The Manila Connection: Rethinking U.S. Engagement in the Indo-Pacific through the Philippines

Tensions in the South China Sea have reached new heights.  Recent incidents, such as the People’s Republic of China’s (PRC) Coast Guard’s ramming tactics and aggressive use of water cannons against Philippine vessels, vividly show the escalation in the region. These bouts do not occur in the middle of nowhere: they center around strategic landmasses in the South China Sea, such as Sandy Cay—a strategic reef close to Thitu Island, the Philippines’ largest outpost in the Spratly Islands. This proximity to the Philippines, and the country’s centrality in the confrontation with the PRC highlight Manila’s role as a key stakeholder in the intensifying great power competition in Asia. The core challenge for U.S. strategy is: beyond military deterrence, how can Washington maintain effective engagement and counter Beijing’s assertiveness? The PRC’s approach, which combines military expansion with economic coercion, demands a comprehensive U.S. response that integrates economic tools alongside military  measures.

The Indo-Pacific Economic Framework (IPEF), alongside the Philippines’ strategic partnership, illustrates a constructive model for U.S. engagement in Asia amidst developing geopolitical dynamics. Given the Philippines’ strategic location, economic potential, and alignment with U.S. interests, the Philippines is well-positioned to serve as a key partner in advancing shared objectives. Even with a more pragmatic or transactional U.S. foreign policy approach, initiatives like IPEF offer avenues to promote strategic and economic cooperation, support a rules-based maritime order, and provide a credible alternative to the growing regional influence of the PRC.

Setting the Scene: Great Power Competition in Asia

The PRC’s strategic ambitions in Southeast Asia encompass more than conventional military expansion; however, the growth of its armed forces forms the tip of the spear. The People’s Liberation Army’s Navy, now the world’s largest naval force, has constructed and militarized numerous artificial features in the South China Sea, extending its power projection capabilities deep into the Philippines’ Exclusive Economic Zone (EEZ). This activity persists despite the 2016 ruling by the Permanent Court of Arbitration in The Hague, which invalidated the PRC’s expansive maritime claims under international law. Beijing’s continued fortification of outposts and recurrent harassment of Philippine vessels—both civilian and military—not only undermines Philippine sovereignty but also poses risks to regional peace and stability.

The stakes are high: the South China Sea is a vital artery for global trade, with approximately one-third of global shipping passing through its waters, and home to vast untapped reserves of oil, natural gas, and other raw materials, including rare earth minerals essential for modern industries. The PRC’s actions not only endanger the Philippines’ economic interests but also challenge the broader rules-based order that underpins peace and prosperity in the Indo-Pacific.

The Philippines’ Response

The Philippines responded to the PRC’s escalation with a multifaceted strategy. President Ferdinand Marcos Jr.’s administration has prioritized domestic stability, advancing military modernization, and pursuing a more assertive and principled foreign policy. Legislative development, including the enactment of the Philippine Maritime Zones Act and the Archipelagic Sea Lanes Act, seeks to codify the country’s maritime entitlements in alignment with the Philippine Constitution, the United Nations Convention on the Law of the Sea (UNCLOS), and the 2016 arbitral ruling. These legal measures are reinforced by enhanced defense cooperation, including joint island defense exercises and infrastructure development on Thitu Island, emphasizing Manila’s commitment to safeguarding its sovereign rights and upholding the rules-based international maritime order.

Simultaneously, the Philippines has deepened its security partnerships: the 1951 Mutual Defense Treaty with the United States remains the bedrock of Manila’s external security, while new agreements, such as the Status of Visiting Forces Agreement with New Zealand, expand the network of like-minded partners committed to regional stability. The Philippines is also aligning more closely with Japan, South Korea, and Australia under the “one-theatre” concept, treating the East and South China Seas as a unified operational domain for intelligence-sharing and mutual reinforcement.

