra from Banda Aceh to Medan, stretching to Singapore and the western part of
the Malay peninsula from Langkawi down to Johor Baru. Since ancient times, this has been the crossroad
of Asian, Middle Eastern and European trade route and civilization. Arabs, Chinese, Indians, Persians and
Turkish sold their goods round the coasts of Malay archipelago. Traders of these countries gathered in
ports on the Strait of Malacca, along northern Java and other Indonesian islands to buy and sell Asian
goods such as raw silk, textiles called batik ,and china porcelain. Mediterranean and European traders
partake of goods such as nutmeg, mace, and sweet-smelling wood called camphor, onion, garlic, pepper
and other spices. In the 1500's, goods from the Indies could reach Europe through the eastern
Mediterranean. Muslim traders, carried goods from Asia and sold them to European and Arab merchants
in Damascus or Istanbul. Merchants mostly from Venice, Italy handled the European side of this
transaction.10
In the early 1500's, the Portuguese were the first Europeans to appear in the East Indies (the
collective term to the Indonesian and Malay archipelagos). In 1497, Vasco da Gama, a Portuguese
explorer, sailed beyond the Cape of Good Hope, and found his way eastward across the Indian Ocean to
the port of Calicut on the Malabar coast of India. They were looking for “new routes” to the East Indies to
break the monopoly of Muslim and Venetian traders on Asian goods.11
The Portuguese built trading posts and fortresses in this area. They came to build a trading
empire. In 1509, Portugal sent four trading vessels to Melaka. At first, the Sultan of Melaka received them
warmly, however, when the Sultan found the true intentions of the Portuguese, he attacked them, and took
some as his prisoners. In 1510, the Portuguese annexed Goa, on the western coast of India, and made Goa
as a base. In 1511, the new Portuguese viceroy in the Indian Ocean, Alfonso d'Albuquerque, attacked
Melaka from Goa and succeeded in defeating the Sultan. Melaka, being of strategic importance, the
Portuguese did not waste time to build their fortress to control the trade of western Indonesia as the
Melaka sultanate had done before.12
Meanwhile, Ferdinand Magellan (Fernão de Magalhães), a Portuguese sea captain in search of a
sponsor, finally persuaded King Charles I of Spain after he was rejected by King Manuel I of Portugal for
his maverick idea to set sail to the Spice Islands (Mollucas or Maluku) through a westward course,
traversing the Atlantic and then to the vast new unknown ocean which was later named by Magellan as
the Pacific Ocean due to its pristine calmness when he and his men crossed through it for 98 days.
Magellan first went to the East Indies with the fleet of Francisco de Almeida, Portugal's first viceroy to
India.13 In 1506, he went to east coast of Africa to strengthen Portuguese bases there upon orders of de
Almeida. In 1507, he returned to Goa, India, where he participated in naval and trade battles against the
Turkish fleets. Coincidentally, in 1509, Magellan was with the four trading vessels that sailed from Goa to
Melaka, which was at first kindly received by the Sultan of Melaka, however, the Sultan's intuition and of
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course also spies, found out the real intentions of the Portuguese, thus the Sultan's order to massacre the
crew, and took some as his hostage. The Sultan felt the presence of the Portuguese was a threat to his
fabled spice and Asian trade.14
On September 20, 1519, Magellan set sail from San Lucar de Barrameda in southern Spain, he
commanded a total of 241 men and a fleet of vintage ships, the Concepcion, San Antonio, Santiago,
Trinidad and Victoria. Magellan received instruction from Charles I to sail directly to Maluku and bring
back a cargo of spices. However dissatisfaction among the crew plagued the voyage from the beginning,
and hostility among the Spaniards toward Magellan was inevitable.15 Magellan skirted unknown
territories and sailed westward to the southern tip of South America, and discovered a passage at Tierra
del Fuego in Argentina through inland islets connecting to southern Chile, thus avoiding the turbulent
waters of the dangerous Drake passage. This new route is now called the Strait of Magellan. It shortened
the voyage by several days and brought Magellan and his men directly to the Pacific Ocean. 16
After sailing northwestward, and Magellan sighted Rota and Guam, and stayed for few days to
replenish their supplies. As chronicled by Pigafetta, these islands were full of ladron (thieves), because
the explorers lost many of their belongings. Thus they named Guam and Rota as the Ladrones islands.
