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The Ending of the Galleons: A Study on the Impact of the Ending of the Galleon Trade on

19th Century Philippine Economy

Gabriel John P. Gagno

The Manila galleon trade was one of the most important economic activities of the

Philippines under Spain. For the country, it was one of the most profitable enterprises, albeit for

the Spanish elite, and constituted much of the islands’ external commerce. The operation was

mainly a transshipment operation: Goods were taken from China, unloaded in Manila, and

loaded onto the galleons headed for Acapulco, New Spain. The entire process placed Manila in a

unique position in Southeast Asia as a leading entrepot1 and a link between the New World and

China.

However, the war of independence in Mexico broke out in 1810, and the galleon trade’s

subsequent decline and ending followed, with the last galleon returning to Manila in 1815.

However, the economy did not decline drastically, and the trend of decline was soon reversed.

Towards the end of the 19th century, the Philippines was exporting its native produce. This is

surprising, considering that the galleon trade was the only legally permitted foreign trade of the

islands, as well as one of the most important trade activities in the colony. This paper examines

the rise in trade levels during the latter half of the 19th century and attempts to contrast it to the

restrictive nature of the galleon trade, as well as proposals and actual policies that became

turning points towards the relative prosperity it enjoyed by the latter half of the 19th century.

1 Conrado F. Benitez, The Old Philippines’ Industrial Development (Manila: Philippine Education co., Inc., 1916),
45.
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In this paper I argue that the termination of the galleon trade and subsequent

liberalization of trade proved beneficial to the economy of the Philippines in terms of expanded

foreign trade and customs collections, with the main beneficiaries being the growers, merchants,

and exporters of agricultural produce. Besides this, another effect of the ending of the galleon

trade was shift of the country’s economic orientation from being a transshipment center to an

export-oriented model, one that prevails to this very day.

BACKGROUND
The galleon trade was an effect of the Philippines’ location in Southeast Asia,2 as well as

laws controlling the islands’ foreign trade.3 These laws were primarily aimed at protecting the

silk industry of Cadiz and Seville from competition with Chinese silk as well as its monopoly of

trade with New Spain. While some laws would not be completely observed, some would be

circumvented by various methods. When this was discovered again in 1710, more laws were

provided that put more restrictions to the already-restrictive trade. This seriously hurt the

prospects of the galleon trade as a profitable activity for the Philippines. Also, such excessive

government meddling on trade policy found Spain in an overall disadvantage with other

European nations’ free trade practices.

Another characteristic of 17th-18th century Philippines was the neglected state of its

agriculture. The Spaniards were so preoccupied on the galleon trade that they no longer engage

in any other kind of enterprise, and the natives are either practicing subsistence agriculture or are

not at all. This made the country dependent on the royal situado, or subsidies from New Spain.

2 Juan Grau y Monfalcon, Informatory Memorial of 1637, in, The Philippine Islands ed. Emma H. Blair and James
A. Robertson (Cleveland, Ohio: Arthur M. Clark and Company, 1904), 27:84.
3 Recopilación de leyes, lib. IX, tit. XLV, in Blair and Robertson, 17:27-50.
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EASING RESTRICTIONS AND OPENING TO THE WORLD

The late 18th and early 19th centuries were characterized by the removal of certain

restrictions such as monopolies and other limitations on shipping movement. For instance, the

Royal Philippine Company opened Manila to Asiatic trade (between Manila and Asian

countries).4 In 1789, permission was granted to foreign (European) ships to import Asian

(Chinese and Indian) goods to Manila.5 Initially, the permission was only for three years, but was

indefinitely extended thereafter. This is an example of late 18th-century efforts to liberalize

Manila’s foreign trade.

Another move was the suppression of the galleon trade on September 14, 1813. In its

place, the government allowed private traders to trade between Manila and New Spain through

Acapulco, San Blas, as well as other ports, subject to the same limitations (500,000 pesos6

inbound, 1,000,000 pesos outbound)7 as the galleons.