U.S. Economic Engagement and IPEF in Action

While military cooperation remains a critical component of regional security, it is insufficient on its own to counter the PRC’s gray-zone tactics and economic statecraft effectively. The United States recognizes that sustained engagement must include robust economic initiatives. Thus, the IPEF reflects a renewed approach to U.S. regional involvement, prioritizing equitable trade practices, supply chain resilience, clean energy development, and digital infrastructure, while deliberately avoiding contentious elements often associated with traditional free trade agreements—such as tariff liberalization, investor-state dispute settlement (ISDS) provisions, and rigid intellectual property protections.

The Philippines’ participation in IPEF is particularly significant. As the only U.S. treaty ally with a claim in the South China Sea, Manila is both a frontline state and a test case for the effectiveness of U.S. economic engagement in the region. IPEF projects in the Philippines focus on strategically important sectors such as critical minerals, semiconductors, and maritime infrastructure—areas that directly relate to the broader great power competition by reducing dependency on the PRC’s supply chains and enhancing the Philippines’ economic resilience.

Recent U.S. trade and investment missions to Manila have yielded over $1 billion in new investments supporting innovation, clean energy, and supply chain security. The Luzon Economic Corridor, launched in 2024, is the flagship IPEF project in the Philippines. It connects key economic hubs like Subic Bay, Clark, Manila, and Batangas, facilitating coordinated investments in infrastructure, renewable energy, and advanced manufacturing. U.S. private sector involvement, such as Cerberus Capital Management’s acquisition and revitalization of the Subic Bay shipyard (strategically located at the former U.S. naval base), not only boosts the Philippines’ maritime capabilities, but also supports U.S. and allied naval operations in the region.

These initiatives have strategic value: they help the Philippines build a credible first line of defense against PRC coercion, professionalize its armed forces, and reduce long-term reliance on U.S. support. Economic engagement also strengthens Manila’s ability to withstand PRC economic pressure and assert its sovereignty in contested waters.

Expanding the Model

The Philippines has emerged as a pivotal actor within an expanding network of minilateral cooperation in the Indo-Pacific. The “Squad”—comprising the Philippines, Japan, the United States, South Korea, and Australia—represents a new model of strategic alignment characterized by enhanced operational coordination, intelligence-sharing, and mutual capacity-building. By framing maritime security challenges as collective concerns, this framework promotes a more integrated regional response. What the “Squad” represents for military and security cooperation, the IPEF offers for economic engagement: a flexible, interest-based platform aimed at strengthening supply chains, driving clean energy development, and shaping the region’s digital future. Together, these initiatives reflect a dual-track strategy that integrates security and economic objectives, positioning countries like the Philippines to play a central role in a more resilient, rules-based regional order. When combined with U.S.-supported economic initiatives, such cooperation contributes to the development of a more adaptive and sustainable structure for preserving regional stability.

Public-private partnerships (PPPs) are critical to this strategy. By leveraging U.S. private sector investments in ports, energy, and technology, IPEF provides a mechanism for sustainable development that aligns economic incentives with strategic objectives. The U.S. International Development Finance Corporation’s recent $20 million loan for affordable housing and plans for a regional office in the Philippines exemplify the kind of targeted, high-impact engagement needed to make a difference.

To maintain a meaningful stake in the Indo-Pacific, the U.S. must scale and sustain economic engagement alongside military presence. The IPEF should be expanded and fully leveraged as a platform for PPPs, encouraging further U.S. investment in critical infrastructure and technology sectors in the Philippines. Washington needs a comprehensive strategy that integrates economic cooperation, capacity-building, and multilateral coordination to uphold a rules-based order. The Philippines, as a case study, demonstrates the importance of combining strategic location, economic opportunity, and political will to counterbalance PRC ambitions.

Conclusion

As great power competition intensifies in the Indo-Pacific, the United States may increasingly rely on the Philippines as a strategic anchor for regional engagement. In addition to strengthening military alliances, the U.S. employs initiatives such as the Indo-Pacific Economic Framework (IPEF) to counter the multifaceted strategy of the PRC. By deepening its partnership with the Philippines and embedding economic cooperation into its broader Indo-Pacific strategy, the U.S. can further strengthen its regional influence, promote stability, and uphold a rules-based maritime order.

Views expressed are the author’s own and do not represent the views of GSSR, Georgetown University, or any other entity. Image Credit: Pacific Forum