Magellan landed at the island of Limasawa, now part of southern Leyte, on March 17, 1521, a day is
added up as a readjustment to the international date line as indicated by various historians.17
In April 1521, Magellan was killed in the now famous Battle of Mactan, which was actually a
battle of rival Mactan chieftains, Lapulapu and Zula where haplessly Magellan intervened to show the
superiority of his forces over the natives. This bravado did not only cost the life of Magellan, it almost
doomed the entire voyage. Only one ship, Victoria, the smallest and most antiquated, commanded by
Juan Sebastian del Cano completed the voyage back to Seville, Spain in 1522 via the Indian Ocean and
the Cape of Good Hope at the tip of South Africa. However, Magellan was credited as the first man to
circumnavigate the globe. First he was able to prove his theory that the East Indies could be reached by
sailing westward to the Atlantic Ocean. He discovered the passage to the Pacific Ocean. He proved that
the world was round and not flat as earlier claimed by ancient astronomers and Greek thinkers Aristotle,
Ptolemy, Galen and Archimedes of Syracus. 19 After 1492, when Christopher Columbus sailed to the
Americas, a Polish astronomer from Krakow named Nicolaus Copernicus theorized that the earth was
round, and indeed, earth was not the center of the universe. Fearing for his life and excommunication
from the dominant Roman Catholic Church, Copernicus theory laid dormant until finally Magellan
reached the Philippines, and completed what could have been his first voyage around the world.
Magellan also proved that America was a land mass separate from Asia.21
Quest for New Lands, Wealth, Trade and Roman Catholic Expansion
Several motivations including acquisition of new lands or territories, the famous spice trade of
Southeast Asia, the great riches of the East Indies and Asia, and the spread of Roman Catholicism to
arrest the spread of Islam, and a host of other reasons such as innovations in the construction of ships.22
Shipbuilders started to outfit ships with triangle-shaped lateen sails in the late 1400s earlier perfected by
Islamic traders. These ships were able to sail against the wind, not just with it. Multiple masts were
introduced in place of the single large mast that hoisted smaller sails one above the other which increased
the speed of ships. Likewise, navigation was made easier by relocating the rudder from the ship side to
the stern. Ships then became maneuverable.23
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Also in the late 1400s, further improvements were incorporated to the European ships using
Evangelista Torricelli's theorem, ”the velocity with which a liquid flows through an opening in a container
equals the velocity of the body falling from the surface of the liquid to the opening.”24 Torricelli, an
Italian, and a friend of Galileo, another equally brilliant Italian mathematician who supported the
Copernican theory of the universe, paved the way for the law of hydrodynamics and hydraulics which
would benefit the shipbuilding industry of their time. This modern innovation, plus a host of other 1600's
discoveries in science and technology like the French scientist and mathematician Blaise Pascal's own law
on hydrodynamics and buoyancy that states: “a fluid in a container transmits pressure equally in all
directions.”25 And because a caravel drew small amount of water in contrast to the ancient hull, it allowed
explorers to go near shores, and docked their ships to make repairs or replenish their supplies. These ships
also carried a state of the art weaponry of the time like rifles and long range cannons.
In 1493, Pope Alexander VI.26 drew a line of demarcation, an imaginary line running from the
middle of the Atlantic from the North Pole to the South Pole about 350 miles (563 kilometers) west of the
Azores and Cape Verde Islands. West of this line all lands belonged to Spain and east of the line to
Portugal. A year after, this line was moved 1,295 miles (2,084 kilometers) west of the Cape Verde Islands
by the Treaty of Tordecillas between Spain and Portugal. This supported Portugal's claim to territory that
is now eastern Brazil. This line was never surveyed. Scholars think it lays at 480 west longitude line. A
continuation of the line of demarcation into the Eastern Hemisphere gave Portugal the right to claim the
Philippine Islands. Spain recognized this claim in the Treaty of Saragossa (1529), which set the line 170
east of the Moluccas (Spice Islands). In a much later treaties with Spain, Portugal gave up its rights to the
Philippines and claimed instead the rest of Brazil. But Spain and Portugal could not legally extend
sovereignty to all lands claimed by both through the line of demarcation because it was nearly
impossible to secure and establish outposts or governments in these vast new territories, thus France,
England and the Netherlands joined the playing field and claimed new territories for themselves.27
The Role of the Chinese
The Chinese played prominently in Philippine trade. With the establishment of the Walled City of
Intramuros by Miguel Lopez de Legazpi, conqueror of Cebu where he also established the first Spanish
township in the Philippines and the first permanent settlement in the islands, Chinese immigrants
converged at the Parian or Alcaceria of Manila in Binondo as early as 1637.28 A community of Christian
Chinese and mestizos had risen in Binondo.