4 The Royal Philippine Company was a company entrusted with distinct responsibilities: 1) facilitate direct trade
between Spain and the Philippines, and invest its profits in the development and stimulation of agricultural activity
in the islands. These can be found in the Real Cedula de Erección de la Compañía de Filipinas (Madrid: D. Joachin
Ibarra, 1785), Articles 29, 40, and 50.
5 Fedor Jagor, Fedor Jagor’s Travels in the Philippines, in The Former Philippines Thru Foreign Eyes, ed. Austin
Craig (Manila: Philippine Education Co., 1916). Jean Mallat, The Philippines. Translated by Pura Santillan –
Castrence (Manila: National Historical Commission of the Philippines, 2012), 464. However, Legarda writes that
there is no considerable increase in trade following these, since they only formalized what was already ongoing.
Some of the methods are mentioned in by Jagor (European ships flying Asian flags). For more information on this
“country trade” between Madras and Manila, see Serafin D. Quiason, “The English ‘Country Trade’ with Manila
prior to 1708”, Asian Studies 1:1 (Quezon City: University of the Philippines Press, 1963), accessed November 14,
2017,
http://asj.upd.edu.ph/mediabox/archive/ASJ-01-01-1963/Quiason.pdf.
6 Peso is interchangeable with dollar in the context of 19th century Philippines, since peso basically refers to the
Spanish dollar, which is a “piece of eight” reales (peso de a ocho). Both are used in the paper to stay as close to the
source as possible. Writers such as Mallat would also use piastre, which is also a term for the Spanish dollar.
7 Representation of Filipinas in the Spanish Cortes, in Blair and Robertson 51:284-285. In 287, it is notable that the
monopoly was transferred to a foreign merchant (note 166).
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Upon the final expiration of the Royal Philippine Company’s monopoly, foreign trade

was de jure opened to the islands with no restrictions. Additionally, the ports of Sual, Iloilo, and

Cebu were opened in addition to Manila (years later, in 1855). Mallat would write:

…All foreign trade, as well as coastal trade with neighboring islands, extended widely and altogether
unexpectedly to the extent that the capital of the Philippines became one of the richest warehouses of the
Indio-Chinese and ships of all nations came to frequent its port.8

Mallat would later write that in around 1841-1842, there were 39 commercial houses in

Manila, as well as foreign houses.9 In 1841, the number of trading houses in the Philippines are

as follows:

Table 1. Foreign trading houses in the Philippines.

Nationality Number
English 7-8
American 2
French 1
Danish 1
Source: Jean Mallat, The Philippines. Translated by Pura Santillan – Castrence (Manila: National
Historical Commission of the Philippines, 2012), 477.
Commercializing Agriculture
The shift of agricultural patterns from subsistence (if not utter neglect) served to

complement the opening of the Philippines to unrestricted foreign trade. Production was

increased, and native products like sugar, abaca, indigo, and tobacco were exported. In the

process, the colony was integrated into the world market.

An earlier, late 17th-century effort to increase revenues and stimulate agriculture was the

tobacco monopoly. Tobacco, a commonly used commodity in the country10, was placed under a

royal monopoly in 1782 by Governor-General Jose Basco y Vargas.11 While far from the

8 Mallat, Philippines, 465.

9 Mallat, Philippines, 477.
10 Francisco Leandro de Viana, Financial Affairs of the Islands, 1766, in Blair and Robertson 50:109-110.
11 Events in Filipinas, 1764-1800, compiled from Montero y Vidal, in Blair and Robertson 50:52-54.
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liberalized trade that characterized 19th-century Philippines, it did accomplish Basco’s goal of

reducing dependence on the royal subsidy. In 1782, the total proceeds (sales minus expenses)

was at 44,697 pesos only. It rose to 230,047 pesos the following year. The proceeds then

generally followed a rising trend. By 1809 (the end of Comyn’s record), proceeds were at

