VFACom executive director Zosimo Paredes said the Philippines stands to lose in terms of training, technology and military equipment that the US donates to the country.
He warned that the countrys image before the international community would also suffer for not complying with its defense agreement with the US.
"If we continue not to put in place the VFA, we lose face before the international league of nations," Paredes said in a phone interview.
He added that the cancellation is Washingtons way of sending a strong statement to the government that it is "unhappy" because the Philippines is not complying with the VFA and is a wake-up call to implement the defense accord.
"This is more of a wake-up call. We can afford not to have the exercises. On the other hand, there are more benefits in having the exercises because we get the training, military equipment they donate and the modern technology," Paredes said.
He shared US Embassy officials view that there is no full protection for visiting US troops as shown in the case of Lance Corporal Daniel Smith despite the VFA provision that provides that custody belongs to the US until completion of all judicial proceedings.
"We should know the VFA thats exactly to provide the kind of treatment theyll be accorded while theyre here on joint exercises. I share with them the meaning of paragraph six of the VFA on custody that should apply until all judicial proceedings are completed. We should no longer talk about it because the issue has been settled in paragraph six," he said.
Paredes stressed that Makati City Judge Benjamin Pozon misinterpreted the VFA provision. Pozon sentenced Smith to life imprisonment last Dec. 4 after declaring him guilty of raping a 23-year-old woman in Subic last year.
Paredes blamed the Senate for passing the VFA despite the gray area in the agreement, such as the issue of custody.
"We voluntarily agreed to this agreement so its incumbent upon us to implement this. If theres anyone to blame it is the Senate because they did not scrutinize provisions like the issue of custody," he said.
Paredes cited the defense agreement between the US and Japan, which has a very clear provision on custody. The agreement provides that custody of a US serviceman who is charged before a Japanese court belongs to the Japanese government.
"While its in effect, were constrained to abide whether we like it or not," he said.
The VFACom has yet to be officially notified by the US government of the cancellation of 2007 military exercises involving 3,000 to 5,000 US military personnel.
The Balikatan exercise is annually held at Ternate in Cavite, Fort Magsaysay in Nueva Ecija, Tarlac, Subic and Clark.
According to Paredes, a ruling on the transfer of custody to the embassy between now and February might change Washingtons decision and the military exercises may push through.
"If therell be a positive result at the Court of Appeals between now and February (the) Balikatan (may still push through)," he said.
Admiral William Fallon, commander of American forces in the Pacific, announced on Thursday that he had canceled a huge annual military exercise with the Philippines in a dispute over Smiths custody.
The US demanded custody of Smith and invoked the provision in the VFA that governs American forces in the Philippines. The bilateral accord requires that US servicemen be held in American custody during criminal proceedings, including while the case is on appeal, until there is a final resolution on the matter.