Chinese mestizos had controlled retail trading business. They set-up shops around Binondo, and
nearby Tondo. They peddled their wares across the Walled City of Intramuros and as far as Bagumbayan,
approriately named as Manila's new town. Affluent Chinese intermarried with powerful Filipino mestizos
and even the Castillan administrators of the colony. Some immigrants from mainland China particularly
from Fookien and Canton had acquired properties around Binondo, and controlled much of the food
supplies such as rice, corn, vegetables, poultry and pigs brought to Intramuros. Much to the chagrin of
the Indios, the enterprising Chinese dominated the market economics of commodities and commercial
supplies of this colonial era.
The Galleon Trade (Manila-Acapulco, 1565-1815)
Aptly called the galleon trade, derived from the galley ship used to transport commodities and
commercial goods between Manila and Acapulco de Juarez, and even reaching as far as Callao, Peru. This
trade route, discovered by Fr. Andres de Urdaneta, was known as the Urdaneta passage, this he gained
knowledge from his return trip to Mexico from Manila. These trade winds blow heavily during the
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months of April to June and from December to March. Thus Legazpi's arrival in Cebu in 1565 was not a
mere coincidence but aided heavily by Fr. Urdaneta's knowledge of trade winds. This trade wind is a
strong wind that blows heavily toward the equator from the northeast or southeast. In the days of sailing
ships, navigators depended on trade winds for ease of navigation. The paths of these winds were so
regular, that early sailors named them trade winds. The belt of rising air between the trade winds is a
region called mild winds or doldrums. It is so calm that sailing ships were often stranded for weeks in this
area. For sure Magellan was caught in the doldrums, that is why he called the new seas he discovered as
the Pacific Ocean, a sea of relative calm and quiet.29
The galleon trade was a Spanish government monopoly. Only two ships were used One sailed
from Acapulco to Manila, carrying P500,000 worth of goods, traversing the Pacific for 120 days; the
other ship carried P250,000 worth of goods from Manila to Acapulco, sailing across the Pacific for
approximately 90 days. Through this trade, Asian goods found its way to America. However, only the
Chinese and Spaniards benefited from this trade. The Philippines became only a transhipment port as
Chinese goods were brought to South America. Very few Filipinos made money out of this trade. Spices
and silk for Mexico and Peru and gold and silver coins for the Asians were the commodities exchanged
and carried in this trade that lasted for two hundred and fifty years.
This trade however brought to the Philippines countless flora and fauna such as avocado
(guacamole), guava, papaya, pineapple, coffee, cacao, chayote, cassava, potato, corn (maize), cattle and
horses. The Philippines sent mangoes, tamarind, rice, the carabao, cocks, Chinese tea and textiles,
fireworks, tuba (a native wine from coconut), and chinaware. Mexicans incarcerated at various Spanish
prisons were sent to the Philippines for hard labor in the rice fields of Pampanga, thus a town in this
province is aptly called Mexico.
Shipbuilding industry in the country was enhanced by the galleon trade. Although prior to the
coming of the Spaniards, the natives were already pre-occupied with shipbuilding and lumbering.
According to Morga, the Filipino had already the knowledge of building ocean-going vessels. The
availability of good timber and hardwood coupled with the ingenuity and craftsmanship of the natives,
explained why Filipinos were good sailors and shipbuilders. The port of Cavite, Puerto Galera and
Naujan in Mindoro were among the leading shipbuilding centers of the islands. The Filipinos constructed
all sorts of boats called by the Spanish as banca, balangay, lapis, virey, caracoa, vinta and prau or paraw.