506,674 pesos.12 In 1818, the proceeds average 500,000.13 In 1838, the Philippines was exporting

110.0 arrobas of tobacco leaf. This was one of the earliest attempts to export tobacco from the

country. In 1841 the tobacco export was valued by Mallat at 2,971,000 francs of leaf tobacco and

2,143,000 francs of cigars, while in 1842 it was at 2,522,000 francs and 1,235,000 francs. The

monopoly continued until 1880, after which private enterprise filled the niche.14 However,

tobacco continued to be one of the main exports of the country, with tobacco leaves occupying

third place after sugar and abaca, while tobacco cigars ending a respectable fourth.15

Some of the products, such as rice, sugar, and indigo, have already been abundant since

the 18th century and were only waiting to be collected in large quantities.16 Sugar, for example,

was one of the most valuable and highly profitable crops after rice.17 When Asian countries

could trade with the colony, they brought in European goods on behalf of the Royal Philippine

Company. At the same time, they exported surplus sugar. In 1813, exports were only at 15,000

12 Tomas de Comyn, State of the Philippine Islands, trans. William Walton (London: T. and J. Allman, 1821), 288-
289.
13 An Englishman, Remarks on the Philippine Islands, in Blair and Robertson 51:118-119.
14 Ed C. de Jesus, The Tobacco Monopoly in the Philippines: Bureaucratic Enterprise and Social Change, 1766-
1880 (Quezon City: Ateneo de Manila University Press, 1980), 189-190.
15 Frank H. Hitchcock, Trade of the Philippine Islands (Washington: Government Printing Office, 1898), 34.
16 Nicols, Commerce, 255.
17 Mallat, Philippines, 444-447. He mentions that for 2 quiñones of land, 400 loaves can be produced and can go up
to 800 loaves. Detailed calculations show that for an investment of 1,718 piastres 6 reales 13 granos (1 peso = 8
reales, 1 real = 8 granos), 1718 piastres can be sold, with a profit of 24%. When renting land (for 30 piastres), net
profit is at 49.5%. He also mentioned that if one can earn up to more than 76% in profit if one buys older buffaloes
(due to depreciation). However, rice, later in the century, would become an import item, and sugar will be the
primary export commodity throughout the 19 th century.
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piculs (2,000,000 lbs.). In 1814, exports doubled to 30,000 piculs (3,990,900 lbs.). It rose to

200,000 piculs (26,666,666.4 pounds) in 1818. Prices range between 5 to 9 dollars per picul. In

the early 19th century, Pampanga and Laguna were the leading sugar provinces, able to produce

550,000 arrobas (13,750,000 lbs.), exporting around 4,583,333 lbs. In some seasons, they do

better, able to export 9,000,000 lbs. priced on the average 6 or 5 dollars per 125 lbs. (depending

on the quality).18

Rice, which has always been an important food source to the Filipino natives, was also

commercially significant in the early 19th century. In 1841, the Philippines exported 99,00 francs

of rice, while in 1842 it exported 356,000 francs.19 However, records show that towards the end

of the 19th century, it had only been exported sporadically and appears frequently on the list of

import items. Between 1886-1890, rice imports averaged 157,332,654 lbs. at 1,836,000 US

dollars, and was consistently the largest import of the country during those years.20

While these early increases in trade contributed to the commerce of the islands,

agriculture was still underdeveloped even into the 19th century, save for the tobacco monopoly.

