In keeping with tradition, Macapagal-Arroyo's foreign policy has been oriented toward business, diplomatic, and military relationships with the US. In the latter part of the 1980s and early 1990s, Filipino-American ties came under heavy criticism as nationalists condemned the presence of US military bases in Olongapo and Angeles cities. The Aquino government refused to renew the bases agreement beyond its September 1991 expiration date, and the eruption of Mount Pinatubo in June 1991 caused extensive damage to Clark Air Base before its closure. A new treaty to permit continued US operation of Subic Naval Station was rejected by the Philippine Senate in late 1991.
Arroyo reestablished these relations in a November 2001 state visit to the US where she was promised $100 million in military assistance. She made yet another state visit in May 2003 in which President Bush described Filipino-US relations as stronger than at any other time in recent history. The US committed to extend $30 million in new grants and aid for the Philippine armed forces, $30 million for new bilateral development assistance focused on Mindanao, and $25 million for a combat engineering unit. Bush capped the visit by elevating the Philippines to a special non-North Atlantic Treaty Organization (NATO) ally as Australia and Egypt.
Following the withdrawal of American military forces in 1992, the Philippine military assumed increasing responsibility for defense of the country with sometimes lackluster results. However, the US-led campaign against terrorism and the ardent support of Macapagal-Arroyo for this effort triggered a reexamination of the policy, and in February 2002, 160 US special forces with 500 support staff arrived on the island of Basilan in Mindanao. The presence of these troops has caused anxiety in the Parliament and could well hurt Macapagal-Arroyo's bid for another term should she change her mind about 2004. She softened her position at the non-aligned movement summit in February 2003 where she recommended pragmatic action in Iraq and North Korea.
One problem is that the Filipino domestic war on insurgency cannot easily be delinked from international terrorism. Abu Sayyaf has ties to Bin Laden and al-Qaida networks, and is thought to number from 1,000 to 2,000 members. Militant Islamic groups such as the Moro Islamic Liberation Front (MILF), which counts some 12,500 members, has trained radical Muslim combatants from Indonesia. In this light, Macapagal-Arroyo accepted a Malaysia and Libya-brokered peace accord between the Filipino government and the MILF, which by end of May 2003 looked promising.
After the US, the Philippines' leading trading partner is Japan, which also is the nation's largest aid donor. Macapagal-Arroyo received a state visit to Japan in December 2002 and further strengthened the economic bonds between the two countries. She considers trade with China "a big opportunity," but relations with Hong Kong are cold due to Hong Kong's decision to cut wages of maids, many of whom are Filipinas. The Macapagal administration also faces on-going diplomatic challenges with China, Vietnam, and Malaysia over competing claims to the Spratly Islands in the South China Sea.