A related industry to shipbuilding was weaving all sort of cloth and rope making. The Spaniards
introduced the massive plantation of abaca, whose fibers are the primary source of material for making
ropes. This was called the Manila Hemp industry and further developed by the Americans, and manila
hemp became synonymous to a world class product so much valued by ocean-going vessels for tying their
anchors and sails. For two hundred years, the Philippines had no equal in this industry.
The coconut industry was also another native industry that provided the Spanish colonizers their
oil for lamp, pulleys, and other simple machines used for galleons. Fines and penalties were exacted to
Filipinos who did not comply with producing enough coconut and abaca.
The galleon trade was not meant to conflict with planting and harvesting of native staple crops
such as rice, corn, and sugar, but this was not happening. Agriculture, fishing, and other cottage industries
stagnated during this time. The few Spanish who invested heavily on this trade became affluent and
powerful. The lucrative trade brought upon the colonizers many luxuries and these were translated into a
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new found opulence in their homes and in their extravagant way of life. Many vices crept into the social
lives of the Spanish administrators. Many became lazy and were readily copied by the more affluent
natives. This indolence plus a host of other vices such as gambling particularly cockfighting became a
social malady that Jose P. Rizal exposed in his novels: Noli Me Tangere & El Filibusterismo two centuries
later.
The beginning of the 19th century saw the decline of the galleon trade. Tobacco which used to be a
major Spanish product brought to Europe had declined in value since the same product was produced in
the new colonies of North America more abundantly. The state of Virginia, whose climate and soil were
excellent for growing this crop became a leading supplier of tobacco to England and the rest of Europe.
Tobacco originated from South America and the Caribbeans. The Philippines also became an important
grower of this crop from the 1700's to the 1900's. Jean Nicot, a French diplomat – from whom tobacco
receives its botanical name, introduced tobacco smoking to France in 1560.Spaniards, Dutch, Italians
started to smoke tobacco in the 1600's.
Sugarcane was already cultivated in the Philippines when the Spaniards arrived. This plant grew
abundantly in the South Pacific islands more than 8,000 years ago. Cane was also widely grown in India,
and mentioned in records by the Macedonian King Alexander the Great sometime in 325 B.C. The
Portuguese planted sugarcane in their colonies in the west coast of Africa, later in Brazil. The Italian
explorer, Christopher Columbus planted sugarcane in the Caribbean thus sugarcane became also a major
product of the Dominican Republic and Cuba. The Philippine sugarcane industry antidated the coming of
the Americans to our country. A large portion of arable lands in Cavite, Pampanga, Morong, Negros, Ilo-
ilo and Cebu had been planted by Spanish friars with sugarcane.
The Encomienda System and the Encomenderos
The encomienda system was a grant by the Spanish royalty to a meritorious subject (Spaniard) to
exercise sovereignty and control to a territory including its inhabitants. It was not a grant of land
ownership, but more than land ownership because the encomendero exercised sovereignty over the
inhabitants including the imposition of tributes and compelling the people to polo or forced labor for the
construction of churches, municipios,and in the construction of the encomendero's residence and other
private buildings.
There were two kinds of encomiendas that existed in the Philippines: the royal encomienda and
the private encomienda. Royal encomiendas were reserved for the King and Queen of Spain like the
ports of Bagumbayan, Santa Ana, Tondo, Malate, Ermita, Malabon and Navotas. Private encomendas
were granted to the crown's subjects who were her favorites or proteges. Examples were Silang, and Imus
in Cavite, and Macabebe in Pampanga.
One-fourth of the total collection went to the encomendero, another portion to the Church
(dominated by Dominicans, Franciscans and Recollects) and the rest to the government. Some
unscrupulous encomenderos made big profits by arbitrarily raising the prices of goods under his custody,
and even hoarding staple food like rice, corn, coconut oil and sugar, and sell them at higher prices when
there was shortage of stocks for these food items. Each encomendero collected from the people in
accordance to his caprices and whims. During a surplus harvest, they demanded rice, tobacco, corn and
other items. Filipinos would buy the same commodities later at higher prices from the encomenderos.
Trade was lopsided in favor of the encomenderos.