To this end, Governor-General Mariano Ricafort issued orders aimed at revitalizing agricultural

activity in the provinces. For example, he ordered gobernadorcillos to send idle natives to render

paid labor in the haciendas. Besides this he also instructed that court disputes regarding farming

labor be settled quickly, and ordered some form of protection to laborers. Most importantly, he

allowed the importation of farming implements and cotton-manufacturing machines into the

18 Comyn, State, 14. John Phipps, A Practical Treatise on the China and Eastern Trade (London: Wm. H. Allen
and Co., 1836), 308.
19 Mallat, Philippines, 493, 504.
20 Hitchcock, Trade, 24-25.
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islands and offered subsidies to private businesses engaged in weaving or dyeing, and later also

encouraged the planting of other crops such as coffee, cacao, cinnamon, and cloves.21

Besides this, several other factors helped improve agriculture in the country, such as the

removal of brokerages in the opening of ports, buying up export, and the encouragement by

foreign merchants. Sugar, for example, benefitted from the opening of the Iloilo port to world

trade due to the reduced transportation costs and absence of other charges (brokerage, docking

fees) otherwise present when bringing goods to Manila,22 as well as technological improvements

(further reduced costs in milling and refining).

The effects on agriculture were mostly positive. Sugar was widely cultivated and quickly

became one of the principal exports of the country. Several large plantations were opened,

particularly in Iloilo, Antique, and Negros, the latter becoming leading center for sugar

production, financed and owned primarily by Europeans.23 Besides this, general improvements

of farming implements were also introduced.

Production thereafter increased. Sugar, already one of the most important crops, became

the most lucrative product. Official customs records of 1848 placed sugar as the Philippines top

agricultural produce,24 while other sources expressly point to it as the primary export of the

21 Events in Filipinas, 1801-1840 (Compiled from Montero y Vidal’s Historia de Filipinas), Blair and Robertson,
51:51-53.
22 Jagor, Travels, 289-290.
23 Ibid., 291.
24 Balanza General de Yslas Filipinas, Ano de 1848, Producción de Estas Yslas en 1848. Sugar produced in that
year was 1,164,366 arrobas. The next crop, which is rice, is only at 691,990 arrobas. Abaca was produced at
512,776 arrobas.
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islands.25 Data shows that, on the average, the country exported 381,068,699 lbs. of sugar

between the years 1886-1890, earning an annual average of 6,741,763 US dollars.26

Abaca also comprised a significant portion of the country’s trade. Between 1886 and

1890, the country exported, on average, 66,508 tons of the product, amounting to an annual

average of 7,715,724 US dollars. Other top exports were leaf tobacco and cigars and cigarettes.

Table 2. Value of Principal Exports from the Philippines from 1886 to 1890 (in US dollars).

Articles 1886 1887 1888 1889 1890 Annual

Exported Average
Manila 4,340,058 8,161,550 8,100,898 10,869,714 7,106,401 7,715,724
Hemp
Sugar 7,019,939 6,156,709 6,271,030 8,236,247 6,024,339 6,741,653
Coffee 1,059,021 1,616,009 1,500,426 1,769,171 1,613,029 1,510,731
Leaf 759,931 640,699 1,340,314 1,360,420 1,349,422 1,090,157
tobacco
Cigars 1,250,193 918,371 1,108,911 953,285 1,125,211 1,071,194
and
cigarettes
Source: Frank H. Hitchcock, Trade of the Philippine Islands (Washington: Government Printing
Office, 1898), 34.

Shift in Economic Policy

Foreign trade data of the late 19th century, as well as observations by Mallat, show that

Manila was transformed from a restricted entrepot, with an agriculture based on subsistence to an

outward-looking, export-oriented economy focusing on abaca and sugar. Rice also showed

promise in the early 19th century, but became an import item during the latter half of the

century.27 From the middle towards the end of the 19th century, the country’s export is always

larger than the import, save for some exceptions.

25 Phipps, Treatise, 308. Mallat, Philippines, 492. Note the conversion 1 peso = 5.4 francs. Hitchcock, Trade, 33-
34.
26 Hitchcock, Trade, 33-34.
27 Jagor, Travels, 144. Hitchcock, Trade, 24.
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Imports Exports

40,000,000.00

35,000,000.00

30,000,000.00

25,000,000.00

20,000,000.00

15,000,000.00

10,000,000.00

5,000,000.00

0.00
1810
1818
1828
1829
1830
1833
1841
1851
1856
1861
1865
1870
1873
1875
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889
1890
1891
1892
1893
1894
Figure 1. Foreign Trade of the Philippines, 19th Century (in Spanish Dollars)
Sources: Frank H. Hitchcock, Trade of the Philippine Islands (Washington: Government Printing
Office, 1898), 11; Balanza General de el Comercio de los Yslas Filipinas, Año de 1838, Section
Balanza General de Valores; Estadistica General del Comercio exterior de las Yslas Filipinas,
Ano de 1882, Section Resumen General.

