Duterte dumps the US: What could be lost?

Story highlights

  • Four million US citizens are of Philippine ancestry
  • Philippines is key US ally in South China Sea dispute

(CNN)The Philippines has long been the United States' staunchest ally in Asia. But for how much longer?

Philippines President Rodrigo Duterte, on his first state visit to China, announced that he would be cutting "military, not maybe social, but economics also" ties with the US.
    Duterte didn't provide details about how he'd break away from the US, a major trading partner, or what the separation could entail.
    But if he makes good on his pledge, it could have huge ramifications for the two countries and the balance of power in the wider region.
    Here's what's at stake.
    Philippine President announces separation from US
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    People

    The Philippines is a former US colony and an estimated four million US citizens are of Philippine ancestry.
    The US accounts for roughly a third of the $17.6 billion that Filipinos working overseas have sent home this year.
    Remittances from many of these people to families in the Philippines are often economic lifelines, and significant contributors to local economies throughout the country.
    And it cuts both ways -- there are more than 220,000 US citizens living in the Philippines, including a large number of US veterans.
    The Philippines is also a big tourist destination for Americans -- an estimated 650,000 visit the country, with its world-class beaches, diving and adventure tourism, amongst many other draws, each year.

    Economy

    Phillippine President: 'America has lost'
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    According to the US State Department, over $25 billion in goods and services are traded between the US and the Philippines each year.
    The country could lose up to $1.3 billion in foreign direct investments, not to mention more than $150 million in development aid if Duterte goes through with his threats to cut economic ties.
    The US is the Philippines' third-largest trading partner after Japan and China.
    "If relations with the US completely break down that would be a cause for concern, since there is a lot of US investment in the Philippines," Mark Williams, chief Asia economist at Capital Economics, told CNN Money.
    "A pivot to China wouldn't help, since China is a relatively smaller investor."
    US companies have invested more than $4.7 billion in the Philippines. Duterte clearly hopes that China will more than make up any shortfall.
    During his trip to Beijing, he signed 13 trade and economic agreements but details were thin on the ground on what benefits they would bring.
    One concrete step was the lifting of a travel advisory cautioning Chinese citizens on visits to the Philippines. China's deputy foreign minister Liu Zhenmin said this would "greatly encourage" tourists.

    Military

    The split couldn't have come at a worse time for the US military. It is seeking bolster against Chinese territorial expansionism in the South China Sea.
    Before Duterte's rise to power, the nation was expected to be a key ally in defending the maritime rights of a number of Southeast Asian nations embroiled in a long-running dispute with China.
    Historically, there has been a large US military presence in the Philippines -- even the country's ubiquitous Jeepney buses were originally cobbled together from World War II-era American jeeps.
    While there is no permanent US presence there these days -- that ended in 1992 -- the country had remained a stalwart ally and Duterte's predecessor, President Noynoy Aquino, signed the Enhanced Defense Cooperation Agreement (EDCA) by executive order, allowing a limited and temporary US military presence in the country.
    As recently as March of this year the US planned to re-create a permanent presence in the Philippines in five new bases.
    The Visiting Forces Agreement or VFA, an older agreement, lays out conditions for the entry of US to the country. It would appear from Duterte's comments that he wants to scrap these agreements.
    Duterte has previously indicated that he'll put an end to joint US-Philippines military drills, although his comments then indicated that the military alliance would remain intact.