The Plano General Economico (General Economic Plan)
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Jose de Basco y de Vargas introduced an economic plan by forming a Royal Economic Society as
his advisers in 1780. It was composed of industry leaders, businessmen and professionals to further
exploit the Philippine islands and its natural resources. His general economic plan included such
monopolies as the tobacco industry, areca and betel nut, the coconut industry, tuba and basi,and
explosives from Philippine manganese. Cash prizes and medals of recognition were given to
businessmen and industry leaders in the tobacco farming, indigo, spices, cotton, cultivation of mulberry
for silk production, bee-keeping, inventions, mining and geological discoveries and as well as in general
sciences and arts.
In spite of the society's despotic objectives, it provided local and foreign scholarships for training
and development of artisans and craftsmen, and it even provided professorial chair for agriculture and
product design. It also introduced mynah birds from China to fight migratory locusts in the archipelago.
The society was also credited for advising the governor-general to ban the killing of carabao for meat
purposes. Also during this time, the first Philippine paper mill was inaugurated in 1825. Another
accomplishment of this society was the formation of silversmith and goldsmith guilds in the country.
The Royal Philippine Company (1785-1815)
Charles III established the Royal Philippine Company by virtue of a decree creating such entity
on March 10, 1785, and granting the same a charter for the next 25 years with the main objective of
unifying the Spanish crown interests in Asian and South American trade. The company was granted a
monopoly of bringing to Manila, Chinese and Indian goods and shipping these directly through the Cape
of Good Hope. Modeled after the most successful and longest government-controlled colonial arm, the
British East India Company, it was vehemently opposed by Dutch and English traders as a direct
competition to their trade in Asia.
The new company also met stiff opposition from Manila traders engaged in the Manila-Acapulco
galleon trade. A decree from the monarch assigning ten percent out of 32,000 shares of stocks to the
Manila merchants and the Church, temporarily halted the crisis. The Manila-Acapulco trade deteriorated
as the Royal Philippine Company raked in profits in its first ten years of operation. The company netted
ten (10) million) pesos in 1794-1795, out of its initial capitalization of eight (8) million pesos, and in
1796, more than fifteen (15) million pesos.
The Royal Philippine Company helped tremendously in the advancement of Philippine
agriculture with the expansion of farming indigo, sugar, coffee, cacao, spices, dye-wood, mulberry and
cotton. Textile weaving was a Filipino traditional cottage industry specially in the northern provinces of
Luzon. Cotton production and weaving were given a priority. Gold, silver, and copper mining were part
of the economic agenda. However as trade and commerce substantially grew with this company, the
untold miseries of the Filipino workers and farmers were eclipsed or overshadowed by the profit-taking
goal of the colonizers.
Transportation, Communications and Infrastructure Development
In 1892, Compania de los Tranvias de Filipinas, was founded and operated by Don Jacobo Zobel
and Adolfo Bayo. There were five street car service lines that connected Manila and its suburbs: four
horse-drawn in Intramuros, Sampaloc, Malate and Tondo, and one tranvia de vapor, (steam engine)
between Malabon and Binondo. In the provinces, a horse-drawn tramcar service connected the towns of
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Talisay, Negros Occidental and Dos Hermanas owned by Esteban de la Rama that operated from 1895 to
1896. In Manila, there were four kinds of horse-drawn carriages for hire: quiles, arana, victoria, and the
calesa or carretela. The Puente Colgante (now called the Quezon Bridge) was built to ease traffic jams
between Quiapo and Arroceros. This was the first suspension bridge in Asia, designed by the famous
architect, Gustav Eiffel.
Manila and Hongkong were service regularly and weekly by ocean-going vessels, while Manila-
Barcelona ships arrived monthly. Ships from other countries in Europe, United States and Japan arrived
irregularly. Manila, Cebu and Ilo-ilo were serviced regularly by steamboats.
Telecommunications in Manila, though reserved for the few social elites, began its service as
early as 1890 with about 170 customers, the numbers 3 and 4 were reserved for the Archbishop and the
Governor-General. Telegraph also started between Manila and Corregidor, and then extended toward the
Ilocos and Bicol regions, such that by 1892, the Manila-Hongkong cable was laid between Bolinao in
Pangasinan to Hongkong, thus connecting the Philippines to the rest of the world. Public lighting in the
streets of Manila commenced as early as 1814 with the use of coconut oil. The French lamp, kingke, an
invention of the Frenchman Antoine Quinquet, was banned for use in nipa huts because it caused fire.