The data also demonstrate that direct trade with Spain was dwarfed by the country’s trade

with other countries such as the United Kingdom (primarily her Asian possessions) and the

United States, who were the main customers of Philippine sugar. In 1841, The English were the

main trading partners of the country, followed by the United States; Spain came only in third28.

The English were the main consumers of the country’s sugar exports,29 as well as abaca. Spain

28 Mallat, Philippines, 494.

29 Ibid., 492.
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was the number one consumer only in abaca ropes and hats. This pattern of trading will carry on

until 1894, the last official customs records.30

Table 3. Top Trading Partners of Manila in 1841 (in French francs).

Country Importations to Exportations from TOTAL

Manila Manila
England 3,959,000 5,435,000 14,394,000
United States 3,275,000 4,696,000 7,971,000
Spain 1,000,000 4,729,000 5,729,000
China 2,155,000 3,293,000 5,448,000
East Indies 431,000 1,719,000 2,150,000
Sydney (Australia) 81,000 1,096,000 1,177,000
France 192,000 750,000 942,000
Source: Jean Mallat, The Philippines. Translated by Pura Santillan – Castrence (Manila: National
Historical Commission of the Philippines, 2012), 491.

Table 4. Top Trading Partners of Manila in 1842 (in French francs).

Country Importation Exportation TOTAL

England 7,466,000 5,099,000 12,565,000
United States 3,154,000 4,772,000 7,926,000
China 2,694,000 4,422,000 7,116,000
Spain 893,000 5,323,000 6,216,000
British Indies 2,137,000 1,404,000 4,541,000
Source: Jean Mallat, The Philippines. Translated by Pura Santillan – Castrence (Manila: National
Historical Commission of the Philippines, 2012), 502.

The increased foreign trade of Manila also increased the ship movement in Manila as

well as the other ports. With that, customs collections in the Manila port also increased,

providing the government with another source of revenue. In 1882, port duties were at a

combined 2,462,777.78 pesos31, compared to 179,865 in 183832. It can also be attributed to the

30 Estadistica General del Comercio Exterior de las Islas Filipinas por el Ano de 1881
31 Ibid., Section Resumen General.
32 Balanza General de el Comercio de los Yslas Filipinas, Ano de 1838, Section Balanza General de Valores,
Section Estado de los Derechos que ha producido la Aduana de Manila en el año de 1838.
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increased trade due to the opening of the other ports to foreign trade in 1855; in 1838, only

Manila was open to foreign trade.

Table 5. Port Activity in Manila, Selected Years.

Year Entry Exit Total

1828 87 93 180
1829 119 123 242
1830 110 115 225
1833 130 135 265
1838 129 131 260
1842 149 162 311
Sources: Balanza General de el Comercio de los Yslas Filipinas, Año de 1838, Section Balanza
General de Valores; Jean Mallat, The Philippines. Translated by Pura Santillan – Castrence
(Manila: National Historical Commission of the Philippines, 2012), 501. John Phipps, A
Practical Treatise on the China and Eastern Trade (London: Wm. H. Allen and Co., 1836), 309.
Mallat, Philippines, 492

CONCLUSION
The galleon trade was a shipping line, serving as the only connection of the Philippines to

the mother country. However, its foundations were built on a restrictive protectionist scheme

prevalent in 16th-century Europe. The desire to protect Andalusian industry and its monopoly, on

South America as well as the practice of controlling silver outflow, turned out to be

disadvantageous and even disastrous to the Philippine trade. The potential of East Asian trade

was not maximized. Combined with the lack of motivation in advancing agriculture, the island

became heavily dependent to Spain.