Until the turn of the 19th century, Intramuros and suburbs were lighted by coconut oil. By 1892, the walled
city and its outskirts were already serviced by La Electricita de Manila, the precursor of MERALCO
(Manila Electric Railways and Light Company).
The Rise of the British Trade Power and the East India Company
The British East India Company carried the British economic might on Indian (continental India)
soil and then it spread its wings to the Far East, claiming Hongkong, Singapore, Borneo, The Malaya
(now Malaysia) as part of its commercial empire and of course, to some extent certain influences in
Australia, New Caledonia and other South Pacific islands. As Queen Elizabeth I long reign came to an
end upon her death in 1603, the Tudor monarchs were busy accumulating wealth, effective domestic
governance and international trade.
King Henry VIII was busy enriching the monarchy by confiscating the vast resources and wealth
of the Catholic Church and its monasteries. Sir Francis Drake quest for new route to the Indies brought
him at par with the footsteps of Magellan, sailing across the Atlantic and to the South Pole near Argentina
where he found a passage that eventually brought him to North America near the present site of San
Francisco and named the area New Albion. He planned to sail back to England via the Atlantic Ocean, but
Drake feared an attack from the Spanish armada would ensue particularly he raided Spanish and
Portuguese ships in the Atlantic earlier. Thus he decided to cross the Pacific and found his way to the
Indian Ocean , to the Cape of Good Hope and finally reached Plymouth, England on September 26, 1580
with a cargo of silver, gold and jewelries stolen from Spanish and Portuguese ships. This voyage of Sir
Francis Drake with his flagship, the Golden Hind, that circumnavigated the globe, marked the beginning
of the British naval supremacy in the next two centuries.
The business classes in England had organized themselves into a trade association with an end
view of investing in domestic and international trade. They too had accumulated substantial wealth and
savings for investment. Under the Tudor monarchy, one modern business history unfolded with the
creation of the British East India Company. This single corporate activity would make England the center
of modern international trade.
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At first the British was slow at building their own East India Company, but rapid Dutch
expansion in the Far East compelled them to take action. As John Keay notices in his history of this
company:
“The final straw came with the news that the Dutch were now seeking to augment their eastern
fleets by purchasing English shipping. Arguing that the national interest was at stake, in July 1599- just
two months after ships of the second Dutch fleet began returning with packed holds – a [petition was
ready for Queen Elizabeth's perusal.”35
Significance of the British East India Company
The British entry into the maritime commerce and trade, albeit was slow, but was pragmatic and
heavily calculated. The Spaniards and Portuguese enjoyed an earlier head start by dividing the world into
their own spheres of influence, so much so that Pope Alexander VI and subsequently, Pope Clement VIII,
gave them half of the unknown world. The Dutch also were not far behind the Iberians, they succeeded in
finding opportunities left out by Spain and Portugal. It was the triumphs of the Dutch bringing goods to
Europe from the Far East that compelled the British to act and form its own company.
The British East India Company was a joint-stock company formed primarily to pursue trade in
the East Indies but resulted in trading mainly with India and China. The company was granted an English
Royal Charter on December 31, 1600 by Queen Elizabeth I. The East India Company traded primarily
with cotton, indigo dye, saltpetre, silk, opium and tea. Aside from its commercial functions, the company
ruled a large part of India, exercising both military and administrative functions. Despite of its mega trade
and monopolistic activities, the company remained a powerful force in India and the Fare East including
Hongkong, the Malayas, and Singapore from 1757 to 1874.
Decline of the Galleon and Spice Trade
Fifty years after the death of Christopher Columbus, the galleon trade was inaugurated, and this
brought to fruition Columbus dream of sailing west to reach east or the Orient. From 1565 to 1815, the
galleon trade route created immense wealth to Spanish colonizers. For 250 years, the galleon trade
brought to Spain their cargoes of luxury goods such as silk, porcelain, gold, silver, spices, tobacco, etc.
Spain reaped a windfall of economic and cultural benefits from. However, the Mexican War of
Independence in 1815 put a permanent halt to to the galleon trade.36
Also, Spain's world dominance came to an end as expected when the British Royal Navy ruled the
high seas. The Spanish armada was no match to the well-equipped, and modern fleets of the British
empire. The marauding English pirates of the Caribbean were also Spain's worst enemies. Often these
pirates engaged the Spanish galleon, and later they were aided by British ships, thus ensuring victory and
subsequent looting of the galleons. Cargoes often found their way to the London market, and to the rest of
European capitals such as Paris in France, and Venice, in Italy. London merchants were the first global
investors. They bought stocks of the East India Company. On September 24, 1598, a group of English
merchants raised 30,133 sterling pounds to finance more ocean going vessels to India. The following
year, they increased their capital to 68,373 sterling pounds, and thus the British East India Company was
born.
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In his book, “An Inquiry into the Nature and Causes of the Wealth of Nations,” Adam
Smith(1776), a Scottish economist and moral philosopher, argued and defended that free market
economies are more productive and beneficial to the state. He was only actually echoing then what had
been long practiced in the English monarchy, as far back as the Magna Carta of 1215, the English Royalty
understood well the advantages of allowing and encouraging other, non-royal sources of wealth and
power. These sources, from the wealthy elite could be independent and could complement the authority
and powers of the monarchs.
“Of the profits of stocks, Smith used interest rates as an indicator of the profits of stock. This is
because interest can only be paid with the profits of stocks, and so creditors will be able to raise rates in
proportion to the increase or decrease of the profits of their debtors.”38
Smith noted that “curiously, interest rates in the colonies are also remarkably high ( Smith
described how wages were higher in the colonies than in England).” Smith attributed this to “the fact
when an empire takes control of a colony, prices for a huge abundance of land and resources are
extremely cheap. This allows capitalists to increase his profit, but simultaneously draws more capitalists
to the colonies, increasing the wages for labor. As this is done, however, the profits of stock in the mother
country rise (or at least cease to fall), as much of it has already flocked offshore.”39
“By contrast, rulers in other nations felt threatened by such developments and inhibited them – to
their detriment. Despite their need for funds to support their high standards of living and to pay for their
wars, many monarchs outside of England continued to dominate the commercial life of the nation – with
baleful results. Not so for the English and this was their unique genius.”40
King James I, successor of Queen Elizabeth, declared that trade to the east could be conducted by
the East India Company, and he asserted that a monarchy can advance its own legitimate interests through
the creation and licensing of an independent entity. It was entirely a new idea. It would become a seed of
future corporations, that these entities do not have natural rights (monopoly, etc.) but only rights
conferred to them by the state.41
The spice trade, controlled by the Portuguese and the galleon trade, controlled by Spain, felt short
of the standards henceforth set by the British monarchy pertaining to trade. There was no shortage of
subscribers to the stocks of the East India Company. “This much is clear from the Calendar of State
Papers Colonial – East India Series (1513-1516).42 These official chartering papers state that on
December 31, 1599, “a privilege for fifteen years (was) granted by Her Majesty to certain adventurers for
the discovery of the trade for the East indies.”43
These concessions emboldened the British East India Company. More adventurers were sent to
Asia than North America. In due time, the British seized from the Dutch and Portuguese the control of the
Strait of Malacca by building their fortresses, such as in Fort Cornwallis in Penang. The British control
of the sea lanes and a host of other factors saw the decline of the galleon and spice trade, plus of course
the slow demise of the Spanish empire brought about by regime changes through out Latin or South
America and as well as in the Philippines. Modernization like the advent of refrigeration, also contributed
to the decline of spice consumption.