The ending of the galleon trade, together with some efforts in the late 18th century

towards the promotion of cultivating land, proved beneficial to the Philippine economy. Firstly,

because of the desire of the Spaniards to maintain the colony, efforts to make the colony self-

sufficient were greatly pursued both in the islands and the mother country. The Royal Philippine

Company, while ultimately a failed enterprise, helped jump start the beginnings of foreign trade

in the Philippines. The tobacco monopoly, on the other hand, brought fiscal independence to the
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colony. Later, the ending of the galleon trade would bring free trade into the country and lift the

country up in relative prosperity. The improvement of agriculture in the Philippines was also

important, in that it provided the Philippines exportable goods.

Another remarkable impact of the ending of the galleon trade is the shift of economic

policy. The restricted policies of the galleon trade mostly died with it in 1815, and a liberal

economy replaced it. With sugar and abaca as the primary export, the economy became a

primarily export-oriented economy, exporting mostly agricultural produce to other nations

(notably not Spain), and importing what cannot be manufactured locally. In a way, the ending of

the galleon trade brought the country into the economic system that prevails to this day.
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BIBLIOGRAPHY
Primary Sources
Comyn, Tomas de. State of the Philippines in 1810. Translated by William Walton. London: T.

and J. Allman, 1821.

Real Cedula de Erección de la Compañía de Filipinas. Madrid: D. Joachin Ibarra, 1753.

Fedor Jagor. Fedor Jagor’s Travels in the Philippines, in The Former Philippines Through

Foreign Eyes. Austin Craig ed. Manila: Philippine Education Co., 1916.

Mallat, Jean. The Philippines. Translated by Pura Santillan Castrence. Manila: National

Historical Commission of the Philippines, 2012.

Balanza General del Comercio Exterior de las Yslas Filipinas en el Ano de 1838. Manila:

Aduana de Manila, 1839.

Estadistica General del Comercio Exterior de las Islas Filipinas, Ano de 1881. Manila: Aduana

de Manila, 1882.

Blair, Emma H, and Robertson, James A. The Philippine Islands, 55 vols. Cleveland, Ohio:

Arthur M. Clark and Company,1904. Accessed October 17, 2017.

Phipps, John. A Practical Treatise on the China and Eastern Trade. London: Wm. Allen and

Co., 1836. Accessed November 10, 2017.

https://archive.org/download/bub_gb_6fI_AAAAcAAJ/bub_gb_6fI_AAAAcAAJ.pdf.

Hitchcock, Frank H. Trade of the Philippine Islands. Washington, DC: Government Printing

Office, 1898. Accessed November 11, 2017.

https://archive.org/download/tradeofphilippin14hitc/tradeofphilippin14hitc.pdf.
 Page 14 of 14

Secondary Sources
Legarda, Benito Jr. After the Galleons: Foreign Trade, Economic Change and Entrepreneurship

in the Nineteenth-Century Philippines. Quezon City: Ateneo de Manila University Press,

1999.

De Jesus, Ed. C., The Tobacco Monopoly in the Philippines: Bureaucratic Enterprise and Social

Change, 1766-1780. Quezon City: Ateneo de Manila University Press, 1980.

Benitez, Conrado F. The Old Philippines’ Industrial Development: Chapters of an Economic

History. Manila: Philippine Education Co., Inc., 1916.

Schurz, William Lytle. The Manila Galleon. New York: E.P. Dutton and Co. Inc., 1959.

Quiason, Serafin D. “The English ‘Country Trade’ with Manila prior to 1708.” Asian Studies

1:1. Quezon City: University of the Philippines Press, 1963. Accessed November 14,

2017. http://asj.upd.edu.ph/mediabox/archive/ASJ-01-01-1963/Quiason.pdf.