The American Regime
American policy toward the Philippines was first capsulized in the Treaty of Paris, a document
signed by the United States and Spain on December 10, 1898. Spain ceded the Philippines to the United
States and a payment of $20,000,000 was required to pay for Spain's rights and improvements in the
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colony. Also in this treaty, the United States agreed to give the Spaniards the right to ship commodities to
the Philippines for a period of ten years tax free. Similarly, America could export goods to Spain under
the same terms and conditions.44
President William McKinley issued his “Benevolent Assimilation” Proclamation on December
21, 1898. It indicated the exercise of sovereignty of the United States over the Philippines and subjugate
the country if necessary through military force. The campaign to colonize the Philippines in the
succeeding years, and put the Filipinos under American rule cost the lives of more than 5,000 American
soldiers, however, on the Filipinos, some 500,000 were butchered by the Americans. The Fil-American
war became a war of attrition that exhausted the resources of the colonizers and the Filipinos. It was the
cruelest war ever waged by America, in which human rights, the right to surrender and be taken prisoners
of war, was never practiced wholesomely. By definition, America waged a war of atrocities that “not
even children be spared.” The marching orders came from the U.S. President Theodore Roosevelt, St.
soon after he heard of the massacre in Balangiga, Samar. “I want no prisoners, I wish you to kill and burn;
the more you burn and kill the better it will please me.” He ordered to General Jake Smith that Samar be
transformed into “a howling wilderness.”45
The Schurman Commission
In March 1899, the United States sent Jacob Schurman, President of Cornell University, to head
a commission. He succeeded in laying the foundation of a subtle conquest of the Philippines, first by
targeting the Filipino elite, “whose cooperation will usher in a new era in our efforts to colonize the
Philippines.”46 Why the elite? There were two basic reasons: 1. fear of losing their wealth and interests
because of the growing demands of the masses for the redistribution of economic resources and benefits;
2. the distrust of the elite in the integrity and character of the masses who lacked education, intellect,
knowledge and of low moral and questionable character, and thus were regarded as potential trouble
makers, bandits and enemies of their own class. The Americans were successful in getting their work
started with the cooperation of the Filipino elite. Again, this paved the way for American teachers and
missionaries spread out in the archipelago through schools, religious missions and medical work.47
The Philippines under this commission was granted political autonomy, meaning the country could be
governed and treated independently as a colony by the United States.
The Bates Treaty
This treaty, entered into by Sultan Jamalul Kiram of the Sultanate of Sulu and General John Bates
on August 20, 1899, allowed American presence in Sulu without necessarily accepting American
sovereignty. There were two versions of this treaty. One local version that called for co-existence
between the Americans and the Muslims in Sulu, and stipulated for mutual respect for property and other
rights. The other version, an English translation clearly provided for the establishment of American rule in
Sulu and the acceptance of American sovereignty by the Sultan and the datus. This allowed the
Americans to interfere even on matters concerning to slavery, taxes, peace and order, trade, commerce,
foreign relations, except on matters pertaining to religious practices and customs.48
The Payne-Aldrich Tariff Act of 1909
Until 1909, American interests in the Philippines was governed by the Treaty of Paris of 1898 that
gave Spain the most-favored-nation treatment. Thus, the Payne-Aldrich Tariff Act of 1909, was the first
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American instrument that advanced American economic interests in the Philippines. The United States
was given the opportunity to exercise “free trade” with the Philippines. This was however a unique
situation because the exercise of “free trade” means freedom of the Americans to trade with the
Philippines absolutely free, without tariffs and quotas. The Philippines, on the other hand, was limited by
a quota system. Philippine exports to the U.S. Were governed by quotas and limited only to raw materials
needed by American businessmen.49
Underwood-Simmons Tariff Act
As economic dependency became the pattern between the Philippines and America, the
Underwood-Simmons Tariff Act was enacted in 1913, by the administration of President Woodrow
Wilson, abolishing the quotas on Philippine exports. This removed all quotas on Philippine products and
complete free trade was established (except for a provision that Philippine manufactured articles exported
to the United States free of duty should not contain foreign materials to a value of more than 20 percent).
This resulted in binding the Philippines closer to the United States economically, while it gave impetus to
Philippine exports of sugar, copra and coconut oil, abaca or hemp and tobacco a niche market in the
United States. This supported modest economic growth of the Philippines during this period.50
The Jones Law of 1916
The Jones Law of 1916 provided for the creation of a 24-man Senate and a House of
Representatives. All the members of the legislature were to elected except the two senators from non-
Christian sector, who were appointed by the Governor-General. Under this structure, the local
government from the provincial to the municipal level shall be elected by the Filipinos, however, the
provincial treasurer, shall be appointed by the Governor-General. In the economic development of the
Philippines, the law had similar provisions with the Underwood-Simmons Tariff Act.
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